Lupin and Cipla Shares Fall Amid Increased Competition in US Market

Shares of Lupin Ltd. and Cipla Ltd. tumbled by up to 7% on Thursday due to heightened competition in the US market for Albuterol Sulfate Inhalation Aerosol, a key revenue generator for both companies.

Key Highlights:

Increased Competition:

• US-based Amphastar received approval from the United States Food and Drug Administration (US FDA) for its Albuterol Sulfate Inhalation Aerosol.
• Albuterol is a significant revenue contributor, being the second largest for Lupin and Cipla in the US market.

Market Impact:

• Lupin’s shares fell 4.90% to ₹1,631.65, with a day’s low of ₹1,591.15, reducing its market capitalization to ₹74,378 crore.
• Cipla’s shares experienced similar declines, hitting a day’s low of ₹1,462.70 after peaking at ₹1,490.85.
• Both stocks are witnessing profit booking as investors react to the increased competition.

Revenue and Market Dynamics:

• According to IQVIA, the US sales for branded and generic Albuterol Sulfate Inhalation Aerosol products were approximately $1.7 billion for the year ending March 31, 2024.
• Amphastar is expected to create price erosion of 10-25% to gain market share, impacting the profitability of existing players like Lupin and Cipla.

Product Launch:

• Amphastar plans to launch its Albuterol Sulfate Inhalation Aerosol in Q3 2024, intensifying the competitive landscape.
• Albuterol Sulfate is used to prevent and treat breathing difficulties, wheezing, and shortness of breath.

Analyst Insights:

Negative Outlook:

• Analysts see the approval of Amphastar’s product as a negative development for Lupin and Cipla, considering the substantial revenue they derive from Albuterol in the US market.
• Increased competition typically leads to price erosion, affecting both revenue and profit margins for established players.

Market Performance:

Year-to-Date Performance:

• Despite the recent decline, Cipla shares have risen by as much as 20% so far this year.
• Both companies must now navigate the challenges posed by new entrants in the market to sustain their financial performance.

Conclusion:

The approval of Amphastar’s Albuterol Sulfate Inhalation Aerosol by the US FDA introduces new competition in a crucial segment for Lupin and Cipla, leading to a significant drop in their share prices. Investors and stakeholders will be closely watching how these companies strategize to maintain their market positions amidst the increased competitive pressure.

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