Lupin reports a mixed Q2 performance

R&D costs remained high at 10 percent of sales with an absolute spend of Rs 435 crore. Lupin reported a loss this quarter of Rs 127 crore on account of an exceptional loss of Rs 546.5 crore. The exceptional loss was on account of a settlement of a lawsuit with the State of Texas. The company made a provision of $53.5 million on account of it.

The company also reported a loss of Rs 167 crore on the divestment of a part of their Japanese business Kyowa Criticare. The profit ex of exceptional was Rs 258 cr which too was below expectations of over Rs 320 cr for the quarter and marginally lower than the Rs 266 crore reported in Q2FY19.

CIPLA reported a good recovery in its Q2 performance versus last quarter. Growth was led by a recovery in key geographies such as India, South Africa, and Emerging Markets. The US while it continued to grow YoY came off QoQ as sales of drug Sensipar generic wore off. Revenue growth for the quarter was 9.6 percent YoY to Rs 4396 crore. India was up 6 percent YoY and 29 percent QoQ to Rs 1745 crore this compares to a 12 percent decline in Q1FY20.

The India business saw growth as there was some stabilisation in the disruptions the company was facing in the trade generic business. The trade generic business was up 61 percent QoQ in the quarter. The branded generic business in India saw a 13 percent YoY growth. The US recorded sales of $135 million. While the US saw a growth of 25 percent YoY it came off versus the $161 million recorded in Q1FY20. The reason for the decline was the petering of sales from a drug used to treat excess secretion of the parathyroid hormone Sensipar generic in the US. However, the base business is expected to have been steady this quarter as well. Other geographies recovered too with South Africa up 9 percent versus a decline of 7 percent in Q1 and Emerging Markets growing 62 percent QoQ after falling 41 percent YoY in Q1FY20.

Margins at 20.7 percent marked the third consecutive quarter they were maintained above 20 percent. R&D costs were steady at 7 percent of sales or Rs 295 crore. The company has guided for margins between 18-20 percent for Q3 and possible come off in Q4 due to seasonality. Profit grew 31 percent led by better operating leverage and supported by higher other operating income. Lastly, the company improved its balance sheet by reducing debt by repaying a $110 million loan one year ahead of schedule.