11 October 2017
Update | Sector: Healthcare
Lupin
BSE SENSEX
31,834
S&P CNX
9,985
CMP: INR1,045
TP: INR1,215(+16%)
Lupin acquires branded business in the US
Buy
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
LPC IN
452
1,572/920
8/-35/-44
467.7
7.0
1750.0
53.3
Financials Snapshot (INR b)
2017 2018E 2019E
Y/E Mar
Net Sales
174.9 169.1 199.2
EBITDA
44.9
36.2
46.6
PAT
25.6
18.7
26.2
EPS (INR)
56.6
41.4
58.0
Gr. (%)
12.4 -26.9
40.0
BV/Sh (INR)
298.9 329.8 377.2
RoE (%)
20.9
13.2
16.4
RoCE (%)
13.3
8.8
11.1
P/E (x)
18.2
25.2
18.0
P/BV (x)
3.5
3.2
2.8
Shareholding pattern (%)
As On
Sep-17 Jun-17 Sep-16
Promoter
46.8
46.7
46.7
DII
12.4
9.8
7.2
FII
27.7
30.9
34.7
Others
13.1
12.6
11.4
FII Includes depository receipts
Stock Performance (1-year)
Lupin
Sensex - Rebased
1,850
1,600
1,350
1,100
850
Single dosage – the key differentiating factor
Lupin (LPC) has announced the acquisition of Symbiomix Therapeutics for a
cash consideration of USD150m, including USD50m upfront and other time-
based payments. In addition, there are sales-based contingent payments. The
transaction was closed on 11
th
October 2017.
Strengthening presence in Branded Women’s Health division:
Currently,
Symbiomix has no sales, and is working on the innovative branded franchise
Solosec. In March 2017, Solosec NDA was submitted with the USFDA, and on
15
th
September 2017, the USFDA approved Solosec (Secnidazole) oral granules
for the treatment of Bacterial Vaginosis (BV) in adult women. LPC expects
Solosec to be commercially available by mid-2018. Solosec is the first and only
single-dose oral treatment approved for BV. The company believes that Solosec
is eligible for at least 10 years of exclusivity in the US.
Key differentiating factor – single dosage (competitors offer multiple
dosages):
According to the Centre for Disease Control and Prevention (CDC),
Metronidazole or Clindamycin cream is the recommended regimen. Tinidazole
is the alternative regimen to treat BV. Metronidazole (first-generation
Nitroimidazole) requires twice-a-day dosage for seven days for a total
administration of seven grams of drug v/s single-dose requirement for Solosec.
A study shows that adherence to Metronidazole for the treatment of BV has
been 50%. Poor adherence due to the length of the regimen may lead to
treatment failures, recurrent disease, and more rapid development of resistant
microorganisms. However, Tinidazole 2g can be consumed once for two days
(not significantly different from Solosec).
No branded player currently; VivaGel could be new competition:
Apart from
existing drugs like Metronidazole, Clindamycin and Tinidazole, VivaGel
(Australia-based Star Pharma-owned) could be the latest and only branded
competition to Solosec. Start Pharma successfully completed Phase-3 studies
for VivaGel in August 2017. Like Solosec, the FDA has granted Qualified
Infectious Disease Product (QIDP) and Fast Track designations for VivaGel® BV
(for both BV indications). Star Pharma also expects to launch this in 2018. The
key factor is that VivaGel is not an antibiotic, and an NDA will be filed for two
separate BV indications – BV treatment and prevention of rBV (more than 50%
of women treated for BV have a recurrence within 12 months). Currently, there
is a treatment that claims prevention of BV (including Solosec). However, in
terms of dosage, Solosec will have an advantage, as VivaGel is a seven-day
treatment.
Market size:
Currently, ~6m prescriptions (~75% is oral and 25% through
vaginal route) are written for BV in the US annually. LPC expects to achieve 15-
20% market share in this segment. LPC expects a payback period of 5-6 years
from the acquisition of Solosec.
Kumar Saurabh – Research Analyst
(Kumar.Saurabh@MotilalOswal.com); +91 22 6129 1519
Ankeet Pandya – Research Analyst
(Ankeet.Pandya@MotilalOswal.com );
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.