'New drug research is a high-risk game'

Q&A: Kamal K Sharma, managing director, Lupin

Lupin Ltd, one of the top five drug companies in India, grew over 30 per cent yearly in the past four years and maintained 38 per cent growth in turnover and 49 per cent growth in profits in the first nine months of 2008-09. Kamal K Sharma, managing director, tells PB Jayakumar the company did it through strategic acquisitions, direct to market strategy in the US and careful selection of products. Excerpts from the interview:

Lupin has acquired six companies in the past 18 months. Except for Kyowa of Japan, all were small ones. Was it to minimise risks?
We believe size does not matter. Our acquisitions are strategic moves to enter into new geographies and add technologies. Kyowa’s acquisition was important as it was for entering the Japanese market. It is not easy to grow there organically. Manufacturing standards there are one of the strictest in the world and that acquisition has provided us quality manufacturing facilities.

After we acquired, Kyowa has grown 21 per cent year on year. Take the case of Hormosan of Germany. The German market has become a trade and insurance-focused one and this company has 48 regulatory filings, including 20 product approvals in Europe. It is the same with other acquisitions in South Africa and Australia. Rubamin (Novadigm) in India added to our contract manufacturing capabilities.

We have retained the management and staff of all the acquired companies. Smaller the size of the acquisition, easier is the integration.

Your new drug research and development programmes are way behind that of many other Indian companies.
New drug research is a high-risk game and time consuming. It takes many years for a molecule to come into the market. We have been increasing our research and development spending over the years and we have one molecule in the third phase of trials and two others in the second phase of clinical trials. We also have drug candidates for tuberculosis and diabetes in the development stage.

We are re-organising and re-orienting research and development activities to get better results. We are also looking at novel biologics and biosimilars in a big way and to in-license molecules.

Your strategy in the US is to go direct to market. Has it helped?
We are growing over 45 per cent, year on year, in the US market. Our branded products such as Suprax and other branded paediatric products are among the top-selling ones. We will soon add more products.

We have 60-70 marketing set-ups in the US. In the generics business, we carefully choose products for filing. Of the 80 submissions so far, we believe at least 25 per cent are patent challenges and out of this, at least eight may have first-to-file status. We expect to maintain at least 35 per cent growth in the US in the coming years.

Lupin is known for anti-TB drugs and in recent years has focussed on cephalosporins. Are you exiting from anti-TB drugs, a segment in which margins are less?
No, we are researching to develop next-generation drugs for multi-drug resistant tuberculosis. We also developed and launched a four-in-one drug combination. As you know, this is a business and we need to also look at profitable areas for growth. We control a lion’s share of the market for TB drugs in India, but that may be just 3 per cent of our total turnover and 12 per cent of our India turnover.

In case of cephalosporins, the charm is over as most of these drugs have lost patent protection. New generation drugs have come in this category.

What are your capex plans for next year?
Every year, we invest about $60 million to create new facilities. At Indore, we are creating a new facility at an SEZ to set up manufacturing lines for oral contraceptives. There, we will invest about Rs 70 crore at a 40-acre facility. We hope to grow at least 25 per cent in the coming year.