Lupin Pharmaceuticals Just Recalled Two Birth Control Pills – Did It Affect The Stock?

Key Takeaways

• Lupin Pharmaceuticals has recalled two batches of its Tydemy birth control pills after reporting defects
• The company’s earnings beat reported higher profits and revenues
• Lupin’s share price rose 4% at the earnings news and has increased 47% in 2023

One of the most prominent players in the U.S. pharmaceutical industry has had to recall two batches of its birth control pills after finding they were defective. Lupin Pharmaceuticals has asked any retailers and distributors of Tydemy to stop selling the bad batches immediately and has advised those taking the pills to seek medical advice.

Despite the hiccup, Lupin’s earnings beat was enough to keep investors on side, and the share price saw a lift. Indian pharmaceuticals have outpaced their U.S. peers on the markets so far in 2023 – let’s take a look at the details.

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Why did Lupin recall birth control pills?

Lupin Pharmaceuticals, the U.S. arm of Indian pharmaceutical giant Lupin Ltd., has voluntarily recalled two Tydemy birth control pill batches. The reason was that the pills in question tested low for ascorbic acid and high for a “known impurity”, which reduces the overall effectiveness of the medication and could result in an unexpected pregnancy. The impurity wasn’t named.

The two batches were distributed in the U.S. between June 3, 2022 and May 31, 2023. In a statement, Lupin said it was notifying wholesalers and distributors about the recall. Anyone taking the drug’s impacted batches is advised to continue taking the medication and seek medical advice immediately to find alternative contraceptive methods.

The pharmaceutical has an unfortunate recent history of product recalls. In November last year, Lupin received a warning letter from the FDA at its active pharmaceutical ingredients plant in India. It was the fourth warning Lupin had received in nine weeks.

That same month also saw Lupin forced to suspend U.S. drug production from another of its India-based plants, with the FDA asking Lupin to let them know “before resuming operations”.

How did Lupin’s earnings beat go?

It was a bumper profit crop for Lupin’s latest earnings report, delivered late last week. The pharmaceutical giant made a consolidated net profit of INR 453.33 crore ($54.78 million) for its first quarter, compared to last year’s Q1 result of a consolidated net loss of INR 86.82 crore ($10.49 million).

The revenue total for its first quarter operations was 4,814 crore ($581,741), up around 29% from last year’s Q1 figure of INR 3,744 crore ($452,438). The U.S. business arm grew 57%, contributing 34% of total revenue.

Analysts put Lupin’s financial turnaround down to the company launching three new products in the quarter, including two nasal sprays, and securing four new drug approvals from the FDA. In the filing, Lupin’s managing director, Nilesh Gupta, said the company expects to see more U.S. drug approvals that will “help sustain the growth momentum both in the top line and bottom line as we move ahead”.

Lupin’s stock performance in 2023

Investors were apparently unphased by the birth control pills recall, as the positive earnings beat eclipsed the bad news. Lupin Ltd., listed on the National Stock Exchange of India, saw a 4% rise in its share price on Friday, hitting a new 52-week high of INR 1,078 ($13.02). The shares have seen a further 1.6% gain during Monday trading.

Despite the recalls and FDA warnings, Lupin’s share price has gained 47% since the start of the year, far outperforming its rivals. India-headquartered Sun Pharmaceuticals has seen a 16.5% gain in the same period, while pharma conglomerate Cipla has climbed 14.1%.

The Indian pharmaceutical sector is performing entirely differently on the stock market than U.S. peers, who have struggled after becoming the pandemic heroes. Pfizer’s share price has plunged 31% in value while Moderna has declined by 39%; AstraZeneca has stayed flat on the Nasdaq after some peaks and troughs throughout 2023.

How is the broader pharmaceutical industry faring?

It’s been a challenging year so far for Big Pharma, with the current earnings season reflecting the big companies’ struggle to bounce back after the pandemic. Pfizer reported second-quarter sales that missed Wall Street estimates and cut its full-year guidance at the same time. The anticipates headwinds from a reduced sales forecast for its new respiratory illness vaccine and lowered output thanks to tornado damage to a critical manufacturing plant. Pfizer’s CFO, David Denton, acknowledged the issues as “near-term revenue challenges”.

Moderna actually raised its forecast for Covid vaccine sales, which is its only approved product, saying it now expects to make between $6-8 billion with full-year sales with its pending fall release of an updated Covid jab. Revenue was up for the second quarter, hitting $344 million versus the $308 million forecasted, but there are still concerns over the company’s long-term profitability.

M&A activity in the sector is also picking up. Biogen recently announced that it’s buying Reata Pharmaceuticals for $7.3 billion to get its hands on the company’s landmark new treatment for a rare neuromuscular disease. Under the deal, Biogen will pay $172.50 per share in cash; Reata’s share price skyrocketed 51% at the news to hit $165.

Telemedicine has also seen some movement in the form of Amazon rolling out its new virtual Amazon Clinics nationwide in a bid to finally break into the healthcare market. The tech titan recently completed its $3.9 billion acquisition of OneMedical earlier this year and has its own Amazon Pharmacy option on the website, so we’d say it’s a pretty serious attempt at capturing market share.

The bottom line

The birth control pills recall is bad news for consumers, but Lupin Pharmaceuticals has shrugged off similar recalls in the recent past. The company’s share price wasn’t affected by the news and was bolstered by the better-than-expected earnings beat.

As for the wider pharma industry, it’s shaping up to be a mixed bag bordering on the edge of disappointment. The coming months may bring more mergers and acquisitions news if the drought has ended, but pharmaceutical companies are struggling to pick it up after the bumper pandemic profits.

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