Lupin Banks On Key Products For U.S. Growth Revival

Shares of Lupin Ltd. have declined by nearly a quarter in the last two years compared with the Nifty Pharma Index’s 15 percent decline. India’s fifth-largest generic drugmaker faces intense competition and pricing pressure in the U.S., its largest market.Its problems don’t end there. Four of Lupin’s plants are under the U.S. Food and Drug Administration’s scanner, raising questions over future product pipelines. The company’s plant at Mandideep, Madhya Pradesh received a warning letter from the U.S. FDA over manufacturing practices on Sept. 19. Its key products, including its thyroid therapy Levothyroxine, are facing capacity constraints while demand has nearly stagnated for others like the antibiotic Solosec. Its asthma therapy ProAir is awaiting regulatory approval.Nilesh Gupta, managing director of the Mumbai-based company, is optimistic that a turnaround is near. Pricing concerns in the U.S. are bottoming out, he told BloombergQuint in an interview. “We’ll be able to achieve double-digit growth in the market over the next few years.”Capacity expansion for levothyroxine will be completed in time by the year-end, Gupta said, adding that the Solosec’s “clinical advantage” will help the company gain market share. He expressed confidence in securing approval for ProAir soon. The company’s revenue would witness tepid growth in the quarter ended September, he said, and start picking up from the third quarter..Watch the full video here:.Read excerpts from the conversation here:.Post Q1, you said that the U.S. (market) will grow in single digits. In the next 4-5 years, do you see double-digit growth coming back for Lupin in U.S.?Absolutely, we do. If really see and when we did our long-term plan just last year, oral solids basically gave us single-digit growth, but it is really the complex generics and the biosimilars that look in double-digit kind of category. That is the commentary for industry as well, on the conventional products you can grow but it is difficult and at best you will get single-digit growth and at best in more complex area for higher growth. So, we do believe that it will be back to double-digit growth. The next year, we still probably be single digit but back after that we should kick in with double-digit growth..But then at the same time you will have to invest and in your opening statement also said that you are investing but somehow returns don’t seem to be coming and if you go in for specialty, if you go in for biosimilars that is complex which will require a lot of money. So, if you are looking at double-digit growth are you also committing to investing significantly and do you have those funds ready to invest in these segments?For us, those investments are already steady. You look at the R&D spend this year is basically the same as last year. It is not coming at the compromise of any of the opportunities that we see. We’re still investing heavily in inhalers, we still invest meaningfully in biosimilars and in injectables we’re building a very nice portfolio as well. So, we are investing; I don’t think it changes. For some of the newer areas like specialty as we get deeper into that we will spend more on clinical of the stuff of specialty. We will be still be able to keep it within the 10 percent of R&D. I think the next year will be similar kind of number probably as with percentage of sales if not as an absolute number..Other is about the market is concerned about the big drug, Levothyroxine, in which there are issues of capacity constraints. What exactly is happening here, how are looking to overcome the capacity constraint and how you are looking to grow this product?I see capacity constraint as a happy problem. I think it is an opportunity on which we can capitalise on. We’re aggressively building on this. We’re running our plant at capacity and we have meaningful capacity but now we are setting up twice the capacity for Levothyroxine, so together we will have thrice the capacity. The bigger players would want more assurance on continuity of supply before they will be able to take us on. And that basically happened at the end of this calendar year..But you have less than 5 percent market share in this, what’s the ideal share you are looking at that you’ll be making money of this product?We’re already making money. But 15-20 percent is the kind of share that we will get with any meaningful product. Our average market share is 32 percent, by that logic you could go to that kind of number as well. But 15-20 percent is the near-term kind of number that we are with..The other one is Solosec in which the ramp up has been much slower than what was anticipated. What’s happening there? When can we expect ramp-up to happen there?We talked about this before. You have to give Solosec enough time. I don’t think you can look at the branded business just like a generic business and obviously I think, these are still, for the Indian industry, early days for specialty…. but for us for Solosec we expected it to be faster, I think the competition being a generic product has been a challenge which has really slowed things down as far as optic is concerned, but we’re still seeing in the monthlies and the quarterlies we are seeing the growth that is happening..Why are you so optimistic on this drug? Just to get a perspective on how Lupin is thinking on this drug. Why will someone come and buy Solosec when there are already cheaper generic drugs available?The clinical medical advantage of this drug is, you couldn’t ask for a better product to sell. So, you have a product for ten days, twice a day that’s its competition has its one and done. For us, its one dose and you’re done; it doesn’t matter what it tastes like. I gave my daughter some medicine yesterday and it tasted awful and I told her you only need to have seven more doses of that now, you just have to take one dose of this one and you’re treated. I would certainly give it a few more quarters like I said, we’re not going to be blind about this. When