Citigroup maintains 'Buy' rating on Lupin

LUPIN

RESEARCH: CITIGROUP
RATING: BUY
CMP: Rs 1137

Citigroup maintains `Buy' rating on Lupin and raises the target price to Rs 1,415, as they raise EPS estimates (FY10E/11E up 1%/14%) and roll over to 15x FY11E EPS.

Citigroup believes Antara strengthens Lupin's US branded franchise and acts as a growth and margin driver ahead of the oral contraceptives launches in the US (late FY11).

Lupin acquired the rights for Antara (fenofibrate 130mg and 43mg capsules) from Oscient (bankruptcy proceedings) for $38.6 million. Oscient had licensed the rights from Ethypharm and also had a deal with Paul Capital. Lupin will pay royalties to Etypharm but has no obligation to Paul Capital.

Lupin has sold its ANDA (FTF P-IV ) on Antara to DRL and settled the litigation. While Paddock has also challenged the Antara patent in May '09, it can only launch after DRL's exclusivity runs out - which, in turn, will only be triggered if Paddock prevails in the district and appeals courts.

Antara had sales of about $70m in CY08 and has grown without much promotion of late. Citigroup raises the FY10/11 EPS estimates by 1%/14%.

This deal also lowers the potential impact of two key risk factors: a) imminent generic competition in Suprax - Antara's sales to help maintain US branded sales at healthy levels, and b) potential escalation of FDA issues at Mandideep - post the Antara acquisition.