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Is Lupin a Growth Stock At Safe Stock Valuations? - Views on News from Equitymaster
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Is Lupin a Growth Stock At Safe Stock Valuations?
Mar 31, 2017

The Megatrend in Indian pharma has few very solid players benefitting from the tailwinds. When we recommended Lupin for the first time in The India Letter, we talked about how it was amongst the few to come out of the USFDA hurdles in just seven months. This was least time taken by an Indian company to resolve a warning letter. What was more commendable was that, the company did not get impacted by the absence of approvals from the USFDA post its warning letter. The most lucrative US business continued to grow despite those tough time. The world's 9th largest generic company (by sales), managed to insulate its growth despite rising pressures in the sector.

To explain a bit more, in June 2016, when we recommended Lupin in The India Letter, the company's Goa plant was facing some issues. This facility had received nine negative observations in July 2015 and again in March 2016.

This was one the key risks which we highlighted in our report. It is important to note that any failure to comply with them could have led to negative developments such as a warning letter or delay in drug approvals. Nearly a third of Lupin's pending filings have been made from this facility. Considering this and valuations, we asked subscribers to invest around 25% of the sum that they were intending to put into this stock.

However, the company has received Establishment Inspection Report (EIR) from the USFDA for its Goa unit in November 2016, indicating the closure of all USFDA inspections at the facility.

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