Views on Lupin - Updates: Angel Broking

Views of Ms. Sarabjit Kour Nangra (VP Research - Pharma, Angel Broking) on Lupin – Updates:

Goa plant gets Form 483's from USFDA

In a recent development, the US Food and Drug Administration (USFDA) have served Lupin's oral solids and formulation plant in Goa with Form 483, which used by the regulator to document and communicate concerns discovered during an inspection. The USFDA has raised nine concerns relating to manufacturing process and quality control. The plant was inspected by the USFDA last week.

The main cause of concern for USFDA is cross contamination due to free movement from one unit to another within the plant. Besides this, unsigned test records, air handling system and stock location are other observations listed in the form. Lupin has 15 days to respond to the observations before any further action is taken by the USFDA. The Goa plant supplies drugs to markets in US, Europe and Japan. While the further details are not available, these observations don't look that serious. Thus, currently we are not changing our numbers.

Lupin acquires US based GAVIS Pharmaceuticals LLC

Also, the company entered into a definitive agreement to acquire privately held GAVIS Pharmaceuticals LLC and Novel Laboratories Inc. (GAVIS), subject to certain closing conditions in a transaction valued at US$ 880mn, cash free and debt free. The transaction has been unanimously approved by the Boards of Directors of Lupin and GAVIS.

The acquisition enhances Lupin's scale in the US generic market and also broadens Lupin's pipeline in dermatology, controlled substance products and other high-value and niche generics. GAVIS brings to Lupin a highly skilled US based R & D organization which would complement Lupin's Coral Springs, Florida, inhalation R&D center. GAVIS's New Jersey based manufacturing facility will become Lupin's first manufacturing site in the US.

New Jersey based GAVIS is a privately held company specializing in formulation development, manufacturing, packaging, sales, marketing, and distribution of pharmaceuticals products. GAVIS recorded sales of US$ 96mn in FY2014 (coming from around 20 products) and has over 250 New Jersey based employees. GAVIS currently has 66 ANDA filings pending approval with the US FDA and a pipeline of over 65+ products under development. 72% of these filings pending approvals represent niche dosage forms. Till date, GAVIS has filed 25 Para IVs and 8 FTFs products. GAVIS's pending filings address a market value of about US$ 9bn. The combined company will have a portfolio of 101 in-market products, 164 cumulative filings pending approval and a deep pipeline of products under development for the US. The acquisition creates the 5th largest portfolio of ANDA filings with the US FDA, addressing a US$63.8bn market.

Prima facie, the acquisition looks very costly, coming in at 9.2xMarket Cap/Sales, given the size of the company, though funding will be not a problem given that company has very little debt on the books. We maintain our NEUTRAL rating on the stock.

Shares of LUPIN LTD. was last trading in BSE at Rs.1728.6 as compared to the previous close of Rs. 1824.05. The total number of shares traded during the day was 472596 in over 24466 trades.

The stock hit an intraday high of Rs. 1835 and intraday low of 1716. The net turnover during the day was Rs. 827678745.

Source : Equity Bulls

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