1. Lupin is a buying opportunity; Citi explains why

Lupin is a buying opportunity; Citi explains why

Mylan’s launch of gFortamet is on expected lines. Fortamet has been a key product for Lupin and particularly profitable after the company hiked pricing in FY16.

By: | Published: October 4, 2016 6:16 AM

Mylan’s launch of gFortamet is on expected lines. Fortamet has been a key product for Lupin and particularly profitable after the company hiked pricing in FY16.

We expect some market share loss and pricing hit but also believe that competition is likely to remain limited over the near to medium term. Our forecasts already build in such a scenario. Actual pricing / market share trends would be a key monitorable for the stock over the next few quarters.

We currently build in revenues of $150million and $100million from gFortamet in FY17/18 — reflecting our current view that this would be a two to three player market over the next couple of years. Apart from Lupin and Mylan, Nostrum is a Para IV filer, that is yet to receive generic approval.

Nostrum’s ANDA is yet to be approved by the USFDA. We continue to like Lupin, given its healthy geographic mix (80%+ sales from India, the US and Japan), large pipeline and robust financial metrics. The compliance overhang at its Goa plant also appears to be easing following some approvals received for filings made from the site.

We acknowledge that optical weakness in earnings (end of gGlumetza exclusivity, competition in gFortamet) and the absence of any chunky launch in the US market could weigh on the stock in the near term, but we would use such weakness as an enhanced buying opportunity.

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