Lupin gets target hike from Nomura to Rs 1,949 on growth potential in US products

Brokerage Nomura has maintained its ‘buy’ rating on Lupin and increased its target price to Rs 1,949 from Rs 1,606 a share earlier.

Nomura suggests that the launch of US products and stringent cost-control measures could exceed current earnings estimates. Additionally, Lupin has potential limited competition opportunities in FY25 with products like gOracea, gMyrbetriq, and gSlynd, pending a favourable verdict.

On April 9, 2024, Lupin announced its final approval from the USFDA for gOracea, becoming the first generic to launch the product in the US. With annual sales of $128 million, according to IQVIA (MAT February 2024), this follows a recent district court ruling that Lupin does not infringe on patents ‘532 and ‘740 covering Oracea, expiring in December 2027 and December 2025. This approval and court decision come after Lupin’s second ANDA for generic Oracea in 2021, following a previous unsuccessful attempt in 2009 due to patent infringement findings by both district and appeals courts.

Oracea, consisting of 40mg doxycycline caps with a combination of immediate and delayed release, treats inflammatory lesions of rosacea with annual sales of around $128 million, per IQVIA. Despite an authorized generic (Mayne Pharma) holding about 25 percent market share, competition is expected to increase with known ANDA filers, including Viatris, Amneal, Alembic, Dr Reddy’s, Prinston, Apotex, Sandoz, and Endo.

Lupin’s ANDA is the only one currently deemed non-infringing by the court, potentially allowing it to be the sole approved generic until Dec 2027 when the ‘532 patent expires. Nomura said Lupin could generate revenues of $10-15 million annually if it remains the only approved generic, presenting a potential earnings upside of $6-9 million (2-3 percent of FY25 earnings), pending competitive dynamics clarification. However, Lupin’s launch is technically at risk pending an appeal from the innovator against the district court decision.

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