Lupin slips 6% post Q4 results; 3 USFDA observations for Aurangabad unit

Lupin shares dipped 6 per cent to Rs 736 on Thursday, extending its previous day’s 3 per cent decline on the BSE, after the drug company reported lower-than-expected net profit of Rs 290 crore for March quarter (Q4FY19).  Analysts, on an average, had expected profit of Rs 455 crore for the quarter.

Lupin on Wednesday, May 15 after market hours said it has received three observations from the US health regulator for its Aurangabad-based manufacturing facility.

The US Food and Drug Administration (USFDA) carried out the inspection at the plant from May 6 to May 15, Lupin said in a statement. "The inspection at the Aurangabad facility closed with three observations. The company is confident of addressing them satisfactorily," it added.

“Currently Lupin has been facing USFDA regulatory issues such as three plants under OAI (Official Action Indicated; high probability of getting warning letter (WL) for the said plant) such as Mandideep Unit-1, Pithampur Unit-2 & Somerset, US facility, pending WL on Goa and Pithampur Unit- 2 and three observations to Aurangabad Facility which raises concerns over Lupin’s ability to deal with the US FDA related issues,” analysts at Reliance Securities said in a result update.

The brokerage firm expects delays in resolving the pending USFDA issues which will impact overall sales/profitability led by higher remedial expenses towards facilities and delay in new approvals.

Analysts at Antique Stock Broking maintains ‘hold’ rating on the stock as the company has the most visible near-term pipeline comprising levothyroxine (awaiting approval for 2 RLDs), gMoviPrep, gEmend, gProAir and the gradual uptick of Solosec among others.

“While the numbers were largely in-line with consensus expectations, the anticipated beat on expected numbers did not materialize, implying that base business pressures are receding more slowly than expected. The margin expansion will continue as the pipeline unfolds and should get a further boost in FY21 as the company embarks on cost rationalisation program. With domestic formulations expected to grow at 12-14 per cent, revenue surprises looks unlikely,” the brokerage firm said in result update.

At 10:01 am, Lupin was trading 5 per cent lower at Rs 744 on the BSE, as compared to 0.06 per cent rise in the S&P BSE Sensex. The stock was trading close to its 52-week low price of Rs 720 touched on March 28, 2019. The trading volumes on the counter nearly doubled with a combined 2.81 million shares changed hands on the NSE and BSE so far.

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