Lupin Q1 profit drops 59.4% on subdued US business
Mumbai: Drugmaker Lupin Ltd Wednesday reported a 59.4% fall in consolidated net profit in the June quarter, missing analysts’ estimates by a wide margin, thanks to price erosion in US, de-stocking ahead of goods and service tax (GST) and a stronger rupee.
The company reported a consolidated net profit of Rs358.06 crore, compared with Rs881.95 crore a year ago, while sales fell 12.3% to Rs3,806.83 crore. A Bloomberg poll of 17 brokerages had estimated a net profit of Rs521.5 crore and sales of Rs4,278 crore.
Besides, last year’s June quarter revenues were also buoyed by a six-month marketing exclusivity in the US for its generic version of diabetes drug Glumetza.
“Our Q1 results have been below our own expectations on count of higher than anticipated price erosion in select products like Glumetza, disruption on count of GST implementation in India and appreciation in the rupee,” Nilesh Gupta, managing director of the company, said in a press release.
Sales in North America, which accounts for 42% of total revenue, declined 26.8% on year to Rs1,601.8 crore. The company launched four products in the US during the quarter.
“Revenue of the company is highly concentrated around Glumetza and Fortamet and so price erosion in these products weighed on the blended US portfolio,” Surya Patra, analyst at PhillipCapital India, said.
Excluding price erosion in Glumetza generic due to additional competition, the base products business in the US witnessed a sequential single digit growth in the June quarter, Vinita Gupta, chief executive officer of Lupin, said on a media conference call.
While there could be some further price erosion in Glumetza generic in the September quarter, pricing of Fortamet is more or less stabilised, she added.
The company expects to get approvals for 30 to 35 products in the US in the current financial year 2017-18, which will help drive growth. Gupta maintained that FY18 will be largely a muted year for Lupin.
Domestic market sales were down 1.8% at Rs932.4 crore, while sales in the Asia-Pacific region, which includes Japan, rose 10.6% to Rs598.9 crore.
Post-GST, restocking by distributors in domestic market has been slow in July but it could bounce back in the next two months, Nilesh Gupta said. “Our focus remains on building our complex generic pipeline, operational excellence, regulatory compliance and building a differentiated specialty business,” he said.
Lupin’s spending on research and development (R&D) was Rs499.9 crore in the June quarter, accounting for 13.1% of sales. Last year, the company had spent Rs670.9 crore on R&D.
The managing director said R&D investments will be around Rs500 crore in each of the next three quarters. Lupin is building its pipeline of specialty products for the US market but over the next two-three years, it will be complex generics that are expected to bolster growth, he said.
The drug maker’s earnings before interest, tax, depreciation and amortisation (Ebitda) margin shrank to 21% in the June quarter from 32.1% a year ago. For FY18, the company expects an Ebitda margin of 21% to 23%.
Shares of Lupin closed up 1.6% at Rs1,034.25 on the BSE, while benchmark Sensex index closed 0.3% lower at 32,476.74 points.
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