Lupin managed to grow its operating profits by a healthy 28 per cent to Rs 516 crore in the September quarter. Better product mix in the US, lower R&D cost, healthy growth in the domestic market and higher export incentives helped the company achieve this.

Lupin’s R&D cost was 32 per cent lower than the same period last year at Rs 93 crore, accounting for 4.2 per cent of revenues. This is much lower than the management guidance of seven per cent. Adjusting for the one-time licensing income of Rs 88 crore received from Medicis during the same quarter last year, loss of Rs 25 crore and normalising R&D costs, export incentives and tax rate, Lupin’s operating profit grew at an impressive 48 per cent.

Higher tax mars profits

Despite a strong operating performance, reported profits witnessed a slow nine per cent rise due to the 11 percentage point increase in tax incidence at 33 per cent. This compares to the management guidance of 28 per cent for the current fiscal.

Domestic growth continued to remain strong at 18.4 per cent. US revenue growth of 21 per cent was helped by higher generic product sales and a favourable currency move, while branded sales remained flat. Lupin’s Japanese sales were higher by 85 per cent, of which Kyowa, the principal subsidiary accounted for 31 per cent, while consolidation of recent acquisition I’rom Pharma accounted for the balance 54 per cent.

US key to margin improvement

With three new approvals in the US market during the quarter, Lupin targets to launch 17 more products by end of the fiscal.

With the upcoming launches aimed at niche segments such as oral contraceptives and differentiated formulation such as controlled release, the management is confident of improving margins. But, slack growth in the US branded business given the sliding Antara brand sales and flattish Suprax sales, remains the key risk to margin improvement.

Nalinakanthi.v@thehindu.co.in

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