Home / Companies / Lupin sees high single-digit price erosion in generic drugs in US this year

Mumbai: With increasing competition and consolidation of distribution channel, drug maker Lupin Ltd expects high single-digit price erosion in generic drugs in the US to continue in 2018.

In a presentation at JP Morgan Healthcare conference in San Francisco, US, Lupin highlighted that challenges in terms of pricing pressure in the US will continue because top three distributors are expected to account for 90% of generic drugs purchases in 2018 as against 52% in 2012 due to consolidation, giving them significant bargaining power.

Government initiatives to reduce healthcare costs and rise in competition in generic drugs are also seen putting pressure on pricing, the company said.

Lupin pointed out that 47 new generic drug manufacturers entered the US market in 2017 and regulatory approvals for generic drugs have also increased.

The US Food and Drug Administration (FDA) approved a record 763 generic drugs in the US fiscal year ended September 2017, as against 651 in the previous year.

Lupin is focussing on building a pipeline of complex generics, specialty products as well as biosimilars to tide over the challenges in plain-vanilla generic drugs.

The company is working on complex inhalation products, injectables, ophthalmic and dermatology products, and controlled substances. On the specialty side, it is focussed on women’s health, paediatrics and neurology.

In October 2017, Lupin acquired Symbiomix Therapeutics LLC for a cash consideration of $150 million, in a bid to expand in the women’s health segment. The lead product acquired from Symbiomix’s, Solosec oral granules for treatment of bacterial vaginosis, will be launched in the US in 2018.

In a post-earnings call in October, Lupin had said that complex generics and biosimilars are likely to start contributing to its earnings growth from fiscal year 2019-20 and 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.

However, the warning letter issued by the USFDA to the company’s plants in Goa and Indore in November due to violation of good manufacturing norms may delay product approvals in the US from those units and hinder growth.

The company said in the presentation that in the near term, it will focus on resolution of warning letter, generic drug portfolio optimisation, improve cost efficiencies and execute new product launches.

“We believe 2018 could remain a tough year for the company with pressure on the US generic business and overhang from the warning letter. While management remains confident of completing remediation over the next few months, we still expect resolution to take 12 months or higher depending on outcome of re-inspection. While the stock has de-rated, we still see downside to consensus estimates particularly in the US," brokerage firm J.P. Morgan said in a report dated 3 January.

At 2.10pm, shares of Lupin were up 0.92% at Rs929.35 on the BSE, while benchmark Sensex index was down 0.01% at 34,440.58 points.

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