Lupin - Motilal Oswal

LUPIN: Enters into out-of-court settlement for generic Lunesta; Launch scheduled for FY14/15; No major upsides

Lupin has entered into an out-of-court settlement with Sunovion for the generic version of Lunesta (Eszopiclone tablets useful for insomnia) for the US market.

Sunovion generates about US$787m of revenues from Lunesta in US. Lupin will be allowed to launch its generic version post 30-Nov-2013 or post 30-May-2014

Since other generic companies have also filed patent challenges for the drug, Lupin is eligible for co-exclusivity and will not be the sole FTF exclusivity player.

Since, Lupin is not the sole FTF on the product, the upside from this settlement is unlikely to be very large.

Assuming that the innovator will settle with all patent challengers (~9 players), we estimate the one-time PAT upside for Lupin at US$2-3m.

Lupin is likely to witness a gradual improvement in the underlying fundamentals led by an expanding US generics pipeline, Para-IV opportunities in the US, strong performance from Suprax & ramp-up in Antara revenues and traction in formulation revenues from its European initiative. The stock trades at 25x FY11E and 20.6x FY12E EPS with a sustained ~30% RoE. Our estimates do not include one-time upsides for the company’s FTF pipeline in the US. Maintain buy.

Source : Equity Bulls

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