Published on 9/10/2017 9:49:44 AM | Source: Motilal Oswal Securities Ltd
Buy Lupin Ltd For Target Rs.1,125.00 - Motilal Oswal
Prepping for next wave of growth
Takeaways from CEO track
We hosted Mr Nilesh Gupta, Managing Director of Lupin (LPC), as part of ‘CEO Track’ at our annual conference. Key takeaways:
* Mr Gupta has categorized the evolution of the Indian pharmaceutical industry into Wave 1, Wave 2 and Wave 3. According to him, the India pharma industry is at the end of Wave 2. Although the next two years will pose challenges for LPC in the US, the company will continue focusing on the complex generics, biosimilars and specialty businesses over the medium term.
* Mr Gupta believes that the domestic market can continue recording a 12% CAGR in the medium term. However, the overhang related to 1) new draft policy, 2) government’s focus on generic-generic and 3) Jan Aushadhi scheme can exert pressure in the near term.
* Over 1995-2015, India became a global generic powerhouse, as exports as % of total revenues reached >45%.
* India pharma – the road ahead: In the US, channel consolidation can continue exerting additional pressure in the near term, as the last leg of consolidation will get over in the next few months. Also, GDUFA -2 will lead to faster approvals (which, in turn, will create more competition). Filing costs have also increased.
* Quality and compliance: In 2015-16, Indian facilities were issued 20 warning letters out of the total 52 (ex-US). A constantly evolving and holistic regulatory compliance effort is a must today. According to Mr Gupta, good regulatory compliance does cost money and not necessarily gets you a premium.
* Focus areas for LPC in specialty business: ADHD, movement disorders, hormones, and niche and small indications in women’s health.
* Focus areas for LPC in complex generics: Inhalation and complex generics.
Existing model facing challenges in US
Over the last two decades, the Indian pharma companies have actively transformed themselves from API manufacturers to finished dosage suppliers. Currently, ~40% of generics volumes supplied in the US are from India. Notably, five out of the top-10 global generics companies are Indian. However, Mr Gupta believes that the existing model is facing challenges, and not delivering the same kind of growth as before.
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