Lupin warns of more pricing pressure as fourth-quarter profit halves

By Zeba Siddiqui

MUMBAI (Reuters) - Indian drugmaker Lupin Ltd expects to launch over 30 products in the United States this year, but warned revenue growth would remain muted due to growing pricing pressure and competition in the world's largest healthcare market.

"We've talked about medium single digits of price erosion in the past and I think we are now (seeing) high single digits," Managing Director Nilesh Gupta told Reuters after Lupin reported a quarterly profit that halved from a year earlier.

The country's third-largest drugmaker has been working on building a pipeline of high-value complex generic drugs in the United States to offset growing competition in plain generics. But a consolidation among drug distributors has hit generic companies' ability to negotiate on prices, and price hikes have also become harder to justify amid regulatory scrutiny.

 

"Competition is increasing and (distributors) are getting more powerful than ever before," Gupta said.

The company expects to launch more than 30 drugs this year, most of which would be small to medium-sized opportunities, with bigger, more lucrative launches planned for 2019, he added.

North America sales at Lupin slumped 13 percent in the fourth quarter, dragging down net profit to 3.80 billion rupees ($58.63 million) from 7.48 billion rupees a year earlier. Analysts on average expected a profit of 6.45 billion rupees.

Compounding generic companies' challenges in the United States is increasing U.S. Food and Drug Administration scrutiny of foreign manufacturing sites that has resulted in warnings and bans on dozens of plants over quality control issues.

Lupin's manufacturing costs and other expenses jumped about 30 percent in the quarter, during which it worked on upgrading its Goa manufacturing plant that is under FDA scrutiny for quality standards violations.

The U.S. business troubles during the quarter could not offset an increase in sales in other markets including India, Lupin's second-largest market, where revenue grew 14 percent.

The company's shares fell as much as 7 percent to their lowest in nearly three years after the earnings report on Wednesday. They later pared some losses to close down about 2 percent in Mumbai.

($1 = 64.8175 Indian rupees)

(Reporting by Zeba Siddiqui in Mumbai; Editing by Himani Sarkar and David Evans)