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Lupin Ltd has continued to see improved investor confidence with a revival in US sales and a rebound in domestic business prospects. New product approvals for launch in the US market have also remained strong. While regular product launches help drive US sales, the resolution of regulatory issues related to four of its manufacturing facilities that have remained under US Food and Drug Administration (USFDA) scanner for long is crucial for the company’s growth prospects.

According to reports, Lupin’s Somerset facility in the US received 13 observations by the US drug regulator. The inspections at Indian plants—and thereby, regulatory clearances too—are getting delayed due to the travel restriction amid a pandemic.

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Currently, four of Lupin’s facilities at Pithampur Unit-2, Goa, Somerset, and Tarapur have the Official Action Indicated (OAI) status, and the Mandideep plant has a warning letter. OAI status entails more regulatory and administrative actions by the drug authorities in the US. The inspection classification for the plant is not out yet. However, analysts at Nomura research expect the plant’s OAI status to remain until the observations are addressed. This could potentially delay future approvals from the Somerset plant. There are about 40 ANDAs (abbreviated new drug applications) pending for approval filed from this facility, according to analysts.

Catching up
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Catching up

Meanwhile, the launch of respiratory inhaler albuterol generics in the US has given a boost to Lupin. The gains that followed the launch of the product have been higher than expected. The other growth drivers in the near term are the ramp-up of a diabetic product re-launched by the company. Flu season strength is also important for Lupin as its product range in the US includes products such as Tamiflu generics. More clarity is awaited on other large product launches as well. All these are important for a sustained growth in the US market.

In the domestic pharmaceutical market, the recovery in acute product sales is expected to provide some traction to Lupin’s sales. Patient footfall in hospitals and clinics is increasingly leading to a better outflow of prescriptions.

Lupin has a strong domestic portfolio and currently derives more than a third of its revenue from domestic formulation sales. Sales had seen a 0.7% decline during Q2 but recovery is now being anticipated in the second half.

Much of the positives have been factored in the share price, according to analysts. Lupin’s shares have gained 7% in the past one month and are trading at 27 times one-year forward earnings estimates.

From here on, investors would want to see sustainability of growth momentum before relooking at valuations.

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