Lupin Ltd reported better-than-expected revenue of Rs 74.5 billion for the fourth quarter of FY26, up 32% year-on-year, but analysts warn that the pharmaceutical major’s peak performance in the US market may be behind it, according to a report by Equirus Securities released on May 10.
Q4 Performance Exceeds Estimates
The company’s quarterly revenue exceeded analyst estimates of Rs 71.2 billion by 5%, driven primarily by strong performance in the US business and growth markets. However, EBITDA at Rs 21.7 billion was in line with expectations as higher revenue was offset by elevated operating expenses related to the generic Myrbetriq settlement and acquisition-related costs.
US Revenue Growth Masks Pipeline Concerns
US revenue reached $371 million in Q4, an increase of $21 million quarter-on-quarter, aided by market-share gains in generic Myrbetriq following a settlement with the innovator and continued strong contribution from generic Jynarque. For the full fiscal year FY26, US sales totaled $1.32 billion, representing a 40% year-on-year growth in constant currency terms.
Despite this strong performance, management flagged incremental competition in key products and guided for US revenue of “billion dollar plus” for FY27, down from $1.3 billion in FY26. The company expects high single-digit to low double-digit revenue erosion versus FY26 due to competition in Tolvaptan and Mirabegron, partially offset by new launches and base business growth.
Margin Compression Expected
Lupin’s EBITDA margins have seen a remarkable expansion from 10% in FY23 to 29% in FY26, driven by high-value product launches. However, analysts at Equirus Securities expect EBITDA margins to moderate to approximately 25% in FY27 and further to 21% in FY28 as top products face heightened competition.
The company has provided FY27 EBITDA margin guidance of approximately 25%, representing a step-down from 29.7% in FY26 due to Tolvaptan and Mirabegron competition, higher R&D spending at around 8% of sales, and per-unit royalty costs to Astellas for Mirabegron.
Key Product Competition Timeline
According to the concall highlights, Tolvaptan’s patent expiry in September 2026 is the competition timeline factored into FY27 plans, though generic penetration remains under 40%, suggesting market expansion potential. For Mirabegron, a third player (Astellas) has settled but is not yet in the market, waiting for product supply. Market penetration for Mirabegron is just reaching 50%, and Lupin still expects it to be a material FY27 contributor despite the competition.
Analysts believe that generic Jynarque, generic Myrbetriq, and generic Spiriva together contribute more than 50% of US revenue and are entering a sharp erosion phase. With this coinciding with a weak near-term pipeline, Equirus Securities expects a sharp US slowdown and models FY27 and FY28 revenue at approximately $1.2 billion and $1 billion, respectively.
Domestic and Emerging Markets Show Promise
On a brighter note, Lupin’s domestic business demonstrated robust growth with core prescription revenue growing 14.5% in Q4 versus Indian Pharmaceutical Market (IPM) growth of 11.6%, representing 1.3 times IPM growth. For the full year FY26, chronic therapy share increased to 66% from 64% in FY25, with the company targeting 70% over the next five years.
Growth market revenue at Rs 9.9 billion rose 49% year-on-year, led by Brazil (up 113% year-on-year) and the Philippines. Management highlighted Dapagliflozin as a key growth driver in Brazil, with Empagliflozin launch expected in the near term to sustain momentum.
The company recently launched Semaglutide injection (Semanext) in India, targeting diabetes, achieving the ranking of #2 generic company and #3 product within the first month. The product uses a pen device with strong physician acceptance and has seen a significant ramp-up in month-2 prescriptions.
Biosimilar Strategy Gaining Traction
Lupin’s current biosimilar franchise revenue stands at approximately $50 million, largely from Etanercept in Europe through partners, with the company guiding for a 3x increase in FY27. Key biosimilar launches include Pegfilgrastim prefilled syringe in partnership with Valorum for the US market, with product ramp-up beginning in Q2/Q3 FY27, and Ranibizumab (Lucentis biosimilar) expected to launch in the US in FY27.
European Expansion Through VISUfarma Acquisition
European sales crossed $200 million for the first time, growing at a healthy double-digit rate during the year. The VISUfarma ophthalmic specialty acquisition is being integrated from Q1 FY27, adding EUR 50-60 million in sales at approximately 25% margins. Management guided that VISUfarma’s top-line could cross $100 million in 2-3 years if synergies play out as planned.
Analyst Downgrade and Valuation Concerns
Equirus Securities has downgraded Lupin from “ADD” to “SHORT” with a March 2027 target price of Rs 2,065, representing a 13% downside from the current market price of Rs 2,380. The downgrade is based on the belief that at current valuations of 24x/31x P/E on FY27/28 estimates, the market is not adequately factoring in the moderation in the US business.
“History suggests that when top products face incremental competition, both profitability and US-business valuations derate sharply, while replacing lost revenue remains difficult,” the analysts noted in their report. “At current valuations, we believe the Street continues to price in new opportunities to offset the erosion and optimism we view as misplaced”.
Financial Guidance and Headwinds
For FY27, Lupin has provided revenue growth guidance of high single-digit growth in Indian rupee terms. The company also noted freight headwinds with ocean freight approximately 15% higher and air freight approximately 60% higher, along with raw material cost pressures from Middle East disruption.
The effective tax rate for FY27 is expected to be approximately 25%, up from 22.1% in FY26, as some domestic facility incentives phase out.
Strategic Priorities
Management indicated that strategic priorities include specialty acquisitions in ophthalmology (now seeing high deal flow post-VISUfarma), pulmonology, and rare neurology assets for developed markets. The company is also evaluating India bolt-on acquisitions in existing therapy areas and new therapy areas to build.
Lupin plans to launch 50+ US products over the next 3 years, including 10 exclusive/first-to-file products, 4 biosimilars, and 2-3 505(b)(2) products. The company’s strategy focuses on doubling the share of complex products led by respiratory and complex injectables, augmented by biosimilars in the next couple of years.
