Price erosion in US impacted second-quarter results: Nilesh Gupta

Interview with Managing director, Lupin

Lupin's net profit fell 35 per cent in the second quarter of FY16 as growth in the US and India markets slowed down. Lupin's managing director Nilesh Gupta tells Aneesh Phadnis that the company is optimistic of better performance in the second half of the year. Excerpts:

Lupin reported its second consecutive weak quarter. Why? Did the company not benefit from rupee depreciation and price hike in the US market?

Price hike in diabetes drug (Fortamet) is yet to kick in and will get reflected from the fourth quarter onwards. On the currency front, there was a gain of Rs 20 crore on a sequential basis. We had expected Q2 (second quarter) sales to be muted. The results have been impacted due to higher than estimated price erosion in the US market and an increase in research and development (R&D) spending. On a sequential basis, the R&D spend was higher by Rs 75 crore.

The US market makes up for 40 per cent of Lupin’s revenue. What is the outlook for that market?

The second half of the year will be better than the first due to increase in product approvals and pricing gains. By late November, we hope to close the acquisition of Gavis and we will see its impact. We received approvals for eight products in the US this fiscal (FY16), but these have smaller revenue potential and the launches did not make up for price erosion in that market.

The US Food and Drug Administration (FDA) made adverse observations (Form 483) in their inspections at Lupin’s manufacturing plants. Did that impact the sales?

There has been no impact on Q2 results because of FDA observations. The Form 483 observations regarding our Indore plant have been closed. We have also addressed the concerns at Goa plant and received approvals for two products from Goa.

Emerging markets seem to be the new focus area for Lupin. Recently, the company announced new appointments for the region. Your comments?

The US is our biggest market with 45 per cent of our revenue from the country. Mexico and Brazil are high growth markets and we are working to consolidate our presence in these markets.

Lupin recently announced a tie-up with Boehringer Ingelheim to distribute diabetes drug. Will we see more such alliances in future?

We are heavily focused on growing our diabetes portfolio and would like to build a leadership in the segment. We had earlier tied up with Eli Lilly for insulin distribution and are looking at further co-marketing alliances.

Growth in domestic market has slowed down. What is the reason?

In the first quarter, we saw sales growth of 26 per cent and now it has evened out a bit. We are expecting 18-20 per cent growth from the domestic market in this financial year and we are on track to achieving it.