I've got it, I have to enclose the entire lookup in single quotes, not just the variable

$application_version      = $::application::application_version
  $application_core_version = lookup("'application::application_${application_version}_package_version'", {'default_value' => '1.0.1.1-1101'})
  $application_libs_version = lookup("'application::application_${application_version}_libs_package_version'", {'default_value' => '1.0.1-1'})

Thanks for the help