Capsules move along the production line at the Lupin Ltd. pharmaceutical plant in Salcette, Goa, India, on Friday, Feb. 7, 2014. (Photographer: Dhiraj Singh/Bloomberg)

Expect Price Erosion In U.S. To Continue In FY18, Says Lupin CFO

Increased competition in Glumetza due to entry of authorised generic contributed to decline in volumes in U.S. market for pharmaceutical major Lupin Ltd. even as the base portfolio saw a price erosion of 6-8 percent in the January-March quarter.

Net profit fell nearly 50 percent to Rs 380.2 crore in the fourth quarter, way below the Bloomberg consensus estimate of Rs 643 crore due to a one-time provision and loss on account of a stronger rupee. Revenue grew only a marginal 1.3 percent to Rs 4,253.2 crore on a year-on-year basis, India’s second largest drugmaker by market value said in a stock exchange filing.

The realisations for the quarter were also lower owing to rupee appreciation, Ramesh Swaminathan, CFO, Lupin to BloombergQuint in a telephonic interview, adding that the pricing environment in the U.S. remains challenging.

There is further consolidation in the channel end in U.S. so there is going to be pricing pressure in America for sure.
Ramesh Swaminathan, CFO, Lupin

Revenue in the U.S. fell 13.2 percent in the quarter and 12.6 percent on a sequential basis as well as its key product Glumetza lost market share after the entry of an authorised generic. The company is banking on its product pipeline and working on developing new speciality portfolio to mitigate product concentration risk in U.S. It plans to launch 25-35 new products in the U.S. in the financial year 2017-18, Swaminathan said.

While U.S., India and Japan remain key markets, there is a lot of optimism around smaller emerging markets like South Africa and the Latin American countries.

Lupin has said time and again that they continue to be on a lookout for acquisitions, Swaminathan said the price needs to be compelling. “ Yes, we would be looking at assets in America because it’s a constant endeavour but the price proposition should be compelling. Prices have come down in America but just because they have come down, doesn’t mean it is necessarily attractive for us”.

The company remains fairly confident of being able to resolve the observations received from the U.S. Food and Drug Administration. Lupin’s Goa and Aurangabad facilities had received three and eight observations respectively earlier this month post the U.S. drug regulator’s inspection.

On the Indian government’s push for generics over branded drugs, Swaminathan said, “It is going to be very difficult for the government to enforce it. Firstly, they are taking the power away from pharmaceutical companies and giving it to the traders and that is not a wise thing to do.”

On May 17, the National Pharmaceutical Pricing Authority (NPPA) had issued show-cause notices to 67 pharma companies including Lupin for introducing 201 new combination drug brands without taking prior price approval. The drug price regulator has asked the companies to furnish production and sales details by June 15. However, Lupin says it is compliant with norms.

"Our stance is that we have not violated the situation. Lupin as a company has very high governance norms and we have not done anything which is not in line with the spirit of the government:, Swamithan said.

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