1. Product approvals in US market to be key growth driver this fiscal

Product approvals in US market to be key growth driver this fiscal

Lupin’s net profit came in at Rs 547 crore, below Bloomberg’s estimate of Rs 606.2 crore...

By: | Published: May 14, 2015 12:47 AM

On Wedneday, Lupin’s net profit came in at Rs 547 crore, below Bloomberg’s estimate of Rs 606.2 crore, mainly due to fewer product approvals in the US market, price erosion and foreign exchange fluctuations. Sharing the company’s road map for growth, Vinita Gupta, chief executive officer of Lupin, told Neha Bothra in an interview that the company hopes to grow at over 15% in FY16. excerpts

Could you share the key financial highlights of this year?
This quarter revenues and profits were flat year on year. During the quarter, we had pressure on our US generic business owuing to lack of any material new product approvals and price erosion on the baseline products that we launched in 2014.

The India business grew well at 20%, Japan grew at 5% and this was despite pricing pressure and undercuts usually seen in March and April. But, overall, the gross margin improved. On the expenditure side, EBITDA was impacted by foreign exchange fluctuations. R&D investments for the year peaked this quarter and manpower expenditure increased due to employee stock option provision plans. Yet, profitability was at the same level despite the fact that revenues and margins were under pressure.

What kind of value do you seek to unlock from the drug pipeline in FY16?
In FY15, we were hoping to get 20-plus approvals. We got 12 and we launched 11. In FY16, we expect to get 15-20 approvals. But, more importantly, it is material products that can contribute significantly to revenues and profitability, such as Nexium, that we hope the USFDA will approve during the fiscal.

We hope a combination of some approved products and some of these expected approvals will help us close FY16 at 15% plus growth rate.

What is your R&D allocation and overall strategy to expand your complex injectables and biosimilar portfolio?
Complex injectables right now is a very small part of R&D investment. The biggest part of our R&D expenditure is still oral solid products and we are evolving our pipeline very pragmatically from simpler generics to complex generics, and have been making significant invetsments in these products.

We entered complex injectables from the company Nanomi (acquired by Lupin in February 2014) and we have started with a few products that we are devloping. This year we are working on five products there, and in India we are working on an additional 10.

But, again, these are early-stage, so the investment is low right now. This fiscal, we are making significant investments in biosimilar Etanercept, which we started developing for Japan and we will leverage the investment in other markets also .Out of the overall R&D expenditure, two-thirds  is still on our oral solid generic products and a third on complex products.

What will be the main growth drivers in FY16?

The major growth driver for FY16 will be product approvals in the US market. We hope to see a few material product approvals this year. Second, we expect the India business to continue to grow at 20% level. Japan we expect to grow at 11%-plus. Third, another major area of growth that we are targetting is acquisitions. We plan an escalation through organic and inorganic growth and we are working on multiple opportunties to be able to complement our inorganic growth efforts.

What kind of companies or businesses do you target to acquire?

We are focusing on a couple of strategic interest areas. We are building capabilities to enter complex generics, which is a high growth segment. We are also looking to build our brand business which allows high margins in therapeutic areas that complement our current strengths in the US market like the paedeatric segment.

Third, we are looking at acquisitions that will increase our geographical presence in countries like Latin America where we have a small presence but see significant opportunity for growth. We have a number of opportunities on the table, more than in the last many years. I’m definitely more confident that we should be able to find the right fit for us this year.

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