Lupin is very bullish on the Indian market, see long-term opportunities: MD
We have gone back to 5-7% y-o-y kind of price decline, which can be off-set with new products, cost efficiencies, says Nilesh Gupta, MD of Lupin Ltd
The last few years have not been easy for India’s pharmaceuticals industry, with consolidation of buyers in the US and accompanying pricing pressure. In an interview, Nilesh Gupta, managing director of Lupin Ltd, said the company is bullish on the Indian market, which is growing very well. Edited excerpts:
Is the Indian pharma industry in good shape? What challenges do you see for Lupin’s growth?
The industry is going through a major transformation at this point of time. We had absolute golden age of 10 years where you saw the Indian companies rising on the generics front, doing well in markets like India and other markets. And then in the last 2-3 years, the story started to run out.
So, most companies right now are trying to transform, it’s probably the worst period in the sense that their transformation has really not become meaningful for anybody at this point of time. And the old model is not giving revenues as you would expect in the past. Lupin has a similar story. We were absolutely the poster child of the generic story. We were a growth darling. We were late in generics. We are basically late in the entire revamp, which companies did about 15 years ago. But once we did it, I think there was a fantastic execution story thereafter, and we executed stellarly for 10 years and then the last 2-3 years, things started to go down, but thankfully, now, things are starting to pick up again.
Is it because of the US pricing pressure or are there other reasons for the stagnant growth?
One part is definitely the pricing pressure, I think last 3-4 years, we used to have at least 10 customers controlling about 90% of the market, we now have three customers controlling 90% of the market. But it happened two years ago. With that came hyper-competition.
So, I think customers consolidating, hyper competition, pricing pressure as well, all of those three, got into the perfect storm, from a market perspective, but I think now the market is starting to get to a new reality.
So, when you say new reality, does this mean uphill or something bad?
On the generics front, we typically have single-digit erosion. So, when the competition came in, when the consolidation of customers happened, basically, there were times where it was 12%-15%, kind of price erosion as well; new products or increases cannot compensate for that. Price increases were very permissible in the past, those have also come down significantly, nobody would take any rational price increase at this point of time.
So, all of that helped you to actually grow the business on a year-on- year basis in the past. With the competition as it settled in, there was a predictable decline, which happens. So, when I say that things are settled down from double digits, we have gone back to that single digit, 5-7% year-on-year kind of price decline, which can be made up with new products, with increase of market share, with cost efficiencies as well.
What would you say about the domestic market? Do you think we are getting some mixed signals from different pharma companies going by their numbers?
Different companies are definitely showing different results. I can’t comment on other companies beyond a bit, but I think we are very bullish about the Indian market. I think the Indian market is one of the few markets, which is growing at, anywhere from 8-10% kind of growth. Most of the markets are not, and it’s our home market, it’s a market where we are extremely small, and we are still only number five in a market.
We have more market share in the US than we have in India. So obviously, that is a potential that the market has. Especially as the affordability of India increases, with that increases the ability to get diagnosed and then get treated as well. And I think that will be a great long-term opportunity for the Indian market.
Do you think that the political environment in India is conducive for growth in business?
I don’t have a very strong view on that. Seventy percent of our revenues come from outside the country. I think one part was obviously benefits that we used to get - tax benefits, which have been reduced over time, you know, there’s exports benefits, which keep getting re-looked at as well. But I think this is an industry that has created a lot of value, for India, at the macro level, its an industry that should be nurtured. It’s an industry that is going through a challenging period of time as well. And I think it’s important to nurture it at that point of time. You know, it’s a small golden goose. And I don’t think government is doing much to nurture it.
With so many twists and turns in the US market, do you think that China is the new destination? Is China the new momentum now for the pharma companies?
I don’t think China is the next big thing. China is an important market, it’s certainly a big market, while the US is the number one pharma market of the world, the number one generic market in the world, just in pure size. Markets like Japan have gone through challenges in the last few years. It’s the second largest market in the world. And China is definitely rising, it will become the second-largest market. But just like India, China also has a very strong presence from within the country. And that is going to be a challenge for anybody else who is building out there. So again, there’s no dearth of competition for regular vanilla generics in China already. But I think that’s all and it’ll become a part of the reality. Therefore, companies will be able to play, but I don’t think its going to be the next big thing.
Let’s talk about quality of medicines. You must have read Bottle of Lies?
I haven’t read it at all, but know enough about it. I think this is taking a bunch of historic events, talking about those. It’s a very one-sided view. I think the journalist could have done a much more responsible job by having a more balanced view by involving more stakeholders, pointedly. They didn’t want to. Pointedly, they wanted to create more sensationalism around that; obviously, sensationalism sells. So I think, they touch on a core point. America’s supply chain has changed over time, 40% of supplies have been from India. So, I think, from that perspective, I think it touches on the right point. But I think the way they went about it was all wrong. FDA has taken a clear position as far as making sure that the medicines that get supplied to the US are of the right quality.
But then we do see data integrity issues?
I think there will always be isolated cases, isolated plants, isolated companies as well. But I don’t think it’s fair to blame the whole industry. I think you have to go by company by company, can you go out on a limb and say every company in the US, does the right thing? Absolutely not. There may be isolated cases that would come up. And I think they have to be dealt with in an exemplary manner by a company.
In a recent lawsuit against Teva Pharmaceutical Industries Ltd accused of manipulating and raising prices of generic drugs artificially to bump up profit, Lupin has been named too. What do you have to say?
It is sub-judice at this point of time. So, we would not comment. But we have done our own internal investigation around this, we feel very strongly about the merits of our case. I can’t comment on the entire industry, but we feel very strong about our position.
Biosimilars is another big opportunity. What is the overall pipeline look like?
Biosimilars is a great opportunity. Till probably a couple of years ago, I would say that biosimilars are still premature, but I think increasingly, it is shaping up as a good opportunity for the industry. For us itself, I think biosimilars is a very nice play. We are expanding very heavily in biosimilars. We started with one product, one alliance and as we got deeper, we started expanding that pipeline as well. We have six products in our pipeline that we are developing. About three of them are more late stage and the other three are early stage.
Where do you see yourself in the next five years?
The big growth drivers for the companies, especially in the US, are going to be from complex generics and specialty. So, women’s health has to get to a significant portion. I think people have moved to complex generics, which we also have where we were focused on biosimilars, injectables and inhalation, and on specialty. And the chosen area that we are focused on is women’s health, which we started on a few years ago. And we are ramping up at this point
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Business NewsCompaniesPeopleLupin is very bullish on the Indian market, see long-term opportunities: MD
First Published:28 Aug 2019, 10:08 PM IST
- Top Gainers
- Top Losers
- 52 Week High