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Lupin posts surprise quarterly loss after acquisition-related charge

Indian drug maker also suffers slump in U.S. sales

  © Reuters

MUMBAI (NewsRise) -- Lupin, India's second-largest drug maker, reported a surprise fourth-quarter loss, weighed by a one-time charge related to the acquisition of Gavis Pharmaceuticals more than three years ago.

The consolidated loss for the quarter ended in March stood at 7.84 billion rupees ($115 million), compared with a profit of 3.80 billion rupees a year earlier, the company said Tuesday. Analysts had expected a profit of 3.20 billion rupees, according to a Reuters poll. Revenue declined 5.1% to 40.34 billion rupees amid and slump in sales in the U.S.

The quarter had a one-time impairment provision of 14.64 billion rupees on certain assets acquired as part of the Gavis group acquisition, the company said. It also recognized deferred tax worth 3.22 billion rupees on account of the intangible assets of Gavis.

In 2015, Lupin agreed to buy Gavis for $880 million in a bid to expand in the largest drug market in the world.

The company took a one-time impairment on the Gavis acquisition "in line with the changed market conditions in particular with the opioids in the U.S," Nilesh Gupta, Lupin's managing director, said in the statement.

North America formulations sales, which accounted for more than a third of Lupin's overall revenue, plunged 21% to 14.99 billion rupees, while the drug maker launched 11 products in the U.S. in the quarter.

Lupin and its peers have been grappling with tumbling drug prices in the U.S., where the Food and Drug Administration has hastened its approval rate for generics, paving the way for increased competition from new players. A rising number of retail pharmacies in the U.S. are also joining hands to gain leverage in buying generic drugs in bulk, pushing prices further down.

The company's sales in the U.S. shrank last fiscal year as it grappled with increased competition in the generic versions of Fortamet and Glumetza, drugs to treat type 2 diabetes. Lupin was the first to file with U.S. regulators for a generic form of these drugs, which offered six months' exclusivity in the market and boosted its revenue the year before.

Gupta said the company's near-term priorities are resolution of the warning letter on its Goa and Indore plants, successful commercialization of women's healthcare drug brand Solosec in the U.S., and executing on "meaningful" product launches.

In November, Lupin received a warning letter from the FDA for two of its plants in Goa in western India and Indore in the central part, after it found violation of good manufacturing practices. The letter has crimped Lupin's chances of getting regulatory approvals for products filed from these units, which, according to analysts, account for roughly a third of the pending generic drug applications with the FDA.

Lupin shares fell as much as 4.1% to touch their 52-week low on Tuesday, before paring some of those losses to end 0.5% lower in Mumbai trading. The benchmark S&P BSE Sensex closed little changed.

--Dhanya Ann Thoppil

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