things are not going as per your plan, you question yourself deeply. You question every aspect—is my team right, are my people right, are the things I’m doing right, is there something wrong. Here, that doubt always happens. You just need to give it few quarters and I believe it should click..ProAir—you say this is the big drug that we are looking at quarter-after-quarter but the approval isn’t coming. What’s gone wrong?The reality is that the U.S. Food and Drug Administration hasn’t approved a generic inhalation product so far. They have approved products which went through alternative pathways, but a pure generic through a regular pathway has not been approved by FDA so far.We have obviously been knocking on the doors, there have been two more applicants that have been knocking on the doors as well. But nobody has got approval so far. I think it has been just that FDA has taken more time, but I actually feel that they have been engaging. They have really been trying to work with us to be able to address the questions. So, we had questions that we have answered before, there has been goal date and the goal date moved out as well. We had second round of questions at this point which we feel very good about being able to answer.We should be able to get quick response back through FDA. So basically next month or so we should be able to respond to FDA I think. We guided last quarter this is looking more like a FY20 (approval) that was just because of the time it was taking. But this is clearly an early FY21 opportunity..Have you received a complete response paper from U.S. FDA on ProAir?Yes, we have..What are the observations, are they major observations or minor observation?We’re not going to talk about those. (We) think it will be a competitive advantage for others to know. We feel they are eminently addressable. And I do think that we would engage for priority review on this as well..But you’re confident that these will be taken care of?Yes, we feel very good. We have gone deep into the points that are there and we feel they are very addressable..Which of your four plants under the U.S. FDA scanner is going first for resolution?Somerset and Goa would be forerunners. We definitely want to work deeper in Indore and in Mandideep. For Mandideep, there are no applications pending, it’s not time sensitive; we just have to get it right. Indore—there are applications pending so that’s time-sensitive, which is why this programme has begun there as well. But we will give Indore a good six months before we make sure that it’s ready.In that time, we want to challenge the site as well in multiple ways—through internal and external experts and I think at the end of this, this should be a very good story to tell..Let’s talk about some things that the market is happy Lupin is doing and is excited about. Enbrel launch in the E.U. and Japan. When can that come?So, Japan we have already launched. Initial quantities have been supplied. Meaningful volumes will be supplied from third quarter. Europe, the authorities wanted to inspect a couple of more things on clinical sites. So, we don’t see that as an issue. We see that we’ll be able to address that as well. But I think it really would be a first quarter launch..Do you think that Gavis Pharmaceuticals didn’t work out the way you planned? Did it happen at the wrong time? Did it not give you the returns that you thought of?I think you answered all the questions yourself. No, obviously the timing if Gavis was extremely unfortunate. I think we acquired Gavis at a time when the generic market was at complete high.Everybody knew the consolidation which was coming and I think nobody anticipated the pace of that and the opioid crisis has not even begun and I think that was the Gavis story. The control substances were the focus area and I think the opioid crisis obviously took a lot of sheen out of the substance market. So that is the tide that we’ve been swimming against as far as Gavis is concerned.But the Somerset facility as we call it now, has been tucked into the network now so I think the lines are extremely blurred. It gave us a nice entry towards women’s health. We used methodology to get into women’s health and Solosec would have happened if it had not been for Gavis at that time.But I think it’s a start, it is a base that we have now. We’re using it sensibly. We’re using it for the federal business, we are using it for the right kind of control on substance products as well. There is stuff to be done. Obviously nowhere close to the returns that we had anticipated originally..How do you see Lupin over the next one year? Where do you see revenue growth? How do you see financials moving and what’s the important milestones that you are looking for Lupin the next few months or at least the next few quarters?Financially, I think we have pretty much bottomed out and the growth has started. We saw that in first quarter, we talked about the fact that second quarter will be a little bit rocky compared to first quarter and then we see Q3-Q4 starting to pick up as well.We still see that. We actually see that happening across the markets; whether it’s India or even with markets like Japan where we see growth happening at this point. I think there are a few quarters of bumpiness that will happen before things settle down. I think we talked about four odd quarters in which we see stable, unidirectional growth. So, I think that is the kind of time frame and that is the kind of outlook that remains as well. But these are very exciting times. These are times where there is so much to do. We have to execute on R&D, we have to execute on specialty, we have to get the compliance story right and I think we have to get the complex generics right. So, I think there is a great to-do list and I think when there is a to-do list, that’s when you get most excited.

Lupin Banks On Key Products For U.S. Growth Revival

Lupin’s Nilesh Gupta on the U.S. market, drug approvals, capacity addition and more...

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