By Sushmi Dey
At a time when most domestic drug companies are looking West in the wake of the number of patents expiring there, Lupin Ltd, the Mumbai-based transnational drug maker, is eyeing a big pie of the Indian market, along with its continued growth strategy in America. It is scouting for acquisition targets in India to diversify into new therapeutic segments, says Chief Financial Officer Ramesh Swaminathan. Also planned are entries into new markets abroad, he tells Sushmi Dey. Edited excerpts:
In the wake of patent expiries, the US has emerged as a billion-dollar opportunity for Indian companies. But given the high price erosion and heavy competition in the US generic market, how do you see the market evolving in the near term?
Given that most of these governments are hard pressed for budgeting constraints, I think they would turn to more affordable medicines and, therefore, the generic industry would survive. The penetration of generics has increased in all geographies. Essentially, the largest markets in the world would continue to be the US, Europe and Japan but a lot of other emerging markets are also coming up. If you want to be a really big, meaningful global company, you cannot actually avoid or defocus from the largest markets that are there today but the growth rate in the other markets should also certainly go up. So, it is important to try to balance that.
What would be the strategy of Lupin to capture a significant portion of the US market?
I see increased competition within the US generics space in the coming years, but Lupin has always had a strategic very well-differentiated focus of addressing niche therapy areas; developing differentiated difficult to develop products. We have also gone beyond and are now focusing on less competitive specialities, where we believe we can command better prices; segments like oral contraceptives (OC), ophthalmology and dermatology. All of this is built on the back of an unmatched vertically integrated business model, which has given us better control over margins as compared to our global peers. We set up a dedicated OC facility in Indore two years earlier, to prepare our entry into the highly profitable segment.
What are the new launches you are planning in the US and what is your revenue guidance from there?
Lupin filed 25 Abbreviated New Drug Applications (ANDAs) last year and our cumulative ANDA filings with the US Food and Drugs Administration (FDA) has risen to 173. We have 64 approvals to date. We received 16 approvals in 2011-12 and launched 11 products. We would look at 15-20 launches this year in the US. If the past is prescriptive of the future, then Lupin would seek to continue to grow at 20-25 per cent in the American market.
What about other geographies?
We are very keen to enter the Latin American market and some in Europe, specifically emerging markets like Brazil, Mexico and Turkey. For example, Mexico is an attractive emerging market for Lupin with an estimated market size of $11 billion, which has been clocking double-digit growth to make it one of the fastest growing pharmaceutical markets in the LatAm region. From the Lupin standpoint, therapy segments such as the central nervous system, oral contraceptives and biosimilars, among others, are promising areas that we would like to grow into within the market.
Where does India figure in Lupin’s plan? Are you planning any India specific projects?
India is an integral part of Lupin’s overall business and a very important part of growth strategy. Lupin’s India formulations business was 27 per cent of overall revenue for FY12. The India formulations business has repeatedly outperformed the Indian pharmaceutical market, growing at a compounded annual rate of just over 21 per cent over the past five years. The India formulations business grew by 23 per cent, recording revenue of Rs 1,906 crore during FY12, as compared to Rs 1551 crore in FY11.
How many products do you plan to launch in India during FY13? What would be the investment and what revenue are you aiming from India?
The company launched 30 new products in India in FY12 and I don’t see any reason why we won’t have a similar number of launches as we prepare to enter new segments. We would look at a three-pronged strategy, wherein we would look at in-licensing and introducing new products into the Indian market, enter new segments directly, and expand in existing and new therapy segments through strategic alliances with like-minded peers, as when Lupin entered into a strategic agreement with Eli Lilly India to market their Huminsulin range of products in Nepal and India. We also would look at inorganic growth within the Indian market wherever we see a strategic fit in keeping with our acquisition policy.
Are you looking at capacity expansion in any existing market?
Lupin has a well integrated global manufacturing network; we operate 10 plants across India and Japan. In keeping with our growth performance and future demand projections, we would continue to invest around Rs 500 crore in creating new facilities and expanding capacities in existing ones.
There is a lot of noise about Lupin planning to sell out stake.
That is baseless market speculation. We have no such plans whatsoever.
How do you see the Indian pharmaceutical sector evolving, especially in terms of pricing and valuations? How industry-friendly is the proposed national pharmaceutical pricing policy?
Price control in the Indian pharmaceuticals market has never been a decisive factor in assuring access and availability of drugs. On a relative basis, I feel it would have been better and wiser to allow market forces to determine the price. For instance, by including combinations in the policy, the scope of control has been widened but this could adversely impact innovation and growth. It could also possibly hamper growth in manufacturing of drugs locally, given the fact that smaller players would find it difficult to invest in manufacturing because of cost pressures, as they wouldn’t be able to match the scale of a larger player.