Lupin scouts for M&As, partnerships


Informist, Monday, Feb 7, 2022

By Apoorva Choubey 

MUMBAI - Lupin Ltd will continue to sharpen its edge in key therapy areas such as complex injectables and biosimilars through new partnerships and acquisitions, while also trying to establish a sizeable presence in specialty drugs. 

The Mumbai-based drugmaker is scouting for alliances and in-licensing opportunities for big products in the major markets of India and the US, says Ramesh Swaminathan, executive director, global chief financial officer and head of corporate affairs in an interview to Informist. 

Profitability Is A Function Of The Products We Have In The Portfolio And Keeping Costs In Check, Which We Are Working On. We Have High-value Products Lined Up For Launches In US, In Segments Like Respiratory, Biosimilars And Injectables.

"These markets may offer compelling opportunities, which could help in plugging gaps in our drug portfolio..." he says.

In India, the pharmaceutical industry is witnessing consolidation as companies are being passed on from the first to second and third generations, he says.

Lupin has not lost sight of its ambition on the specialty drugs category apart from focus areas of inhalation drugs, complex injectables and biosimilars, says Swaminathan. 

The company entered into three different agreements for products such as biosimilar pegfilgrastim in January alone, as part of its strategy to scale up global presence in niche drugs. 

It hopes to significantly improve earnings trajectory from Oct-Mar, with the help of new launches in the US, greater focus on cost saving and inorganic growth opportunities.  

Following are edited excerpts from the interview with Swaminathan: 

Q. What kind of growth does Lupin expect in the backdrop of rising costs and intense competition in certain key markets like the US? 

A. We would expect things to get progressively better from the second half of next financial year, when we think we would come good with decent growth numbers. 

We have seen fairly decent growth in various markets during the December quarter. In North America, we were able to ramp-up albuterol market share to a record 20%, and reached over $200 mln in terms of sales. The India business has done well too. However, the active pharmaceutical ingredients segment has seen weakness because certain acute therapies are not selling in most parts of the globe. This is essentially because people are not venturing out and there was virtually no flu season. 

On regards the bottomline, costs and one-time expenses hit performance. There are lots of cost-saving initiatives we are working on, which are aimed at trying to improve gross margins.

Q. What will lead growth from the second half of 2022-23? 

A. We have at least three good product launches lined up in the US including inhalation drug spirivia. We have some products lined up for other geographies also. As you know, over 110 products are pending for approvals with the regulators. We expect the clearance for the Goa facility to fastrack new approvals.  

Acute therapy-related sales will recover as well, as several products return to shelves. Plus, we have stepped on the gas when it comes to cost-saving strategies, which will bear fruit in coming quarters. That's the reason for the optimism. 

Q. The intense competition and pricing pressure in the US generics market has meant that pharmaceutical companies are trying to establish themselves in other categories of drugs, such as specialty products or injectables. What is Lupin's plan for the US market?

A. The overall generics market in the US has come down to $57 bln-$58 bln from about $66 bln. The US has seen channel consolidation, as a result of which prices have eroded.

Lupin's focus is on three main areas of inhalation drugs, complex injectables and biosimilars, apart from oral solid dosage formulations. We expect all these three to show significant growth in the years to come. Our range of products in the inhalation portfolio is the highest in the industry. We have also sharpened focus on complex injectables products and biosimilars, where we will launch several new products. All of these will mean that each therapy area could contribute $200 mln-$300 mln to revenues.

Q. Lupin has recently entered into various collaborations for drug distribution in different regions. Are you looking at similar agreements or would you consider acquiring portfolios or companies to fuel growth?  

A. We are looking at alliances and collaborations similar to the ones we entered into in China, Europe and Brazil. We are also looking at in-licensing opportunities for big products of other companies.

There are, of course, mergers and acquisitions opportunities that we are scouting for, especially in India and the US. These markets may offer compelling opportunities, which could help in plugging gaps in our drug portfolio in the therapy areas we are focussed on. Moreover, we see consolidation happening as companies are being passed on from the first to second and third generations, which could throw up more options. There is tremendous scope for the drug business in India, as the market is underpenetrated.

We have also not lost sight of the ambition on the specialty front, therefore, we may look at acquisitions in the segment. 

Q. Disruptions due to COVID have meant that research & development activities and clinical trials are being delayed. Is that something that's happening with Lupin as well? 

A. We have seen that happening in India for at least one important trial of ours, because of COVID. It's happened in some other parts of the world because patients are not coming in soon. There is a slowdown, which is a temporary phenomenon, and things seem to be getting back to normal. It will not have a material impact in terms of the launch pipeline in the US.

Q. When it comes to the India business, what is the reason behind the decision to foray into non-core segment of diagnostics?  

A. Diagnostics is certainly not going to be the dominant theme for our India operations. If India is a 100-bln-rupee market five years down the line, then diagnostics could be 5 bln rupees. But the diagnostics foray is an important initiative for us, from the perspective of having another growth engine. I think the diagnostics market is ripe with opportunities because it's quite fragmented. The organised sector is only 16% of the entire market, so there is immense scope for expansion, improving technology, harmonisation, and bringing healthcare closer to patients' homes. 

Q. How do you expect profitability to fare in coming quarters?   

A. Profitability is a function of the kind of products we have in the portfolio and keeping costs in check, which we are working on. For the immediate future, we have high-value products lined up for launches in the US, in segments like respiratory, biosimilars and injectables. We also believe our cost-savings initiatives will bear fruit. The operating margin target would be upwards of 20-22%, after the next couple of years, which we are confident of achieving.  

Q. Do you expect costs to keep rising? 

A. Rising inflation is a matter of concern and it could continue for the next couple of quarters. Things could stabilise when more capacities come into play. So, from Sep-Oct, we expect inflationary trends to taper off. 

Q. Do you expect any further provisions in coming quarters related to Metformin or any other items? 

A. The exceptional expense seen during Oct-Dec was due to Metformin recalls that had happened earlier. Retail returns of the drug were slow because of COVID-19, which we had to provide for in this quarter. It's a one-time thing only. We also took an extraordinary provision for a flu drug Oseltamivir as acute therapy sales were down. We do not see more exceptional charges here on. 

Q. Are you looking at repurposing any drugs in your portfolio? 

A. Repurposed drugs are always an important feature. We are on the lookout for such opportunities.  End

US$1 = 74.70 rupees

Edited by Vandana Hingorani

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