Next to India and the US, Japan is a very interesting market for Lupin, says Dr Kamal Sharma, Managing Director, Lupin Ltd, in an exclusive interview with Business Line .

What is your growth strategy for the domestic market and key focus therapy areas for new launches?

Growth has three components, namely products, doctor reach and field force productivity. Products are ever evolving. Our product selection process involves identifying new product deliveries that will help better drug absorption in the human body and therapy groups with unmet treatment needs. In-licensed molecules help Lupin fill the portfolio gaps in therapy areas which are currently not addressed by our captive R&D. In addition to the top management, we also involve key opinion leaders in finalising new therapy areas and products.

With sales force in excess of 4,000 representatives and given the specialities we focus on, Lupin currently reaches out to 1.3-1.5 lakh doctors in the country. Hence the untapped potential is huge. We endeavour to add 30,000-40,000 doctors every year.

Lupin has consistently increased productivity. With addition of people, productivity may have moderated but it will gradually improve. Lupin believes in scientific promotion, which is not just gratification of the doctor community, but education and dissemination of knowledge.

What are the diseases for which Lupin is eyeing in-licensing opportunities?

Gap in therapy areas because of non-availability of treatment options or higher treatment costs are filled through launch of in-licensed molecules. For instance, until a decade ago, Alzheimers disease was not known to many. But it is scientifically accepted today, many have succumbed to it. This is because of the changes in the ecosystem due to socio-cultural wave, leading to changes in lifestyle. Some other interesting therapy areas with relatively less treatment options include diseases such as multiple sclerosis.

Why is Lupin’s operating margin in the domestic market lower than the industry?

Significant presence in low-margin anti-tuberculosis segment is one major reason. Secondly, we are investing money into research, recruitment; training of sales force. Hence, current margins are lower at 25-26 per cent. As these investments begin to pay off, domestic business margins should also improve over the next few years.

Can Indian companies sustain the current growth pace in the US market? What can be the sustainable growth for Lupin in this market over the next two years?

Marginal players may find it difficult to sustain post the patent-cliff. However, companies investing in technology, trying to increase presence in difficult-to-manufacture product segments such as oral contraceptives, anti-asthma and dermatology should be able to sustain growth even beyond the patent cliff.

We are looking at sustaining 25-30 per cent growth in the US generic market. Lupin has filed for 13 ophthalmic products, the revenues from which should start flowing from FY14, subject to timely approvals. The potential in the ophthalmology market is around $5 billion and Lupin can garner at least $50-60 million of these revenues.

What makes Japan an attractive market for Lupin?

This is the second largest market next only to the US. The generic penetration in Japan is way lower at 20 per cent as compared with 80 per cent in the US. Hence, there is significant growth potential for generic drugs. Japan being a branded generic market, the sustainability of revenues is higher than other developed markets. Though the regulatory and operating environment is relatively complex, Lupin’s early entry gives it an edge over others.

How has the recent acquisition I’rom Pharma turned out for you? When do you expect the company to turn profitable?

I’rom has started contributing to Lupin’s profits beginning 1QFY13. The company’s current pre tax margins are at 7 per cent. Product portfolio re-jig by marshalling resources to products that have better prospects and efficiency tightening have helped I’rom achieve this.

I’rom’s profit margins should inch up to Kyowa’s levels of 12-14 per cent by end of the current fiscal.

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