Lupin reported loss of Rs 835 crore for the quarter ended December due to impairment of certain intangible assets worth Rs 405.4 crore.
Lupin, India's third-largest drug maker, expects its margins to improve in the fourth quarter due to lower expenses and rise in levothyroxine sales in US market.
Lupin's earnings before interest, tax, depreciation and amortization (EBITDA) margins have dropped to 14.1 percent in Q3FY20.
The company said that the margins are expected to return to 18 percent for the full year FY20 due to to reduced selling, general & administrative (SG&A) and R&D expenses in the fourth quarter.
Lupin reported loss of Rs 835 crore in the quarter ended December, due to impairment of certain intangible assets worth Rs 405.4 crore acquired as part of the Gavis acquisition and tax write-off of Rs 294.1 crore on divestiture of Japan operations.
The company revenues quarter dropped 2.8 percent to Rs 3,716.09 crore from Rs 3,821.19 crore in the same quarter last year.
Lupin acquired US-based Gavis in July 2015 for USD 880 million to expand US portfolio, especially pain management drugs (controlled substances) and get manufacturing base in the US.
Gavis was largest ever overseas acquisition by Indian drugmaker but its contribution from it has been below expectations so far. The pace of approvals has been slow and the US crackdown on use of opioids has worsened matter. Sales of the company have not even been close to the expectation of the much-tampered target of USD 200 million in FY18.The company so far took an impairment of over Rs 1850 crore on Gavis.
The company said it still has $100 million in form of intangible assets on its books for Gavis, which the business is able to support now.
Regulatory compliance update
On regulatory front, Lupin said it is ready to offer Goa and Somerset manufacturing sites for USFDA re-inspection by the end of FY20.
"As far as Goa and Somerset are concerned, we're close to the finish line in the next three months," said Nilesh Gupta, Managing Director, Lupin.
Gupta said the company is working on programme called ‘Quality First’ that aims to address the raise the overall quality standards of the entire global manufacturing network. The Lupin rolled out the programme in August.
"The programme basically is focused on everything that you can expect to build sustainable quality, right from product robustness to training of people, to simplifying standard operating procedures (SOPs), to best practices on investigations, all of those. And, you know, I think it's obviously a much bigger, deeper programme. It's a multi year programme. We started with the pilot of this programme in our Indore facility. This is going to be the biggest reboot that we can do for quality and compliance systems. We also have address a lot of people issues," Gupta said.
Five of Lupin’s facilities Tarapur API facility. Indore Unit-2 (makes oral solid and ophthalmic formulations), Goa (oral solids), Mandideep Unit-1 (cephlosporins) and Somerset (oral, derma and controlled substances) are under official action indicated (OAIs) and warning letter by US FDA that bars them from getting new approvals.
US is critical market for Lupin's profitability, as it generated about 35 percent of its revenues in FY19.Exclusive offer: Use code "BUDGET2020" and get Moneycontrol Pro's Subscription for as little as Rs 333/- for the first year.
