Lupin - New launch market share can surprise on the upside, Reiterate BUY! - Antique

Lupin launched a key product TRICOR (Market size ~USD1.3bn) in November 2012. Initial indicators suggest that the market share could surprise on the upside. Teva has the leading market share in this segment. Also, high competition products like Combivir (USD250m) has been able to garner reasonable market share (>20%). Seroquel is doing well with more than 25% market share which is second to market leader Teva. Post the exclusivity of geodon, Lupin has been able to maintain market leadership. Lupin has posted strong growth in the last five years (29% & 23% revenues & profit CAGR, respectively). We believe that our FY14e estimates offer scope for upward surprise (see Exhibit 2) on the back of high value product opportunities.

Pipeline prospects inspire confidence

Oral contraceptive launches, Geodon market share post exclusivity &early ramp up in TRICOR can potentially drive upside to earnings projections. The launch of generic version of Teva's Combivir (USD 275m Market) in a limited competition market looks like a lucrative bet for the company. Given the entry barrier in products like Geodon, Femcon Fe - AG & Fortamet and companies plan to launch 120+ products in the next three years, addressing a market of USD48bn in brand revenue, we feel confident about FY13e & FY14e product pipeline. Lupin had 3 very successful oral contraceptive launches Nor QD, Lo- Seasonique and Femcon. Lo- Seasonique has 45% plus market share alongside Teva and Watson. Company has filed a total 31 ANDA. Also it is targeting 10-12 OCs launch in FY13 and expects launch of Seasonale and Yasmin in FY13.

US business growth holds promise

Lupin has one of the most impressive FTF portfolios. US revenue contribution to total revenues is up to 42% (FY13e) from 35% (FY10) (increase of 700bps in the last three years). Incremental revenues of about USD300m from FTF products like Yazmin & Tricor should drive the dynamics. Lupin's track record in creating brands in the US extends beyond Suprax. We believe that post the busy launch Calendar of Lupin in the US market, a meaningful market share build up should happen over there - thanks to an excellent distribution machine.

Valuation and outlook

FY13e launch includes high value opportunity drugs like Tricor which has a market size of USD1.3bn and a strong OCs portfolio; we estimate a revenue growth of 32% and 20% for FY13e and FY14e, respectively. We value the stock on earnings multiple of 23x FY14e EPS, given the superior growth projections and improving return metrics and arrive at a target multiple of INR720 with an upside of 20% from the current levels. Reiterate BUY.

Source : Equity Bulls

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