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Price objective of Rs 1,950 on Lupin on fair value average: Merrill Lynch

As per Medispan’s Price Rx Pro database’s daily report, Lupin has taken an approximate 15% hike in WAC (wholesaler acquisition cost) of its branded “Methergine” Oral Tablet 0.2 mg as of 13th September, 2016.

Published: September 16, 2016 6:14 AM
As we had recently highlighted, branded Methergine could be an -100 m annualised opportunity for LPC in the US market. (Source: Reuters)

As per Medispan’s Price Rx Pro database’s daily report, Lupin has taken an approximate 15% hike in WAC (wholesaler acquisition cost) of its branded “Methergine” Oral Tablet 0.2 mg as of 13th September, 2016.

The hike was taken in both package sizes i.e. package of 12 and 28 tablets. As a result of this hike, WAC of Methergine 0.2 mg now stands at $1,514 for the 28 tablet package (compared to $1,316 earlier) and $649 for the 12 tablet package ($564 earlier), resulting in WAC of about $54/ tablet compared to about $47/ tablet earlier.

However as we have also highlighted in the past, WAC may not represent the actual amount accruing to LPC as it does not include rebates and charge backs to the channel partners. However at the margin, we see this as a positive development.

As we had recently highlighted, branded Methergine could be an $80-100 m annualised opportunity for LPC in the US market. This price hike is a testimony to LPC’s ability to command pricing premium without much impact on volumes.

Our price objective of `1,950 is based on simple average from triangulation of fair value from three methodologies, namely: three-stage DCF valuation with separate value for R&D which gives a fair value of `2,180, EV/IC vs RoIC based on June 2018E, which gives a fair value of `1,533, and target P/E multiple of 24x (at premium to the sector target of 20x based on stronger near term earnings growth momentum) on June 2018E EPS, which gives a fair value of `2,140.

The author is  Merrill Lynch.

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