Rakesh Jhunjhunwala's pharma bet hits new 52-week high; should you buy?

According to the shareholding pattern for March 2021, Rakesh Jhunjhunwala held 1.6 per cent stake or 72,45,605 Lupin shares at the end of Q4

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Share of Lupin rose 5 per cent to hit an over four-year high of Rs 1,258.40 on BSE in intraday trading today. The stock ended 3.16 per cent higher at Rs 1,246.90 against the previous close of Rs 1,208.65.

The pharma stock, which forms part of ace investor Rakesh Jhunhjhunwala's portfolio, has gained 43 per cent in one year and risen 28 per cent since the beginning of this year.

Lupin share stands higher than 5 day, 10 day, 20 day, 50 day, 100 day, and 200 day moving averages. Market cap of the firm rose to Rs 56,580.69 crore on BSE.

According to the shareholding pattern for March 2021, Rakesh Jhunjhunwala held 1.6 per cent stake or 72,45,605 Lupin shares at the end of Q4.

Lupin Limited today announced that the USFDA has accepted the Biologics License Application (BLA) for its proposed biosimilar to Neulasta (pegfilgrastim) through a filing using the 351(k) pathway. Pegfilgrastim has estimated annual sales of $3.66 billion in the US.

Nilesh Gupta, MD, Lupin said, "The pegfilgrastim filing is our first biosimilar filing in the U.S. and is a milestone in our research and innovation journey as we continue to focus on delivering unique and affordable solutions to alleviate disease burden. Biosimilars is a key part of our growth strategy and we are proud of the world-class achievements of our group.''

The BLA submission is supported by similarity data from analytical, pharmacokinetic, pharmacodynamic, and immunogenicity studies.

Recently, the pharma major also announced the achievement of key milestones for Lupin's MEK inhibitor compound that is planned for development by Boehringer Ingelheim in combination as potential targeted therapy for patients with difficult-to-treat cancers.

As part of the agreement, Lupin has received payment of USD 50 million from Boehringer Ingelheim for the achievement of key milestones.

Lupin and Boehringer Ingelheim inked a licensing, development, and commercialization agreement in 2019 for Lupin's novel oncology compound to treat KRAS-driven cancers. Lupin's MEK inhibitor developed as part of its oncology pipeline had previously shown pre-clinical activity as a single agent as well as in combination.

The pharma firm turned profitable with a profit of Rs 1,216 crore for the fiscal ended March 2021 against a loss of Rs 269 crore in the previous fiscal. However, total income fell 3.53 per cent to Rs 15,299 crore in FY20-21 against Rs 15,858 crore in FY19-20.

Net profit in Q4 rose to Rs 460 crore against Rs 389 crore in the corresponding period of the previous fiscal. Total income in Q4 slipped 5.25 per cent to Rs 3,841 crore against Rs 4,054 crore income in the corresponding quarter of last year.

"We have raised our FY22E/FY23E EPS by 2%/9% to factor in: a) outperformance in the domestic formulation (DF)segment, b) niche launches in the US and European markets, c) extended benefit of cost savings in DF, and d) lower effective tax rate. We value LPC at 25x 12-month forward earnings to arrive at our target price of Rs 1,320 per share," Motilal Oswal said.

"We believe that current valuation factors the potential upside from niche launches. We downgrade to Neutral on the limited upside from current levels," the brokerage added.

Axis Securities has a 'Buy' call on the stock with a target price of Rs 1,400 per share.

"Gross margins expansion with the launch of value-added products, digital promotion in marketing of Solosec, cost rationalization in R&D and employee segment could improve EBITDA margins by 590 basis points while better capital allocation could result into the improvement of RoCE by 560 bps over the period FY20-FY23E," the brokerage firm noted.

"We remain positive on the stock, as prospective pipeline, streamlined costs, and improved margins should help growth in the near-term," said Geojit BNP Paribas.

Hence, we maintain our HOLD rating on the stock with a revised target price of Rs. 1,270 based on 26x FY23E adj. EPS," it added.