Lupin’s Views On Pharma Sector

The investor sentiment on the pharma sector is very encouraging. The BSE Healthcare Index on this bullish sentiment has surged by 26 per cent on YTD Basis. The remarkable returns in the first seven months are on the back of the strong results posted by the pharma majors. Even the June quarter was not an exception when the overall sector saw topline and bottomline growing by 25 per cent and 22 per cent respectively.

In order to get more insight, we had sent a questionnaire Ramesh Swaminathan, President Finance & Planning, Lupin. According to him, the June quarter performance of the company has been robust due to the new product launches in the US markets. This was also due to the higher domestic market growth and strong rupee depreciation against USD.

He is also of the opinion that the US market has seen increased competition in last couple of years in the generics due to patent expiries and newer entrants. In that context the generic drug user fee act (GDUFA) will also help to the companies on improving the focus on products that they seek to develop and commercialize. This would benefit the serious players in the market. The outperformers will be the companies who will be able to deliver superior supply chain metrics. Companies developing complex products on a timely and cost effective basis would also be at the gains. Besides, companies with capabilities in niche areas like Oral Contraceptives, Dermatology, Opthalmology, Oncology, Respiratory and Biosimilars will have superior business opportunities.

Lupin’s CFO has also said that there has been steady approval rate in the US and if the momentum continues in the other markets, the next quarter should also be a good quarter for the Industry.

Lupin has posted strong June quarter results with 43.8 per cent rise in the top line to Rs 2253 crore. The net profit also grew by 33 per cent to Rs 285 crore. EBITDA margins at 21.7 per cent were better than that recorded in the June quarter of last fiscal at 19.2 per cent. We are bullish on the Lupin and advice to buy the scrip which looks to achieve the target of 640 in this fiscal.