Motilal Oswal Financial Services

7 Dec 2013

Update |Sector: Healthcare

Lupin

CMP: INR855

TP: INR 1059

Buy

1A.Launches generic Trilipix; low competition opportunity; 2%

contribution to FY14E/15E EPS; upside already factored in

estimates

‐

Lupin has launched its generic version of Trilipix in US. The product has

USD450m sales. Lupin is the 2

player to enter the market.

Lupin had filed a Para IV ANDA for the product and was sued by the

innovator, Abbott, in March 2010. The case was subsequently settled in

June 2012.

Apart from Lupin, there are at least five other Para IV filers. Mylan already

launched its generic in July 2013 as per settlement with Abbott. Besides

them, Impax and Actavis too have settled for an early launch, while suits

against Sandoz and Anchen Pharma are still ongoing.

We believe competition could be limited to four players in the short term

with two more players entering in the longer run. We estimate

USD11m/18m sales in FY14E/15E, with 2% contribution to EPS which is

already modelled in our estimates.

‐

1B. Approval for generic Trizivir; may be FTF; 2%/4% upside to

FY14E/15E EPS if launched at risk

‐

Lupin has received approval for generic Trizivir having USD125m sales in US

for the innovator.

Lupin seems to be the first generic company to be sued by the innovator; we

assume that it is the first‐to‐file and may therefore be eligible for 180‐day

marketing exclusivity.

The patent litigation is still ongoing and management has not confirmed if

they will launch “at‐risk”.

Assuming that they do, this could have 2%/4% upside to our FY14E/15E EPS

estimates. However, we will revise our estimates only after clarity on

management’s stance.

‐

Valuation and view

‐

We expect LPC to report stronger operational performance in 2HFY14 aided

by new launches in US and stronger performance from India.

Key growth drivers for FY14/15 will be the strong product pipeline for the

US including higher contribution from oral contraceptives. Management will

focus on getting access to certain high‐end technologies, brand buyout and

access to front‐ends in certain key emerging markets (especially Latam,

Russia). While India formulations will see a slowdown in FY14E impacted by

the new pricing policy, we expect growth to rebound to historical levels of

16‐18% in FY15E.

Post these developments, we have retained our estimates for FY14E/15E as:

(1) our estimates have already factored in upside from launch of products

like Trilipix and (2) we do not have clarity on management’s next step on

generic Trizivir.

‐

Lupin

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Lupin

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07 Dec 2013