Friday, 24 July 2015

What took mighty Lupin down!

In an interview to CNBC-TV18, Praful Bohra, VP- Research, Religare said that US business is one of the most profitable markets for Lupin, and seeing a decline there has resulted into overall weak numbers. 

Besides, absence of big bang approvals and Aurobindo Pharmax entry into generic Suprax also impacted Lupin sales, he said. He also feels the price Lupin paid to acquire Gavis is too high. 

Below is the transcript of Praful Bohra's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. 

Sonia: How to approach Lupin  ? 

A: The numbers were weak. On the operating front - that's largely led by the sequential decline in the US business. However, some part of it would also be driven by the entry of Aurobindo Pharma  in Suprax; I think that would have led to some sequential decline. Having said that I also believe that there would be some erosion in the base business because there were no big bang approvals for Lupin in the last quarter. The US business is one of the most profitable markets for Lupin and that seeing a decline the overall numbers are weak. 

Latha: How are you looking at the Gavis acquisition? Is the price right?  

A: First on the acquisition and what it brings to the table. If you look at the portfolio of Gavis, they have a portfolio of control substances products, dermatology products where Lupin is negligibly present as of now, so that way the acquisition fits. The only thing is the price that they are paying; my sense is it is pretty expensive. So they are paying almost 9x the sales. We have seen such kind of valuations in the past only for domestic acquisitions like Ranbaxy and Abbott 's acquisition of Piramal. I think for US geography this is an expensive acquisition, much higher than what the past acquisitions have been in the range of four-five times sales. So price is one thing which I am concerned about but from a strategic perspective initially this can be return on capital employed (RoCe) dilutive in the medium-term for the company. 

It is okay portfolio wise because it fits in the strategy of Lupin but whatever the price they have paid is obnoxious.

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