Heartburn Drug Approval For Rival Negative For Lupin, Says Jefferies

Jefferies sees the U.S. Food and Drug Administration approval for a new generic of a heartburn drug as a negative for Lupin Ltd.

“Novitium has received FDA approval for Famotidine oral suspension generic. It is a single-source product where Lupin is the only supplier currently. By our estimates, it accounted for about 15% of Lupin's U.S. sales in FY21,” the research firm said in a report, while maintaining its ‘hold' rating on the stock.

Within the limited portfolio, Novotium actively sells at least four oral solutions/suspensions, Jefferies said. “Therefore, it appears that they have in-house manufacturing capabilities for this dosage form.”

Lupin's shares fell as much as 2.3% to Rs 1,036 apiece, before erasing losses in line with NSE Nifty 50 index's recovery. Its trading volume was 74% above the 20-day average for this time of day.

“We value Lupin at 24.8x FY23 estimated Earnings Per Share to arrive at our price target of Rs 947,” Jefferies said.

Key risks for Lupin, according to Jefferies:

• Lower than expected revenue from Albuterol—used for treatment of asthma.

• Better-than-expected launch rate of differentiated products.

• Fast clearance of facilities by the U.S. FDA.

Of the 40 analysts covering Lupin, 23 have a ‘buy' rating, nine suggest a ‘hold' and eight recommends a ‘sell', according to Bloomberg data. The average of the 12-month consensus price targets implies an upside of 2.2%.