You are using an older browser version. Please use a supported version for the best MSN experience.

Lupin to exit from weaker brands, to buy stronger ones

LiveMint logoLiveMint 12-05-2014 CH Unnikrishnan

Mumbai: Lupin Ltd, India’s fourth largest drug maker by sales, plans to rejig its domestic business after local growth slowed over several quarters because of a new drug pricing regime that forced pharma companies to lower prices and the absence of some key therapies in its product portfolio.

The restructuring will include dropping or divesting some brands that are not central to its business and the addition of some critical therapies, including cancer drugs, through acquisitions and other channels.

“This exercise, which we are yet to formulate fully and still looking at the details, will see shedding of some non-crore products as well as addition of some new products and therapeutic areas that we do not have at present, ” managing director Nilesh Gupta said in a telephone interview on Saturday

Lupin, which posted less than 5% growth in its India business in the fourth quarter, was among the companies most affected by the new drug price control regime introduced in July. Although the company’s sales have been expanding overseas, the US generic market in particular, sales growth in India has been disappointing for the last seven quarters.

While the new drug price regime covering all the 345 drugs in the National List of Essential Medicines (NLEM) has been a key concern, the company’s absence in some fast-growing segments including cancer therapies and injectable drugs, has also limited its growth.

In response, Lupin may drop some brands or put them on the block. These brands are typically the ones that generate revenue of less than `5 crore and belong to a category called complementary therapies, which are drugs that doctors prescribe in addition to the main treatment.

“Lupin can either divest those small brands to companies which are focusing on such areas as their niche or can simply drop them from its marketing portfolio,” said a pharma market consultant who did not want to be identified.

As sales growth in the domestic market slowed, India’s contribution to Lupin’s overall revenue fell to around 20% during the March quarter from 30%. The contribution of India to its overall revenue and growth have been on the decline.

“Lupin, as it is the case with any other top-rung drugmakers in the country, has over a thousand brands sold in the country, and now it’s time to look at each of these brands to optimize efficiencies,” said a Lupin executive who asked not to be identified.

He did not share details of the brands that the company wanted to shed.

According to the market consultant cited above, historically drugmakers have discontinued brands that have come under drug price controls as they become unprofitable.

“But, this practice is not possible under the new Drug Price Control Order as it doesn’t allow companies to withdraw products from the market without a substantial reason,” he said.

Gupta said the company wanted to restructure the business to become a more focused company and recoup the 15-20% growth rates it posted in the India market in earlier years.

Lupin, which was originally present in low-profitability segments like anti-infectives and antibiotics, has diversified into many more specialities, including therapies for cardiovascular disease and diabetes, in the last five years.

“The speciality areas that we are still not strongly present in the domestic market includes oncology and injectibles manufacturing etc.,” said Gupta.

“We have been looking around for potential acquisitions in these areas in India, and will also partner with speciality companies to expand our portfolio in speciality segments,” he added.

The company is also looking to enter some newer and potentially high-growth markets abroad.

“In the overseas market, we may still look for inorganic growth, especially in Brazil, where we are keen to have major footprint,” said Gupta.

But, the Japanese market where Lupin has been the only successful Indian generic drugmaker with multiple local acquisitions and partnerships, has run into trouble due to currency volatility and a dwindling contract manufacturing business.

Lupin has acquired to two local companies—Kyowa Pharmaceutical Industry Co. Ltd and I’rom Pharmaceutical Co. Ltd—in Japan since 2007.

“In Japan, currency volatility is a major issue,” said Gupta. “In the case of I’rom, we needed to initiate a massive rationalization of the business mix and in the contract manufacturing services business, ” said Gupta.

More From LiveMint

image beaconimage beaconimage beacon