Lupin Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Lupin Ltd (LUPIN) Q3 FY23 Earnings Concall

Management Update:

• [00:03:30] LUPIN said it is optimistic of growing its US business in the next couple of years. In India, the company added close to 1,000 reps, and created 6 new divisions to expand its reach. LUPIN expects its investments to get above market growth of double digits in coming quarters in India.

Q&A Highlights:

• [00:11:35] Prakash asked how the U.S. run rate was doing after the launches and acquisitions of products, and good flu season that helped with market share gains. Vinita Gupta CEO said the performance was satisfactory. The business, base business, in-line business, and new product launches were all good for the quarter. However, the flu season products have impacted the performance and when the flu season stops, there will be a decline.

• [00:15:31] Prakash enquired that on the cost side, why there is jump and the outlook. Ramesh Swaminathan ED said that the jump in SG&A cost is due to higher travel expenses, increased litigation costs, rupee depreciation, inflation, and addressing inefficiencies at the factory level. LUPIN added that initiatives to optimize costs are still ongoing, and they will bear fruit in the upcoming quarters.

• [00:19:00] Saion Mukherjee asked what LUPIN’s outlook on margins would be if Spiriva experiences further delays. Ramesh Swaminathan ED said LUPIN recognizes that if the topline doesn’t move, it still have to work on initiatives to reduce costs. If Spiriva and other products get delayed, then the expense lines will go down and shift the EBITDA margin.

• [00:21:30] Saion Mukherjee also inquired about the INR500 crores in savings if it’s still valid and how much is already achieved. Ramesh Swaminathan ED answered that LUPIN achieved success in about 50-60% of the INR600 crore and are still working on the rest. It will eventually get achieved which is a matter of time.

• [00:23:20] Damayanti Kerai enquired when did the addition of 1,000 people to the India sales team happen and how many more people are expected to be added. Ramesh Swaminathan ED answered that LUPIN started adding from Nov. And in 4Q23, LUPIN is adding six new divisions and increasing its sales force in India. LUPIN has been growing below the industry average, but with the addition of these new people, it expects to grow faster than the market in 2Q24.

• [00:27:19] Damayanti Kerai asked that with more sales people coming in which segments LUPIN is focusing to outpace market growth. Nilesh Gupta MD said its big therapy areas are diabetes, cardiovascular, and respiratory which would grow.

• [00:28:05] Damayanti Kerai also asked that on diabetes, if LUPIN is relying more on improved volume penetration. Nilesh Gupta MD said that the market potential is always there in India as it’s the diabetic capital of the world. If it bounces back for the market then it will bounce back for LUPIN also.

• [00:37:13] Neha Manpuria asked that from a 2-3 year perspective if any organic or inorganic investment is needed to bolster LUPIN’s India position. Nilesh GuptaMD answered that LUPIN is doubling down in India. The company is committed to the requirement from a people, expense and R&D perspective to cater to the business.

• [00:43:04] Neha Manpuria enquired about the opportunity pipeline in the injectable business. Vinita Gupta CEO answered that LUPIN got the approval to accelerate its portfolio and bring in-house manufactured products into the market. LUPIN has filings pending for glucagon and famotidine and other products, and it will try to bring fortified products into the market in the next fiscal year with an even larger number the year after.

• [00:46:09] Niteen Dharmawat enquired about guidance for top line and EBITDA guidance for FY2 and FY24. Ramesh Swaminathan ED answered that the EBITDA margin for the next quarter should remain around the same as the current quarter, but will improve due to cost savings and increased revenue from new products. Overall, the ideal target will be to reach 20% margin and double digit topline growth.

• [00:48:54] Sameer Baisiwala asked if LUPIN is seeing competitive intensity in the U.S. for OSDs going up. Vinita Gupta CEO answered that the company has seen some rationalization and some reprieve on the price erosion front. Generally prices have been returning to high-single-digit erosion. LUPIN hopes that this trend will continue in CY23.

• [00:51:50] Sameer Baisiwala asked  about US business profitability. Vinita Gupta CEO said its EBITDA is currently below the company average. The U.S. EBITDA from FY24 is expected to be above the Company’s average level of EBITDA.