Acquisitions will be critical for building Lupin’s specialty drugs business: Nilesh Gupta

Lupin MD Nilesh Gupta says the company company’s acquisitions could be a mix of late-stage development assets, finished products portfolio or companies


Lupin’s Nilesh Gupta said R&D spend as a percentage of sales would remain under 13% in 2017-18. Photo: Hindustan Times
Lupin’s Nilesh Gupta said R&D spend as a percentage of sales would remain under 13% in 2017-18. Photo: Hindustan Times

Mumbai: Maker of generic (or off patent) drugs Lupin Ltd, plans to build a portfolio of specialty products for the US market through acquisitions in areas of women’s health, pediatrics and neurology, managing director Nilesh Gupta said in an interview.

“In the near term, we are looking at acquisitions to build our specialty business. It could be a mix of late-stage development assets, finished products portfolio or companies. We have evaluated many opportunities but what we are looking at is a strategic fit and rational valuation. Over the past 4-5 years, valuations in the specialty segment have gone up significantly but are now starting to get more rational,” Gupta said.

Lupin currently has just around four or five branded products in the US market. In 2015-16, the firm’s branded business had a revenue of $46 million, contributing 5% to Lupin’s US sales.

Pricing pressure due to increased competition has hurt the growth of Indian generic drug makers in the US, forcing them to shift focus to high-value specialty products. The quickest way to build this business is through acquisitions, an analyst said. “Lupin will have to take the M&A route to fast-track its specialty business in the US. The company will prefer assets which are near launch. I expect revenue from the specialty segment to start kicking in from 2018-19,” Ranjit Kapadia, senior vice-president, Centrum Broking, said.

Lupin’s strategy to acquire a speciality drugs portfolio appears to be an attempt to diversify and derisk its US business. Its generics business in the US has been doing well, thanks to some smart launches.

For the quarter to December, Lupin reported a 20.7% year-on-year rise in consolidated net profit to Rs633.11 crore from Rs524.56 crore a year ago on the back of strong US sales growth. A Bloomberg poll of 25 analysts had estimated a net profit of Rs619.7 crore. Total sales rose 31.5% to Rs4,404.94 crore from Rs3,350.33 crore a year ago. US sales grew 53.4% to $316 million, while India sales were up 11.9% at Rs991.2 crore.

Over the next two to three years, growth in the US business would be driven by generics, Gupta said.

Lupin spent Rs568.2 crore on research and development (R&D) in the December quarter, 12.9% of its sales. Gupta said R&D spend as a percentage of sales would remain under 13% in 2017-18.

The company’s acquisitions are likely to be focused, Gupta hinted.

“Based on our organic pipeline and business environment in key markets, we expect to reach $3-$3.5 billion revenue by FY19 (we had earlier re-stated our aspirational target of $5 billion). Inorganic growth was a key part of the strategy to reach the $5 billion target but we have moderated our inorganic expansion plans in the near-term. These remain a part of our longer horizon plan.”

Lupin shares closed 0.51% higher at Rs1,495.35 on BSE on Thursday, while the benchmark Sensex rose 0.14% to 28,329.70 points.

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