Lupine’s acquisition of a portfolio of brands to boost domestic sales

The proposed acquisition by Lupine Ltd of a portfolio of brands from Anglo-French Drugs & Industries and its associates is seen as positive. The turnover of the portfolio being acquired was 95 crore in FY21. As the acquisition is for a cash consideration of 325 crore, this implies an enterprise value to sales valuations of 3.3 times, which is attractive and below the industry average of 4-5 times, analysts say.

The portfolio will strengthen Lupine’s offerings primarily in the vitamins, minerals and supplements (VMS) category. The category is developing well and has seen strong growth in the current fiscal year.

Motilal Oswal Financial Services Ltd (MOFSL) analysts said that given Lupin’s marketing expertise as well as the strong brand recall of the acquired portfolio, there is ample scope to grow sales of the acquired brands over the course of the year. the next 3-4 years. However, the overall impact of sales of these products on Lupin’s earnings is expected to be minimal at 0.6% of Lupin’s consolidated sales for FY21.

Lupine, meanwhile, is doing well domestically, with sales up 15.9% year-over-year in the September quarter. The December quarter is also expected to see similar numbers.

Sales growth in the United States, however, is a controllable key. Lupine faced pricing pressure in its core U.S. business after posting low-single-digit sales growth in the second quarter. It had recorded sales of $172 million and $184 million in the United States during the April-March and July-September quarters, respectively, and is targeting a run rate of $200 million per quarter during the second semester.

Axis Securities Ltd analysts expect Lupine to record sales of $190 million in the United States in the December quarter, helped by products such as inhaler generics Albuterol, thyroid treatment Levothyroxine, etc.

Another positive point is that the company has had some regulatory respite. Its key Goa facility was cleared by the US Food and Drug Administration in December after nearly four and a half years of regulatory hurdles.

In another development, the company on Wednesday announced a partnership with Shenzhen Foncoo Pharmaceutical Co. Ltd (Foncoo) for China – a first for Lupine in this geography.

Indian pharmaceutical companies are eyeing the Chinese market for growth. Dr Reddy’s Laboratories Ltd has taken the lead in setting up its front end operations, and Lupin’s progress will be watched closely.

Shares of Lupine posted marginal gains of up to 0.8% on Wednesday, a day when the broader indices traded were down.

Valuations limited the stock’s gains, analysts said. While MOFSL analysts expected a 19% CAGR for Lupin’s earnings in fiscal years 21-24, they said potential launches factored into the estimates. At current prices, the stock is trading at 25.6 times estimated earnings for FY22.

To subscribe to Mint Bulletins

* Enter a valid email address

* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our app now!!

Comments are closed.