Lupin Plunges After Warning U.S. Drug Sales May Extend Drop

Lupin Ltd. fell to its lowest point in almost three years after warning that its U.S. revenue may extend declines over the coming year after India’s second-largest drug maker lost exclusive rights to sell generic versions of a pair of blockbuster diabetes drugs in its biggest market.

U.S. sales fell more than 12 percent in the final quarter of the 2017 fiscal year compared with both the previous quarter and the same period a year ago, the company said when it reported its results Wednesday in Mumbai. Flat or declining sales in the U.S. could continue for the next four quarters, Chief Executive Officer Vinita Gupta said in a telephone interview Wednesday.

“We’re trying our best to offset it,” Gupta said. "The next 12 months will be challenging for us."

Lupin’s stock fell as much as 7.7 percent to 1,133.50 rupees, the intra-day lowest level since July 2014 in Mumbai trading Thursday.

"Price erosion in the US business, led by increased competition and buyer consolidation, will continue to exert pressure on earnings growth," Kartik Mehta, an analyst at Deutsche Bank AG, wrote in a note to clients, lowering his price target for the stock to 1,329 rupees per share.


Consolidation among the largest buyers of generic medicines in the U.S. may intensify price erosion across Lupin’s portfolio from the high single-digit percentage declines Lupin had previously predicted, she said. Generic drugmakers globally have faced a deterioration in their U.S. businesses with regulators there approving new products at a record pace, ushering in fresh competition and prompting price cuts.

The introduction of competition to Lupin’s generic versions of Valeant Pharmaceuticals International Inc.’s Glumetza and Shionogi & Co. Ltd.’s Fortamet cost the Indian firm market share and forced it to lower prices on those products in the last quarter, a trend which the company expects to continue, Gupta said.

The company won’t be able to offset those revenue declines until its next big exclusive product hits in 2019, when it will have 180 days of exclusivity to sell a generic version of Gilead Sciences Inc.’s heart medicine Renaxa, which it estimates is a $1.2 billion market, Gupta said.

Declines in the U.S. business, where Lupin gets 46 percent of its revenue, caused overall net sales to fall 5.5 percent in the fourth quarter to 41.6 billion rupees ($642 million) from the previous quarter, the company said Wednesday. Consolidated profit was nearly cut in half to 3.8 billion rupees from the previous year largely due to a foreign exchange loss and a provision for a potential liability relating to a patent dispute in Australia, it reported.

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