1. Buy Lupin with target of Rs 1,600: Kotak

Buy Lupin with target of Rs 1,600: Kotak

Our checks suggest that at least one generic filer for Suprax suspension is likely to be delayed to H2FY17...

Updated: December 4, 2014 11:40 AM

Our checks suggest that at least one generic filer for Suprax suspension is likely to be delayed to H2FY17, belying our conservative Suprax assumptions for FY16/17 and giving Lupin enough time to launch brands in the US through in-licensing or internal development (one pediatric cough and cold product in Phase III). We raise our estimates by 3.5% and 8.5% for FY16 and FY17 and reiterate ‘buy’ with a revised target price of R1,600.

The US FDA’s approval cycle has seen little improvement with the number of ANDA approvals for CY14 likely to be lower than in CY13 and the past three-year average. Given the sharp rise in the ANDA backlog, which exceeded 3,700 in July 2014, the timing of Suprax generic competition is unclear. We believe the cephalosporins market is unlikely to see new competitors and among existing competitors, we believe there are two filers for Suprax powder for suspension formulations though there is only one generic filer for the tablets formulation. Our earlier assumptions factored in sharp erosion for Suprax, and our channel checks suggest that at least one generic filer is likely to see delays beyond H2FY17.

We now estimate aggressive generic erosion for Suprax in FY18, which gives Lupin headroom of another two years. By this time we expect it to receive approval for its pediatric cough and cold product, which is likely to enter Phase-III in coming months.

Kotak Institutional Equities

Tags: Lupin
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