Buying tech platforms & brands in US would remain priority

Written by Soma Das | Updated: Jun 28 2012, 06:49am hrs
Lupin has overtaken Cipla to become the third-largest domestic pharma company by turnover in 2012 fiscal by posting net sales worth R6,960 crore. Kamal Kumar Sharma, managing director, Lupin, speaks to FEs Soma Das on how the company plans to improve its Ebitda margin and traverse successive orbits to reach the next level. Edited excerpts:

Lupin has overtaken Cipla. What would you attribute this feat to

For their growth story, companies rely on different business mixes. Based on these bets, the script for growth keeps changing. We believe our bets in the geographies we delineated to focus on and the strategies we adopted there paid off. Today, 35% of our revenue comes from the US, 30% from India and 14% from Japan. Both in US and in India we have consciously preferred to concentrate on the prescription market rather than disproportionately focusing on the retail market. That imparts a certain stability to growth as incentives that drive growth are not just commercial, but are based on beliefs. While in US, we have garnered 5.1% of the prescription market and are among the top-five generic firms, we have been growing consistently over the average industry growth in the domestic market.

Lupin has set a milestone of taking revenues to $3 billion by 2015. Isnt that too optimistic a target

These financial goals have three levels of definition for us. Firstly, they signify the companys aspiration. Secondly, they are drivers of better performance as individuals making up the organisation strive to attain that common goal and, finally, these goals define the desire of the company to place itself at a position in the future, relative to its peers. So, these are goals we would attempt to achieve. Also, remember that this goal would be inclusive of organic growth plans and inorganic strokes that the company decides on its way to reaching them.

What could be those inorganic strokes that can spur Lupins growth to take a leap to the next level

Our larger acquisition strategy can be understood under three broad principles. Firstly, brand acquisitions in the US. At a given point in time, Lupin is evaluating three to four drug brands (patented drugs) in the US market. Secondly, we are looking to acquire technology platforms in the US, European markets. These specific technology platforms should give us an edge in some way over existing therapies either in improving patient compliance or drug administration and delivery. Finally, we are looking at strategic fits in specific geographies. For instance, we have weighed at least six possibilities in the Latin American market and are deeply interested in sprucing up our presence there. But it is also a very challenging market with unique dynamics and, hence, the search for a perfect option is still on.

What are the challenges you perceive or parameters that Lupin needs to improve upon to reach its stated goals

There are many parameters we are constantly striving to improve. One of them is our goal to improve our Ebitda margins by 50-60 basis points in next three to four years. And we are working on bettering supply chain management in several ways. These are of course goals within goals for the company. For one, we have more shipments getting delivered by air compared to ocean raising the cost of such delivery significantly.

In next two to two and half years, we would like to improve on the air to ocean ratio in favour of ocean. Then, the company is growing at such a pace, becoming more and more global in its dealings that the strengthening the MIS (management information system) has become a priority, so that various arms do not lose focus. We also want to maintain our standing as one of the best companies to work for.

Internally Lupin conceives its evolution in form of orbits. Could you give an update on milestones achieved and the path ahead in that context

Thats true. We set a target for ourselves six years back to become more of a finished dosage firm from being an API (raw material used in pharma end products) firm as we become more of an international firm from just being a domestic pharma company. We successfully achieved that. The second orbit has been to increasingly concentrate on specialities, alongside conducting much of the clinical research activities in-house. We are somewhere traversing this orbit now as we establish our core competence in therapeutic areas of dermatology, oral contraceptives and opthalmology.

The next orbit has been conceptualised as one where the company launches its own clinical technology platforms and the fourth orbit would be when Lupin would launch its own new chemical entity (new drugs). The first new drugs would most likely be biosimilars.