Lupin Ltd's proposed acquisition of a portfolio of brands of Anglo-French Drugs & Industries and its associates is being seen as a positive. The turnover of the portfolio being acquired was at Rs95 crore during FY21. As the acquisition is being done at cash consideration of Rs325 crore, it implies an enterprise value to sales valuations of 3.3 times, which is attractive and lower than the industry average of 4-5 times, as per analysts.

The portfolio will strengthen Lupin’s offerings primarily in the vitamin, minerals and supplements (VMS) category. The category is growing well and has seen strong growth in the current fiscal.

Analysts at Motilal Oswal Financial Services Ltd (MOFSL) said that given Lupin’s marketing expertise as well as the strong brand recall of the acquired portfolio, there is enough scope to expand sales of the acquired brands over the next 3-4 years. However, the overall sales impact of these products on Lupin’s earnings is expected to be minimal at 0.6% of Lupin’s consolidated FY21 sales.

Lupin, meanwhile, has been doing well in the domestic market, with sales growing 15.9% year-on-year during the September quarter. The December quarter is also expected to clock similar numbers.

Sales growth in the US is a key monitorable, though. Lupin has been facing pricing pressure in its base business in the US, having reported low single-digit sales growth during Q2. It had clocked $172 million and $184 million in sales in the US during the April-March and July-September quarters, respectively, and is targeting a run rate of $200 million per quarter during the second half. 

Analysts at Axis Securities Ltd expect Lupin to clock in $190 million in US sales in the December quarter, aided by products such as generics of Albuterol inhaler, thyroid treatment Levothyroxine etc.

In another positive, the company has been witnessing some respite on the regulatory front. Its key Goa facility was cleared by the US Food and Drug Administration in December after almost four-and-a-half years of regulatory hurdles.

In another development, the company on Wednesday announced a partnership with Shenzhen Foncoo Pharmaceutical Co. Ltd (Foncoo) for China - a first for Lupin in that geography. 

Indian pharmaceutical companies are eyeing the China market for growth. Dr Reddy’s Laboratories Ltd has taken a lead, setting up its front-end operations, and Lupin's progress will be watched closely.

Lupin’s shares saw marginal gains of up to 0.8% on Wednesday, a day when broader indices traded were down. 

Valuations have been limiting gains for the stock, as per analysts. While analysts at MOFSL expecting a 19 percent CAGR for earnings for Lupin during FY21–24, they said potential launches are factored in the estimates. At current prices, the stock is trading at 25.6 times FY22 estimated earnings.