LUPIN - Adds Locoid to branded franchise - Edelweiss

Lupin has entered into a strategic co-promotion agreement with Onset Dermatologics (Onset), for exclusive rights to market Locoid lotion (hydrocortisone butyrate 0.1%) in the US. The target market comprises of children in the age group of 0-5 years suffering from Atopic Dermatitis (AD) or mild eczema. We estimate the potential market to be USD15-20mn for Lupin in the US and it would be an addition to the branded product basket of Suprax and Alinia, promoted primarily to pediatricians.

Market potential for Lupin

AD is a common skin disorder in young children and is treated by use of corticosteroid creams and immuno-suppressants. Lociod or Hydrocortisone, a topical corticosteroid currently promoted by Onset for children in age group of 5-7 years, has garnered USD25mn sales in US during the last twelve months, as per IMS. Lupin would be the copartner to market exclusively to pediatricians using its 160 branded field force in US. Given the children below 5 years account for one fourth of children population in US, the target market could be 4-5mn affected population which results in a potential market size of USD15-20mn for Lupin.

Focus on expanding branded franchise in US

Lociod is the second partnership entered into by Lupin this fiscal, after its entry to an in-licensing deal in Q1FY14 for Alinia (anti-diarrhea drug for pediatric population with more than 1 year of age). These tuck-in brands bode well with the management's strategic intent to tap potential within the target segment of pediatric and primary care in US. We note that the management, in its Q1FY14 earning call, had guided for more brand additions with focus on respiratory, derma and inhalers segments.

Outlook and Valuations: Strong play on US pipeline; maintain 'BUY'

Lupin's current branded franchise in US is USD150mn, primarily led by Suprax and its line extensions. These brand additions would be accretive to growth of this franchise over the next 2-3 years. However, we would await more clarity on the market share development before incorporating these into our estimates. We remain positive on best in class pipeline of products in US among peers and maintain 'BUY/SO' rating.

Source : Equity Bulls

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