What about growth from your largest market, the US?
I have said in the past that growth in the US will be muted. People do not like it when I say that but it is the reality. There, we have pretty large products (Glumetza and Fortamet) that are now seeing increased competition.
Normally, we talk about a single-digit kind of price erosion for the entire portfolio. When exclusive or semi-exclusive products get competition, the erosion becomes more than that. So, we will probably have single-digit growth in the US at the maximum, with these products coming down. But, the growth also depends on the number of products that get approved from the FDA (the US drugs regulator).
We are very much ready between Lupin India and Lupin Somerset. We will launch every product that gets approved. We have already talked about 25 approvals. If we get more, we obviously can grow better. If we get around that, then growth will be muted.
How close are you on the revenue target from US acquisition Gavis?
Broadly on track. When we acquired it in 2015, we said we'd be three times revenue in three years. We're on track for two and a half times the revenue in three years. Gavis is at the right place, with manufacturing in the US. It is also at the right space, with business in controlled substances. Next year, we will launch at least 10 products from Gavis. Many of these would be pretty high-valued controlled substance products.
How would you compensate for single-digit growth in the US?
It is fair to look at things in the longer horizon. In the past year, we grew in the US at 30 per cent. On that, single digit growth simply does not sound good. But, if you look at it from a three-year horizon perspective, it is good growth.
But, emerging markets are growing at a good rate. India will grow north of 15 per cent. Japan will be good as well. Last year, we acquired a portfolio of 21 generic brands from Shionogi and we’re now expecting north of 20 per cent growth in Japan. South Africa, Brazil and Mexico will record strong growth as well.
What about the other (major) emerging market, Russia?
We planned to acquire JSC Biocon two years earlier but never closed that. Russia is a challenging market now, with an appreciating currency. It is a big market but with that particular asset, it did not make sense.
In India, increasingly, more drugs are coming under a pricing-cap. How does it affect your plans?
In India, you live from disruption to disruption. The next big disruption will be GST (the goods and services tax). Right now, the NLEM (National List of Essential Medicines) is a finite list. Products get added to that and over time, prices get notified for that list as well. It has become a reality.
But, it remains a lucrative and big market. Also, heavily under-diagnosed and under-penetrated. So, over time, that will drive the growth — new patients, new diseases and new diagnoses. But, yes, price increases do not drive the market anymore.
What about your merger & acquisitions strategy?
On the generic side, we are very well set. On the geography side, too. In the past two-three years, we acquired in Brazil, Mexico. We have built further presence in Japan and acquired Gavis in the US as well. We're now getting more and more into hybrids and speciality (drugs). So, the number one priority for acquisition is speciality in the US. It has become even more needed. Also, speciality in Europe and Japan. We are looking at each of these areas.
From a balance sheet perspective, we can do an acquisition worth as much as $1 bn. But, our sweet spot remains a couple of $100 mn type of deals. So, our acquisitions will be somewhere in that range, of $200 mn to $1 bn.