LUPIN - Lupin Ltd Share Price

In their earnings call for FY2025, management provided an optimistic outlook emphasizing sustained growth and strategic focus. Vinita Gupta, the CEO, mentioned that FY2025 has been a "stellar year," with revenues reaching $2.7 billion and EBITDA at $625 million. Management highlighted a 17% growth in the US market, making Lupin the 3rd largest company by prescriptions dispensed in the US generic market.

Gupta outlined several major forward-looking points:

1. Product Launches: Fiscal Year "˜26 is expected to feature significant contributions from injectables and biosimilars, particularly with anticipated launches of products like Glucagon, Liraglutide, and Risperdal Consta®.

2. India Growth: The company aims to continue growing at 1.2 to 1.3 times the market rate, targeting an increase in the chronic therapy portfolio which now constitutes 64% of sales. The team is also expanding its sales force by providing 2,000 new representatives over the next four to five years.

3. Complex Generics: Management is shifting focus towards complex generics, projecting this segment to comprise 49% of revenues in the next five years, up from 30% in FY2025.

4. Cost Efficiency: Continued emphasis on cost optimization is underscored, with plans to lower operational costs by INR 750 to INR 1,000 crores in the next fiscal years. The EBITDA margin is anticipated to rise from 23.7% in FY25.

5. Market Expansion: The company is looking to enhance its footprint across Emerging Markets while also building on its established positions in API production, particularly within the US to leverage market demands created by geopolitical shifts and growing demands for local production.

Overall, management's outlook reflects confidence in navigating market challenges while capitalizing on emerging opportunities through strategic growth initiatives.

Question: "How do you look at revenue growth going forward in FY26 and possibly beyond, for both India and US business? Also, how should we look at margin side as the share of complex generics increases?"

Answer: We expect buoyancy in our top line due to a strong product pipeline, which is aligned with our growth strategy. For FY26, we anticipate growth driven by key product launches. As the share of complex generics increases and cost efficiencies remain a focus, we project margins to improve gradually. Our expectation is that margins will rise at least by one percentage point this year due to these factors.

Question: "With concerns about the MFN policy, how do you view the impact on novel drugs and tariffs? What flexibility do your US facilities offer for managing supply chain?"

Answer: The MFN policy primarily affects branded drugs, whereas generics should remain stable due to existing low expenses. While tariffs on Indian pharmaceuticals are crucial, we're optimistic about bilateral talks leading to reduced rates. Our Coral Springs and Somerset facilities provide us the capacity to explore local manufacturing for essential drugs, and we are actively discussing potential partnerships to ensure reliability of supply.

Question: "How do you see the impact of potential Medicaid cost cuts on Indian pharma?"

Answer: Any Medicaid cost cuts will likely target branded drugs first. I believe generics will be less affected due to their lower costs. We are emphasizing the inefficiencies from PBMs that take a significant portion of the value, and we expect some scrutiny on them could potentially improve the pricing environment for generics.

Question: "What is the expected market share growth for Huminsulin following Lilly's departure and how are you preparing for Semaglutide?"

Answer: We anticipate increasing our Huminsulin market share from 18% to 24% post-Lilly's exit. We've also developed our in-house version of Semaglutide, aiming to capture additional market share after its patent expiration in March 2026. We see significant potential for increasing overall diabetes treatment penetration in India.

Question: "What is the status of Mirabegron in regards to the ongoing litigation?"

Answer: We are currently selling Mirabegron and preparing for the trial in February. We have strong defenses on both non-infringement and invalidity grounds, so should we prevail at trial, we could keep it on the market until the patent expires in 2030.

Question: "What are the underlying factors driving your margin expansion strategy?"

Answer: Our margin expansion is driven by improved product quality, strategic R&D investments, and efficiencies gained from cost optimization. The ongoing growth of complex generics will enhance our margins, allowing for a steady rise in profitability.

Question: "Could you elaborate on your current CDMO initiatives and the competition's impact on that?"

Answer: Our CDMO capabilities leverage existing API manufacturing and present a growth opportunity amid industry shifts. We're building a skilled team focused on commercial competency. While the CDMO market is competitive, our strong reputation and experience position us well to capture this market and address the growing need for reliable suppliers outside of China.

Question: "Do you see any impact of the adjacencies on your overall profitability in FY25?"

Answer: Yes, the adjacencies, including the digital health and diagnostics segments, currently have a negative impact on our overall profitability. However, we're optimistic about their growth potential, expecting them to evolve into positive contributors as they gain traction.

Question: "What will your R&D spending look like in light of your focus on complex generics?"

Answer: We plan for R&D spending to increase by 10-15% next year. Complex projects will dominate this allocation. It's essential as we target innovative, high-potential drug candidates in alignment with our longer-term growth strategy.