Lupin slips nearly 7% on CLSA downgrade, target price cut

NEW DELHI: Lupin slipped 7 per cent to Rs 1,554.40 on the BSE on Friday after CLSA downgraded the stock to underperform from buy earlier largely on concerns over USFDA issues.

The global investment bank also slashed its 12-month target price to Rs 1,800 from Rs 2,162 earlier as they feel that the stock is likely to remain range-bound till US concerns subside.

Two repeat observations from July inspection are worrying, said the CLSA note. Repeat observations increase the risk of escalation and approval delays, they say.

Lupin shares crashed earlier this week after the US Food and Drug Administration (USFDA) has issued nine observations related to manufacturing practices at its Goa-based formulations site.

Goa plant has many limited competition products awaiting approvals and if delayed will impact earnings. To counter the uncertainty, the investment bank slashed earnings per share (EPS) estimates by 9 per cent to their FY17-18 earnings.

In a statement to exchanges, Lupin said the FDA had inspected its Goa facility last week. "The observations are on aspects such as inadequacy and adherence to SOPs ( standard operating procedures). We are in the midst of putting together a response to address the US FDA's observations," the company said.