Indian drugmakers who are the largest suppliers of generic medicines to the US, the biggest pharmaceuticals market in the world, are gradually looking to build a footprint in the branded medicines segment.
Not only do branded medicines fetch a premium, their acquisition also enables Indian pharma companies to cut through the laborious and often unfruitful process of securing the US Food and Drugs Administration’s (USFDA) approval to sell generic versions of these drugs.
Mumbai-based pharma company Lupin Ltd is one such Indian firm that is trying to establish a small yet significant footprint in the US branded medicines market, at a time when several large American drugmakers are looking to divest branded medicines they have been selling
On February 3, Lupin’s vice chairman Kamal Sharma told FE that his company was close to acquiring a branded medicine portfolio in the US worth $50-100 million. “We are looking to acquire assets and brands in America, mainly brands in the pediatrics and primary healthcare space,” Sharma said.
Such acquisitions are an integral part of Lupin’s future growth strategy, which entails achieving a turnover of $5 billion ( approximately R30,860 crore) by FY18. The company is debt-free and has a free cash flow of R1,163 crore, which puts it in a comfortable position while considering small acquisitions like the one it is close to completing in the US.
“In our view, potential divestment of assets by big pharma should provide Lupin with interesting opportunities for M&A (merger and acquisition) next year (financial year),”a JP Morgan report said.
Lupin doesn’t intend to go slow on its generic medicines business, which accounts for a major portion of its overall turnover, but intends to complement it with a niche branded medicines business, which would help in further growth in revenues.
At the JP Morgan global healthcare conference in San Francisco in January, Vinita Gupta, the company’s chief executive outlined the company’s goal of becoming a “leading generics player with a larger specialty business” with a wider footprint across regions and presence on new generic platforms like inhalation and dermatology.
Analysts say a significant driver of Lupin’s growth plans would be a 15-25% annual growth rate in the branded medicines market in the US, along with expansion in Latin American markets via new products. Lupin will also look to strengthen its generics and specialty business in
Europe and acquire specialty brands in segments like dermatology, respiratory and pediatrics across markets like US, Latin America and Eastern Europe, according to the JP Morgan report.
Around 45.5% of Lupin’s turnover comes from the US market, and around 10% of this is through the sales of branded medicines. Lupin already owns branded formulations like Suprax, Antara, Locoid lotion and Alinia in the pediatric segment in the US. While these are small brands at present, Lupin hopes to grow them in size over the next few years.
Lupin has been continuously making small-ticket acquisitions of such branded drugs in the US. According to the JP Morgan report, Lupin can spend as much as $1-1.5 billion for such acquisitions. The company has also acquired substantial stakes in other pharmaceutical companies in countries like Japan, South Africa, Germany and Australia.
While Lupin has and will continue to make small acquisitions around the world, JP Morgan says that the company is not in a position to make a big-ticket acquisition through the all-stock route as the company’s promoters may not be willing to dilute their holding in the company further. As on December 31, promoters held 46.66% in the firm.
By Neha Bothra