Lupin expands Japan business with Rs 1,000 crore buy

Japan accounts for about 10% of Lupin's revenue and is its third biggest market after the US and India

Lupin has acquired the branded drug portfolio of Japanese pharma company Shionogi for about Rs 1,000 crore, expanding its presence in the market. Japan accounts for about 10 per cent of Lupin's revenue and is its third biggest market after the US and India. The deal is valued at 1.6 times the acquired product sales.

Under the deal, Lupin's Japanese subsidiary Kyowa will acquire 21 (off-patent) branded products from Shionogi covering different therapies – central nervous system, oncology, cardiovascular and anti-infectives.

The 21 acquired products have turnover of $90 million (Rs 600 crore) according to the national health insurance price data, Lupin said. The transfer will come into effect on December 1.

“This acquisition marks Lupin’s foray into the Japanese branded market in line with our aspirations to build and strengthen our specialty business globally. The new branded product portfolio has a strong fit with Lupin's Kyowa business as it adds depth and reach to its current CNS portfolio and other therapy areas,” said Lupin's managing director Nilesh Gupta.

Big-ticket acquisitions of brands & companies by Indian firms
2016	Lupin acquires branded drug portfolio from Shionogi for Rs 1,000 crore
	Dr Reddy's Laboratories buys 8 drugs from Teva for Rs 2,300 crore
	Sun Pharma bags Novartis' branded drug portfolio in Japan for Rs 1,900 cr
2015	Lupin buys US firm Gavis in $880 mn deal. Transaction closed in 2016
	Cipla buys US drug makers Invagen and Exelan in $550 mn deal. Transaction closed in 2016

Kyowa is Japan’s ninth largest generic drug company by sales and the acquisition of Shionogi's products will catapult the company to sixth position, Lupin said. It acquired Kyowa in 2007.

Lupin had annual sales of Rs 1,300 crore in Japan in FY16 with a three per cent year-on-year growth. Last year, the company set up a plant for manufacture of oral solids and signed a strategic partnership with national level distributor to expand its business.

Lupin's acquisition of Shionogi brands is the second large acquisition in Japan by an Indian drug firm in recent months. In March, Sun Pharmaceutical Industries acquired branded drug portfolio of Novartis for Rs 1,900 crore.

Traditionally a market for innovator and branded products, Japan is seeing a shift towards generics as its government tries to cut its social welfare spending. Generics account for about 50 per cent of the total drug sales in Japan and the government plans to increase the share to 80 per cent. The Japanese government's push towards generic drugs is coupled with price cuts in off-patent drugs.

Sujay Shetty, partner (pharma) at PwC, however believes there is sufficient demand for branded products in Japan. “Generic substitution in Japan is low in comparison with other western countries because the Japanese residents prefer innovator and branded products.”

“Japan is a very important market for us. The acquisition strongly supports our future growth plans and the brands have robust synergies with Kyowa’s existing portfolio, which will enable Lupin to build a wide customer base across key therapies,” said Fabrice Ergos, Lupin's president for Asia-Pacific and Japan.