Why Lupin Fails to Earn a Pre­mium

Un­cer­tainty over the ex­tent of price and mar­ket share ero­sion in two of its key di­a­betic prod­ucts and lower-than-ex­pected ramp-up of Gavis ac­qui­si­tion keep­ing stock range­bound

The Economic Times - - Companies: Pursuit Of Profit -

ET In­tel­li­gence Group: At a time when most pharma com­pa­nies are em­broiled in res­o­lu­tion of USFDA is­sues, fac­ing de­lay in drug ap­provals or are still find­ing their foot­ing in the global generic in­dus­try, Lupin, the coun­try’s third-largest pharma com­pany, has been an ex­cep­tion.

With one of the high­est drug ap­proval rates, swift res­o­lu­tion of USFDA reg­u­la­tory queries, di­ver­si­fied pres­ence in key mar­kets, abovein­dus­try growth in the do­mes­tic mar­ket, and timely strate­gic ac­qui­si­tions, Lupin has reg­is­tered per­for­mance con­sis­tent enough to get buy calls from two out of ev­ery three an­a­lysts, ac­cord­ing to Bloomberg data. Ace in­vestor Rakesh Jhun­jhun­wala holds 1.8% of Lupin.

Yet, the stock is down by a third from its Oc­to­ber 2015 high, like the rest of its peers. TheLupin­stock­istradin­gat­apriceto earn­ings mul­ti­ple of 29, or 40% lower than the peak valu­a­tion of 49 hit two yearsago.It­fail­sto­com­man­danypremium over its peers such as Sun Pharma, which has faced dis­rup­tion on ac­count of USFDA reg­u­la­tory is­sues, and Ci­pla, whose tran­si­tion is still to yield the ex­pected re­sults.

Lupin’s man­age­ment be­lieves that in­vestor con­cerns over the prospects of the phar­ma­ceu­ti­cal in­dus­try have pre­vented the de­served re-rat­ing of the Lupin stock.

How­ever, an­a­lysts be­lieve there is an un­cer­tainty dis­count thatiskeep­ingth­eLupin­stock­within a range.

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