InvestorQ : Why has Lupin posted such a huge loss and what does that mean for the stock price of the company going ahead?
Tisha Malhotra made post

Why has Lupin posted such a huge loss and what does that mean for the stock price of the company going ahead?

Answer
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Moii Chavate answered.
10 months ago


Lupin posted a loss of Rs.130 crore in the September quarter as against a net profit of Rs270 crore in the corresponding quarter last year. The impact was largely because of a provision of Rs.380 crore for settlement in a US court over the divestment of Kyowa Criti Care Ltd in a case related to US Medicaid and also incurred a loss of Rs.170 crore on divestment of its stake taking the total one-time loss to Rs.550 crore.

Lupin’s operational performance was strong, with sales rising 10.3% YOY to Rs.4360 crore. Growth in sales revenues was largely led by sales of drug formulations in its largest market, India where it increased 11.5% to Rs.1340 crore. Interestingly, even the revenues from the North American market grew 6.1% to Rs.1320 crore as Lupin launched three new products during the quarter taking its total to 171 products in the US generics market.

However, the US operations have larger concerns in terms of FDA regulatory issues. Business was hit by regulatory issues at four of its plants viz. Goa, Pithampur, Mandideep and Gavis Pharma’s Somerset plant. US FDA had also observed serious violations of good manufacturing practices at the Somerset plant earlier this year.

Stock prices could remain under pressure due to the FDA related issues, even considering that the US now accounts for just 31% of its total sales and India accounts for an equal market share. It is advisable to be cautious on Lupin and rather focus on stocks like Cipla and IPCA Labs which have given good numbers in the latest quarter.