Mumbai: Drugmaker Lupin Ltd expects its complex generics and biosimilars  to start contributing to its earnings growth from 2019-20. Until then, the company’s growth is likely to hinge on the quantum of generic drug approvals in the US and its efforts to improve operational efficiencies.

“High-barrier complex products (complex generics and injectables, inhalation products, biosimilars) will start kicking in from FY20 onwards. For FY19, we have some limited competition and first-to-file products," Vinita Gupta, chief executive officer of Lupin, said in a media conference call on Monday.

The company plans to file the application for its first biosimilar etanercept in Europe and Japan in the current fiscal and expects to launch the product in FY20. In total, Lupin is currently working on developing four-five biosimilars and hopes to take advantage of the second wave of biologics going off-patent.

With opportunities in simple generics dwindling and price erosion due to higher competition and consolidation in the distribution channel in the US weighing on margins, drug makers, including Lupin, are working to shift from plain-vanilla generics to complex generics, specialty products and biosimilars, which are high-value and limited-competition drugs. 

“Small molecules and oral solids opportunities have gone and now the future will be in biologics, depot injectables, complex generics. We have been investing in these areas since last five years and we believe, we are well positioned to capitalise on the opportunities," Gupta said.

In the meantime, the company expects good flow of generic drug approvals, around 30 a year, to drive growth, after a muted FY18.

“Things have been difficult, not only for us but for the entire industry. We had significant price erosion. We are close to the bottom at this point and additional product launches will really give us operating leverage and help the grow the business," Gupta said.

In the quarter ended September, Lupin’s consolidated net profit declined 31.3% on year to Rs455 crore, and sales were down 8% at Rs3,874.2 crore due to pricing pressure in the US. Sales in the US, its largest market, fell to $204 million from $292 million a year ago.

“We believe Lupin’s US sales at $200 million per quarter have likely bottomed, as the impact of customer consolidation is largely in the base, dependence on top products has come off and visibility of complex launches has improved further. We forecast FY19 US sales to grow 14% led by launches of Levothyroxine ($1.2 billion market size), Renexa ($900 million market size), Axiron ($240 million market size) and other opportunities," brokerage firm CLSA said in a report.

“Profits appear to be passing through a trough in the first half of FY18, as US business bottoms out. Hereon, operating leverage can play out positively subject to 1-2 complex US launches every year and mid-teen growth in the non-US business. This, along with reasonable valuations, drives our overweight rating on Lupin," broking firm Morgan Stanley said in its report.

The company is also rationalising costs, particularly on the research and development (R&D) front and certain other manufacturing expenses, in a bid to improve profitability.

Lupin plans to cap R&D spend at Rs500 crore per quarter and invest more in meaningful generic products, complex generics and specialty drugs, while scaling back on smaller generic opportunities and new drug discovery programmes.

Given the challenging phase that the industry is going through, all of Lupin’s subsidiaries and operations teams have targeted reducing operating expenditure and they are on track to deliver additional amount to the bottomline, Gupta said.

At 11:15am, shares of Lupin were down 0.1% at Rs1,026.45 on the BSE, while benchmark Sensex index was down 0.2% at 33,212.59 points.

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