Mumbai-based company looks for a second acquisition in Japan for $50-100 million.
Lupin Pharmaceuticals plans to expand its presence in Japan, the world’s second-largest drug market, in a big way.
The Mumbai-based company is looking for a second buyout in Japan this financial year, according to company officials. In 2007, it had acquired Kyowa Pharmaceutical.
Through this buyout and ingredient outsourcing, Lupin aims to achieve a 20 per cent rise in revenue next financial year.
Almost every Japanese is covered under the government-funded National Health Insurance scheme. To reduce its healthcare expenditure burden, the government has introduced a series of reforms that would expand generic drug penetration to 30 per cent of the generic market by 2012.
The $75-billion Japanese drug market has a small generic segment, worth 5 per cent of the total in value terms and 19 per cent in volume terms.
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S Ramesh, chief financial officer of Lupin, said, “We are in talks with a few players, but there is nothing in the final stage. The deal size could be in the range of $50-100 million, while the products that we target are in cardiovascular, central nervous system (CNS), and gynecology space. Inorganic growth is an ideal way of expansion in the Japanese market.”
Japan is one of the largest markets for cardiac and CNS drugs, due to its ageing population. Its population has touched 128 million. According to studies, nearly one in five Japanese is over the age of 65 and by 2030, this is expected to rise to more than one in four.
As a part of its cost-cutting measures, Kyowa will source active pharmaceutical ingredients (APIs) from India. According to analysts, Kyowa is expected to post 24 per cent compounded annual growth rate over the next couple of years. It plans to launch 10 drugs in different therapeutic areas, including CNS, cardiology, diabetes and gynecology. These products will address a market size of close to $3 billion.
According to Ranjit Kapadia, vice-president, institutional research, HDFC Securities, the Japanese government is trying hard to cut medical costs by supporting use of generic drugs. He said, “The government is relying on even providing financial incentives to doctors and chemists to boost generic sales in the country.” Indian pharmaceutical companies are also exploring the Japanese market through API exports by seeking regulatory approval for their domestic plants, he said.
According to a recent Standard Chartered Bank report, Lupin achieved an eight per cent growth in 2009-10 and an rupee-adjusted annual growth of 13 per cent in the year-to-date. This was despite bi-annual price cuts affected in April 2010, which impacted 15-16 per cent of Kyowa’s portfolio. Lupin had filed API registrations for 15 products, representing almost half of its current sales, which will positively impact its cost of operations from 2011-12, the report added.
For 2009-10, Kyowa had reported consolidated sales of Rs 534 crore, 11 per cent of Lupin’s consolidated revenues. Its revenue grew 16 per cent to Rs 172 crore during the third quarter of 2010-11. This was 12 per cent of Lupin’s overall revenues during the quarter.