>LUPIN LIMITED (ICICI DIRECT)

Predictable growth, good value…

We met the management of Lupin Ltd. Lupin is an innovation led pharma company producing a wide range of generic formulations and APIs for various markets globally. The company has a significant presence in the therapy areas of CVS, diabetology, asthma, paediatrics, CNS, GI, anti-infectives and NSAIDs in the domestic market.

Business model
Over the years, Lupin has successfully transformed itself from predominantly being an API manufacturer to a formulations manufacturer. At the end of FY09, formulations accounted for 81% of Lupin’s total sales as against 56% in FY06. The company generates a significant portion of the revenue from growing therapies of CVS (21% of domestic formulation sales), antibiotics (22%) and asthma (8%) in the domestic market. The chronic segment, which is growing at over 30% YoY, accounts for ~40% of total domestic formulation revenue while the acute segment accounts for 60%. The domestic acute therapy areas are growing at a lower rate. Lupin recorded robust revenue growth at a CAGR of over 30% over FY06-09. Domestic formulation revenues grew at a CAGR of 23% over FY07-09.

Lupin has a robust revenue distribution in various geographies. It generates ~35% of total revenue from the domestic market and 65% from exports. Developed markets of US account for ~30% of total revenues. Out of the total US revenue, which grew by 65% YoY in FY09 to Rs 1189 crore, 27% accounted for the branded business in the US markets (currently the company has two brands, Suprax & Aerochember in the US market). The EU revenue, (~2.5%) grew ~100% to Rs 102 crore. Lupin has filed for 90 ANDAs in the US market. Out of this, 56 are awaiting approval. Lupin entered as a finished dosage player in the US in 2003 with the launch of Cefuroxime Axetil. Although Lupin was a late entrant in the US market, it made its presence felt by launching Suprax in the branded US market in FY04. Its generic business gained momentum in 2005. The company generated US$74 million from the branded business in the US. In FY07, Lupin’s Lisinopril was rated the fastest growing product in the US. Currently, Lupin has two products in its branded portfolio, which contributes ~27% to US revenues. Till date, the company has filed nine ANDAs in the oral contraceptive segment in the US market. Lupin is the only Indian company to have a significant presence in the Japanese market through
the acquisition of Kyowa Pharma in October 2007. The company also has a significant presence in SRM.

In the domestic market, the company has widened its product basket to include a mix of branded and value added generics apart from foraying into newer therapeutic segments such as gynaecology, oncology and wound management. Simultaneously, the company is also focused on garnering market share in the antiasthma, CVS, diabetes and other chronic segments, while maintaining its dominant position in the anti-TB and anti-Infective segments. During FY08-09, the company launched 54 new products in the market.

Going forward
Over the years, Lupin has been growing at a robust space and delivering a performance in line with large cap players. Lupin will likely witness robust growth in numbers on account of growth in advanced markets and SRM. Incremental benefits are likely to be visible from the inclusion of Aerochamber plus products and AllerNaze to its US branded portfolio. At the CMP of Rs 1014, Lupin is trading at ~16.5x its FY09 EPS.

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