The US is back on growth track, what is the way forward?
A few years back US was about 45 per cent of our sales, now it is around 30 per cent. US had crossed a billion dollars in revenue for us about two and a half years ago. Versus that we are significantly lower, we are at $800 million plus now. But we are back on the growth path. Last two years had seen a decline. This year we had budgeted single digit growth and clearly we are delivering as per that plan.
For complex generics, not more than three - four players will make it to the finish line. Depot injections continue to remain non-genericised even after all patents have expired. The truly complex products will not see the same degree of commoditisation. We are also very clear that we are not walking away from the plain vanila generics. If we are there on day 1 (in the US market), we will have sizeable market share. For example in Ranolazine, even after genericisation where many other players have come, we still have 25-30 per cent market share. We would focus on first to file (FTF) opportunities, and Para III, we will file 25-30 products every year. We did 30-35 oral solids every year, we now do 15-20 products. The biggest part of the growth will come from injectables, inhalation products and biosimilars. For the next five years, in oral solids we see single digit growth. Inhalation will be the biggest growth driver in the near term.
FTFs would also mean more litigations?
We have a fantastic legal team. Litigations are in a steady state and we dont see that going up immediately. We will litigate in the ones where we are exclusive. Every biosimilar and inhalation product will have litigation as well. We have 15-20 litigations every year. At any point of time, we will have 20-25 litigations going on.
What role will Gavis play in your US growth?
Gavis is completely enmeshed in the Lupin
structure. We do not call out Gavis separately anymore. There are products from Gavis that have moved to India and vice versa. Gavis timing was the most unfortunate, the valuations were the highest and the opioid crisis had not kicked in. The FDA has now come down on the opioid crisis in a very meaningful way. We have evolved the portfolio over time. We would want to do more complex ones in controlled substances. The focus is also on a few FTFs, apart from the federal and institutional businesses. There are three or four speciality products that are under development there. The direction is set.
With multiple plants with official action indicated (OAI) classification from the USFDA, how does it affect future product approvals?
Three areas shine out in complex generics - inhalation, injectables and biosimilars. The inhalation facility is all fine, it was inspected last year. The injectable facility is a new facility, its never been inspected. We have not yet filed to the USFDA from that facility and the biosimilar ones. None of these are impacted. So, complex generics facilities are those that are either not inspected or have gone through completely fine.
Indore, Goa, Mandideep are all oral solids facilities, that's where we have the OAIs. We have four OAIs now, nothing to be proud of. We need to do a lot to fix those. The impact is primarily on the oral solids. Increasingly, more of the oral solids are coming from Nagpur. About half our filings come from Nagpur and that facility was inspected and came out with zero 483 observations. The bigger story does not get impacted at this point of the time.
OAIs hold up approvals and generics business are built on new products. We hope that at least two of these OAIs will be reversed by the end of the year. There is a few months of work that we need to do before we offer them for re-inspection. In Pithampur where we had six 483s, we want to do a bit more work and may be we will offer it for re-inspection by the end of the financial year, or we may take a bit longer. For, Pithampur and Mandideep we will take a bit more time. Goa and Somerset would be put up for re-inspection sooner.
Why do you think there has been a flurry of OAIs off late for the Indian players?
As far as classification of an OAI is concerned, this is a new practice. In the old practice you had to have pretty much a warning letter when a facility would be classified as OAI. Typically, before the FDA would classify an inspection, it would go through the entire review process, then a warning letter, and then it would be classified as OAI. In the new practice, within 90-days you get a determination and therefore they would also flip those - sometimes they would classify an OAI as a VAI, or sometimes an OAI will get escalated into a warning letter. The whole process is supposed to be faster, including classification and approval. This is a new system coming in, which is why you see a flurry of OAIs.
I decided to attend every FDA inspection that happens. I could get a lot of insight into people. In front of an FDA inspector, they would do their best. In Pithampur unit II, we were not able to answer well, people had not known the details adequately. In Aurangabad, which is one of our oldest facilities, people there knew exactly their products and processes. They took considerable pride in the plant and their people. Those are the winning formulas.
Now that you are looking at launching biosimilars in Europe, are you building capacities?
We are doing a major capacity expansion for biosimilars - growing it six fold. At Pune we are doing a greenfield set up and adjoining to the existing site. This would be dedicated only to biosimilars and biosimilars active pharmaceutical ingredients (API). The facility will be ready next year and to launch biosmilars in Europe. We expect approval for biosimilar (etanercept) next year. But, that would not be from this facility. It would be from our existing facility. To supplement that we would need some contract manufacturing.
After a series of acquisitions till 2017, you have slowed down. Any plans for inorganic growth?
If you go back 15 years, Lupin was a company that had more revenue from APIs than from finished products. We had no business in the US and India was mostly acute (therapy) drugs. Exports were only 10 per cent of our total revenues. From there came the expansion phase - we build the US. We were primarily APIs in the US and then we started with finished products. We started exporting to Japan, South Africa, Australia, Brazil and Mexico. To ensure we had substantial on-shore presence in these markets, these geographic expansion, we needed acquisitions. We were done with the geographical footprint expansion about three years ago. We don't want to expand this footprint, if required we will contract this. Partnerships are the natural way to supplement the porfolios in these markets.
The acquisition priority now remains US speciality and India. In India we are already sizeable, so we need something that would complement. We would be interested in acquisitions in dermatology or urology, where we do not have much presence. Gastrointestinal therapy also is another area we want to build on. Now we have to think in terms of NLEM, price control. We need to think if there is an anchor brand around which we can build.
How has the price control regime and push for generic generic changed the domestic market strategy?
I would not attribute the market growth or degrowth to NLEM alone, its for a bunch of other factors as well. On the Jan Aushadi and generic generic play are taking bigger bites of the market in terms of volumes at least today. We are still getting 3-4 per cent increase for the price controlled products. We participate in government tenders. We don't supply to Jan Aushadhi at this point of time. We have started to bid for some of those as well. We need to have quality agenda in India as well. And the lack of it has been a challenge for bidding for Jan Aushadhi in the past. We would love the government to insist on a certain kind of quality and we would love to bid.