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BL Research Bureau

Lupin’s move to acquire a majority stake in Kyowa Pharmaceutical Industry Co Ltd (Kyowa), a leading Japanese generics drug company, is a part of its strategy to focus on the country’s $60-billion pharmaceutical market.

With the Japanese Government promoting generics to tackle cost pressures in view of the rapidly aging population, the generics market in Japan is expected to account for 35-40 per cent of the total pharmaceutical market in the country.

This gives generic drug makers like Lupin an opportunity that they are attempting to capitalise through mergers and acquisitions.

However, it may take some time before the acquisition can deliver earnings benefits for Lupin. Japanese companies such as Takeda, Eisai Pharma, Mitsubishi Pharma, and Astellas already dominate the local drug market, resulting in considerable existing competition. Besides, Indian companies such as Strides Arcolab, Ranbaxy and Zydus Cadila are also present in Japan.

Still, recent regulatory amendments have now made it simple for overseas companies to bring their products into Japan. Non-Japanese companies can now farm out the manufacturing process even if they do not operate their own production facilities in the country.

Kyowa, one of top ten generic drug makers of Japan, reported sales of Rs 252 crore ($63 million) for the year ended March 2007.

With this stake, Lupin will be able to add significant value through its strengths in research and development and global marketing.

In 2005, Lupin signed an agreement with Kyowa to market finished formulations in Japan, demonstrating that both companies’ can work together.

More Stories on : Stocks | Mergers & Acquisitions | Pharmaceuticals

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