Global brokerage CLSA has maintained a 'reduce' rating on pharma major Lupin while slashing its target price to Rs 640 from Rs 650. The stock has declined over 7 percent in 2019, making it the top loser in the Nifty Pharma index, which has also declined nearly 9 percent on a year-to-date basis.

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The sector has been under pressure on the back of USFDA observations, pricing pressure, increasing R&D expenses, and fixed-dose combinations (FDC) ban, among others.

"We cut Lupin’s FY20-22 EPS by 2-4 percent, factoring in lower US revenues due to slow ramp-up of Solosec and weak launch pipeline for generics. We note that 75-80 percent of incremental growth in the US is likely to come from three products, Solosec and Levothyroxine which are already launched, along with ProAir which is likely to be approved by 4QFY20," the brokerage said in the latest report.

Based on revised US numbers, the brokerage expects Lupin to achieve incremental US sales of $206 million over FY19-22.

"Dosing benefit with Solosec does not seem to have gained traction, leading to weak ramp-up. Historically Levothyroxine generics have taken time to gain share given high volume requirements, whereas ProAir generic will compete with other respiratory drugs (Ventolin, Proventil) restricting market-share gains," the report stated.

According to CLSA, execution is the key, which includes getting timely approvals, gaining the desired market share and clearance from the US FDA on affected sites. Any slip on execution could pose a downside risk to earnings, it added.

Lupin expects to present two of the four affected sites for a re-inspection by 4QFY20.

The company reported a consolidated net loss of Rs 123.44 crore for the second quarter ended September 30, impacted by provisioning for a one-time payment to settle a lawsuit in the US and loss in the divestment of injectables business in Japan. The Mumbai-based company had posted a net profit of Rs 288.45 crore in the July-September period of 2018-19.

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