Pharma player Lupin aims at 15-20 percent growth for FY14 on year-on-year basis. CFO S Ramesh believes that the margins of the company will increase on a quarter-on-quarter basis.
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Meanwhile, Lupin recently got approval from the American authorities for Yasmin, an oral contraceptive and hopes to launch it soon in the US. He further added that the company is looking at around 100 new launches in the span of next three years.
With regards to the domestic pricing policy, Ramesh expects the prices to come down by at least 2-3 percent. "Lupin will be impacted by around Rs 30-40 crore which will flow to the bottom-line as well, but overall penetration would certainly increase in India, so one expects the growth to continue," he adds.
Below is the verbatim transcript of S Ramesh's interview on CNBC-TV18
Q: What is happening with Yaz and Yasmin and how much closer could you be in launching that and by when do you think it could happen?
A: We got approval for Yasmin. As of no, we have not got the approval for Yaz and there has been a Supreme Court ruling in America recently, so it clears the decks for generic competition to enter. We are in position to launch one of those and the other as soon as we get approvals.
We have more than 31 submissions to the American authorities for the oral contraceptive space and we already have six in the market. We have 11 approvals till date and by the end of the year, we would have about 18 launches in place.
Q: Are you also pitching for some exclusivity? What kind of market do Yaz and Yasmin represent?
A: They are fairly large products. To that extent, if you look at our track record you have been getting between 25-30 percent post generalisation. We will be able to get same kind of market share for these two products as well, but it is too early to talk about either of them.
Q: What export launches have you planned in FY14 and because of the rupee depreciation, what could the positive impact be on realisations in terms of exports?
A: We have a very rich pipeline lined up for the US. We got about 180 odd filings and we have launched around 45 in the market. We have about 85 products that have been approved. So, in the next three years we would expect at least 100 odd launches and even in the course of this year upwards of 20 would be possible.
Overseas would certainly be a pretty large chunk of that. Important ones that we could be launching through the course of the year could be Gatifloxacin, potentially Niacin at the end of the year. Some of these could be pretty large ones. If you talk about any generic product of over USD 10 million being blockbuster, we will have quite a few of those being launched in the course of the year itself.
Q: The potential launch of Yaz and Yasmin along with the ones that you have mentioned, how much do you think it could help in terms of augmenting your margins further? You closed last quarter with 25 percent plus margins. Do you think you could better going ahead?
A: If you look at last quarter, the margins are close to about 26 percent on the back of launch of Tricor. It was a pretty large drug for us. Continuing into the current quarter there are of course seasonal variations. For example, flu season is off so to that extent sales of Suprax and others could be down and the price coming off in case of Tricor, Ziprasidone, Fortamet. While these are there, we still believe the overall momentum would continue and you would find growth.
If you look at EBITDA margins, you could expect a margin increase of about 75-100 bps, perhaps not on an annual basis. But if you take a block of 2-3 years, we would expect about 100-125 bps increase. Better realisation of products in America and India as moving towards chronic therapy will give you back-ending of production from Japan. All this actually contributes to the margin increase.
We also invest ahead of the curve in terms of idle capacities that have not been used fully, investing in R&D which is not paid up fully. Therefore, there would be some mitigation there. Overall, we do expect margins to increase, but they will actually happen on a sustained basis, on a quarter-on-quarter basis. It is not linear. To that extent, we would expect it to happen over a period of time, but not necessarily every quarter.
Q: There is some technical impetus going into this and the next quarter and that has happened with the currency. Have you been able to quantify what the potential margin impact could be because of how sharply the currency has moved?
A: The rupee depreciation certainly helps. Fortunately, we had not covered our entire exposure. The total coverage was potentially less than 30 percent. So to that extent, it does impact us pretty favourably. It could have been much better if we had known that this is going to be the kind of depreciation that one could see. 55 and so on we thought was a pretty good rate, then we see 60 levels and are we seeing the bottom of it at all, is still pretty difficult to say.
Q: Domestic business picked up quite significantly for Lupin. What kind of growth on an average would you expect both from domestic and exports going into the next couple of quarters?
A: Last year, the overall growth was about 24 percent. Fourth quarter was a little aberration because of certain therapy areas where there were some shortages in the market. Look at growth on a yearly basis. This year also, growth between 15-20 percent should be possible.
First quarter is going to be pretty sluggish because of National List of Essential Medicines (NLEM); there is a lot of tentativeness around that. The trade has been de-stocking. The average inventories held by the trade has come down from about 39 days to about 28 days and India would be impacted by that. To that extent, Q1 could be perhaps an aberration, but things would pick up Q2 onwards.
Q: A lot of analysts are trying to find out the impact of the domestic pricing policy on many companies like Lupin. In terms of domestic growth itself, how much can be impacted by this issue? What are you expecting in terms of a run rate for domestic growth in Q1?
A: One expects the prices to come down by at least 2-3 percent, the industry could shrink by that percentage. Lupin is not very different. We are amongst companies that are less impacted by the new policy.
Overall, about Rs 30-40 crore impact would be there which would flow to the bottom-line as well, but overall penetration would certainly increase in India, so one expects the growth to continue. One expects the market to grow at around 10-12 percent on an annual basis and that would mean we would be favourably impacted.