Lupin revising product portfolio in US to overcome price erosion impact

Homegrown pharmaceutical firm Lupin Ltd is rationalising its product portfolio in the US, transitioning from simple oral solid medicines to more complex generics to overcome the impact of price erosion witnessed in the market, according to the company's CEO Vinita Gupta.

With its planned product pipeline for complex generic medicines in the next two years, she said in the years to come the company hopes to have up to 40 per cent of its revenue coming from such medicines in the US market.

"...Oral solids (are) still the bread and butter (for the company), but the kind of price erosion one has witnessed on the oral solid side, we decided that it made sense to rationalise the portfolio that does not make sense," she told analysts.

Gupta further said, "Whether it's negative margin or low margin, it makes sense to really take the overhead out of our P&L (profit and loss) to improve profitability. We are taking those steps."

She was responding to a query on Lupin's strategy to counter the impact of price erosion of its products in the US, a key market for the company.

According to Lupin Ltd Executive Director, Global CFO and Head Corporate Affairs Ramesh Swaminathan, the company continued to witness around 10 per cent price erosion in the US market in the first quarter ended June 30, 2022.

Gupta said the company's effort is to transform the portfolio and transition it to complex generics, adding, "It doesn't make sense to really carry loss leaders in the portfolio."

On the steps that Lupin has taken, she said, "It started with inhalation products at 25 per cent of our revenues last year and we hope in the next year or two, with the pipeline that we have coming, we get closer to 35 - 40 per cent in the years to come."

Lupin's transitioning of the portfolio from the simple generic oral solids to complex generics had started with short-acting bronchodilator albuterol.

Going ahead, Gupta said Brovana, which is indicated for chronic obstructive pulmonary disease, will be further strengthened with Spiriva, a long-acting bronchodilator.

These along with nasal spray Nascobal, injectable products, biosimilars pegfilgrastim used in the treatment of blood cancer, have the opportunity to get into the market, she added.

Lupin feels that there is a more sustainable higher margin opportunity in the complex products space, Gupta said. She, however, asserted that Lupin will not vacate the oral solids segment.

"We'll continue to optimise on the oral solids. And at the end of the day, we want to also manufacture oral solids very profitably," Gupta said, adding continuous efforts are on to reduce cost of goods for oral solids such as optimisation on the active pharmaceutical ingredients (API) front or external vendor development.

In the first quarter, Lupin's sales in the US declined sequentially by 33 per cent to USD 121 million from USD 181 million in Q4 FY22 as it took certain strategic decisions such as cutting down inventory at trade level and discontinuation of certain products, in order to have a sustainable and profitable business in the US, Swaminathan said.

"The pricing erosion in FY22 has brought down the margins of certain products to single digit to negative territory. The company decided to discontinue some of these products with low and negative margins, which impacted our sales," he added.