Pharma major Lupin targets $1 bn revenue from inorganic growth by FY18

Says open to acquisitions; historically $200-300 mn has been a sweet spot

Looking to add $1 billion in revenues from inorganic growth to reach its target turnover of $5 billion by 2018, pharma giant Lupin, which is currently worth $2 billion, says it is open to late stage speciality assets. 

Lupin's chief financial officer Ramesh Swaminathan told Business Standard that while $200-300 million per acquisition is a sweet spot for the company historically, it does not mean that the company won’t look at bigger acquisitions.
“We’re looking at adding $1 billion in revenues from inorganic growth to reach our target of $5 billion by 2018," he added. 

Lupin, he said, will continue to scout for meaningful acquisitions that will enable the company to build and consolidate its position as an emerging global specialty pharmaceutical powerhouse. Acquisitions will help it bolster our existing global brands business specifically in the US, acquiring technological capabilities, entering new markets where it has no presence, the company said. 

As such, the company has been making strategic acquisitions of late. Among them are the Gavis buyout for $880 million in July last year that gave it access to a $63.8 billion market as well as a deep pipeline. Another was Nanomi, a Danish technology company in the injectables space in 2014.

"The Gavis acquisition enhanced our scale in the US generic market and also broadened our pipeline in dermatology, controlled substance products and other high-value, niche generics,” said Swaminathan. “The acquisition gave us manufacturing capabilities in the US along with a highly skilled US based R&D organization which would complement our Coral Springs, Florida, inhalation R&D center."

Gavis currently has 66 abbreviated new drug applications (ANDAs)  filings pending approval with the USFDA and a pipeline of over 65 products under development. Nearly 72% of these filings pending approvals represent niche dosage forms. Swaminathan said that Lupin and Gavis have a combined portfolio of 101 in-market products, 164 cumulative filings pending approval and a deep pipeline of products under development for the US. 

With Nanomi, Lupin made its foray into the technology intensive complex injectables space. Nanomi has patented technology platforms to develop complex injectable products and a rich talent pool of scientists. 

Analysts say that in comparison to the current fiscal in which the company was saddled with USFDA issues together with price erosions in its key markets, the upcoming fiscal is likely to see some margin improvements, in the range of 26-28%. 

Swaminathan has recently been quoted as saying that following the Gavis acquisition, the company is comfortable with a debt-EBITDA ratio in the range of 1.5-2, and that the acquisition is expected to improve its US turnover. Further, Lupin received 10-12 US ANDA approvals in past nine months and is hoping to receive another 14-15 approvals by the end of 2016. 

Lupin posted a profit after tax of Rs 493.80 crore in the September quarter on the back of revenues of Rs 2,526 crore while its operating margins were at 28.78%.