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Lupin looks to brands, new markets for growth

Published: 25th November 2013 04:15 PM  |   Last Updated: 25th November 2013 04:15 PM   |  A+A-

Lupin Ltd, India's No. 4 drug maker by revenue, may come from the land of cheap generics but it is betting on high-margin branded drugs in the United States to drive growth.

It also wants to expand beyond its core U.S., Indian and Japanese markets into Latin America, Eastern Europe and China, and is prepared to spend as much as $1 billion to buy brands and companies in coming years.

"Whether it's companies elsewhere, whether it is brands, we are looking at larger ticket numbers than what we have done," said Managing Director Nilesh Gupta, 39, half of the brother-sister team that helps run the company founded by their father, Desh Bandhu Gupta, who remains chairman.

Lupin shares are up nearly 40 percent in 2013, beating the 20 percent rise in the Indian pharma index, fuelled by the U.S. launch of 14 generics and acquisitions of marketing rights for two brands.

A decade ago Lupin was another Indian "me-too" maker of cheap versions of off-patent drugs and was a late entrant, in 2004, to the United States. Gupta's older sister Vinita, now Lupin's CEO, was its first U.S. employee and remains based at its U.S. headquarters in Baltimore.

Last year, Lupin generated $706 million in revenue in the United States, or 40 percent of its sales, and hopes to grow that to over $1 billion in the fiscal year that ends in March 2015 and $2 billion to $3 billion in five to seven years.

In August, Lupin struck a deal with U.S.-based Romark Laboratories L.C. to exclusively market Alinia, a diarrhoea treatment for children, and Lupin wants to maintain sales of such branded drugs at about 20-25 percent of U.S. revenue, with the remainder coming from generics.

"It's the only part of the business where you can actually raise prices. Everywhere else it's one-way street, especially in India," Gupta said in an interview at Lupin's offices in suburban Mumbai, referring to price controls that cover a widening range of drugs in the company's home market.

Some analysts said while Lupin's focus on brand acquisitions augurs well for the company, investors will bet on launches of new generics in niche segments including oral contraceptive and ophthalmology to drive growth in the short term.

"Brands will take time to develop and scale up. Until and unless they get something which can catapult them in the big league, it will be generics that will drive the growth in the near-term," said Rahul Sharma, a sector analyst with Karvy Stock Broking in Mumbai.

New markets

Youthful-looking and wearing a dark suit and white shirt, Gupta, who has an MBA from the Wharton School in Philadelphia, speaks candidly about the company's past shortcomings and industry challenges.

"So far, I don't think we did a good job in terms of building our own products," he said, a statement that could apply broadly to an Indian drug industry whose innovations have mostly been incremental changes to existing products.

"We have got some pretty good capability in place now, for example, in the inhalation side or the dermatology side to be able to build our own brands," he said.

Gupta also voiced a widely held view within the Indian drug industry about tightened rules on clinical trials and price controls: "The regulatory framework in India is a pain."

Lupin is unique among Indian drugs firms for being a relatively big player in Japan but tiny in Europe. Gupta said it is looking to double the number of countries it operates in to about 20 but is moving slowly.



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