Expect FY16 US generic launch for Nexium: Lupin

A: This company has always been part of our consolidated results so to speak. The turnover has been around USD 80 million topline, it has been an extremely profitable company, EBITDA margins generally range between 25 percent and 30 percent and more importantly, the company was growing at a rate of at least 30 percent per annum for the last several years.

So it is a very profitable asset, a fast growing asset, it is the third-largest company from a prescription basis in South Africa and that market itself is a fairly large market and important market for us which is USD 3.5 billion market growing at around 5 percent. So from a strategic sense, it is an extremely important acquisition. What does it do in terms of bottomline? At an EBITDA level it has already been consolidated so the minority interest goes down. So earnings per share goes up.

Sonia: That is about the acquisition but I wanted to talk about the Indore facility and the fact that it was audited by the USFDA in the month of January. Were there any worrying observations from that facility and is there any fear of the matter escalating into an import alert?

A: It is a governing body and we respect whatever observations they bring to the table. The very fact that we had new products being approved from the same facility, immediately after in fact inspection speaks of the fact that they are pretty okay with the facility per se. So I think it is disconcerting from our end but we are taking cognizance of the observations and respect them for what they are.

Latha: They are relatively minor observations you would think, no data integrity or any such issues?

A: No, certainly no data integrity issues or anything of that kind. The FDA doesn’t classify anything as minor or major, these are just observations and from our perspective, we have submitted those, we have taken that into cognisance.

Sonia: When can we expect the launch of the Nexium generic?

A: We haven’t got the approvals as yet. As you would be aware, there has been a lot of approvals which are pending at the FDA end and lot of us have been stymied by lack of approvals. So that has been one of the disconcerting features of American market, approvals from America have been pretty slow this year. It is not as though Lupin is alone in this, in fact the host of generic companies are also with us in this. To that extent, we are of course little disappointed but we are fairly hopeful that it will happen during the course of the next fiscal.

Latha: Should we hear of more acquisitions?

A: For sure. If you look at the balance sheet, we are today a cash surplus company and we have been looking at in fact acquisitions in various markets. Certain parts of Western Europe, certain parts of Eastern Europe and of course America have always been important to us. We have also professed our interest in the Latin American market.

Latha: Which region would you say is ranking high, should we hear from Europe from some European acquisition first?

A: All of them are important from a strategic sense. So it is very difficult to say whether it is going to be Europe first or America first or Japan first.

Latha: What I meant was where are you high up in terms of having spotted a target?

A: At any point of time we would look at least several proposal on my table. In other sense it is very difficult to say this is going to take priority over something else. It depends on to the value proposition. So as you would be aware -- we don’t chase acquisitions and the proposition has to be compelling from a financial and economic perspective.

Latha: Are they large like USD 300 million -- that kind of size?

A: That has always been between USD 250 million and USD 300 million so whilst we can look at outlaying close to about couple of billion dollars overall several quarters, certainly we will be looking at in fact between USD 200 million and USD 300 million per tranche.

Sonia: Coming back to the Nexium generic launch, you said that the approvals could come through and the launch could take place by the end of FY16, what is exactly the size of this product and what could be the potential for Lupin?

A: It is a pretty large size product over a billion dollars but when it comes into the market, there is a price erosion. If you look at our past, we have always had about 25-30 percent market share in most of the products that we get into and going by that track record, we are fairly confident we would be able to establish a fairly decent market share in this product as well and for sure, as long as the price erosion is well contained, it would be a profitable product.

Latha: Give us a word on your revenue growth expectations. Last time around US was a bit flat probably because of the currency, so what are you expecting, is there a mean reversion, you go back to about more than 20 percent growth in the US as well how is India doing?

A: Last year was in fact an exception when it comes to India. The current fiscal we have done extremely well. Our growth rate has been around 20 percent mark in the first nine months. We are fairly confident of sustaining a pretty good growth rate for India for sure.

If you look at America in fact our past growth rates have been well over 20 percent. This year of course Q1 was very good quarter, that is on the back of good products that we launched in fact in the previous year but if you look at in fact the year as a whole, we are little disappointed with the kind of approvals that we have got from FDA and that has kind of stymied the growth.

So that is the dark clouds on the horizon. If there are further approvals which are going to be delayed, it will certainly have an impact when it comes to the growth rate and the overall sales in America itself and that is something which was across the industry.