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Lupin first company to shift manufacturing of some drugs from India to US after Trump’s ‘Buy American’ order

CEO Vinita Gupta does not name the drugs. Analysts say move will not have much effect on Indian pharma sector. Gupta says US business was down 26 percent in Q1FY21 Q-o-Q. Efforts under way to bring Metformin back into the market within Q2FY21.

August 11, 2020 / 07:15 AM IST
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Lupin has started shifting the manufacture of some drugs from India to the US, following the US government's policy of 'Buy American', directing federal agencies to give priority to drugs made in US factories, CEO Vinita Gupta told Moneycontrol during an interview.

US President Donald Trump had last week signed an executive order directing federal agencies to buy certain essential medicines solely from US factories.

Lupin is the first pharma company to do so after Trump’s order. Gupta did not name the drugs or categories that have been shifted.

Analysts said Lupin’s move does not have much effect on the Indian pharma sector as Trump’s order mainly applies to public procurement by US departments and state agencies.

“Our supplies/exports are mainly to the non-government sector,  dominated by supply chain cartels like Walmart, and much export to state agencies or departments doesn't happen.  Also, US doesn't encourage Indian manufacturers to participate in public procurement processes and mainly involve companies in the US and EU,” Dinesh Dua, Chairman, Pharmaceuticals ExportPromotion Council of India (Pharmexcil), said.

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Pharmexcil is a trade body under the Ministry of Commerce and Industry.

Surya Patra, Vice President, PhillipCapital, echoed the view: “Too early days, and are not expecting any major changes the way pharma companies operate."

US business

Lupin, Gupta said, is banking on the approval of its generic drug Albuterol, relaunch of Metformin, and the scale-up of Levothyroxine to help recover its US business in the second quarter of FY21.

Albuterol sulfate or generic ProAir HFA is an inhaler-based drug used for the treatment of asthma and other respiratory diseases. Metformin is used as a first-line medication for the treatment of type 2 diabetes, and Levothyroxine is used to treat thyroid hormone deficiency.

“Based on the market improvement that we’ve seen in the last two months, we expect things to improve. The baseline business is getting normalised," Gupta said.

“Efforts are under way to bring Metformin back into the market within the quarter. After that, we plan to ramp up material products like synthetic hormonal drug Levothyroxine and Albuterol that we have to launch this quarter. We also have a couple of other partner products that we are expecting this quarter. All these give us the confidence to improve the topline and margins from Q2 onwards," Gupta said.

Albuterol sales are worth around $800 million- $1 billion in the US alone. Lupin is targeting a 20 percent market share for the drug. The company plans to launch another limited-competition inhalation product, generic Fostair, in 2020.

Lupin's respiratory products, including its inhalers, are developed at its Inhalation Research Center at Coral Springs, Florida.

Gupta, who is based in the US, runs the critical US business that contributes little over one-third of Lupin's revenues. The US business was down 26 percent in Q1FY21 on a quarter on quarter (Q-o-Q) basis due to the seasonality of flu products such as Oseltamivir and Azithromycin.

The pre-buying in March and the recall of Metformin extended-release (ER) tablets in the US market due to the presence of a probable cancer causing impurity, N-Nitrosodimethylamine (NDMA) also affected revenues.

Revenues in Q1FY21 dropped 9.1 percent on a year-on-year (Y-o-Y) basis to Rs 3,528 crore. The company posted a net profit of Rs 106.9 crore during Q1FY21, a drop of 60 percent on a Y-o-Y basis. The earnings before interest, tax, depreciation and amortization (EBITDA) margins dropped 530 basis points Y-o-Y 14.7 percent to Rs 5,085 crore.

Regulatory update

Gupta said the company is expecting the US Food and Drug Administration’s (USFDA) inspection of the company’s Somerset facility in New Jersey in a couple of months.

“Due to COVID-19, the USFDA has not been travelling for inspections. They have announced that at the end of July, they will start on-site inspections in the US. So we have offered Somerset for inspection and expect it to happen in the next couple of months," Gupta said.

Five manufacturing plants, including four in India, are under USFDA scanner.

They include Indore Unit-2 (which makes oral solid and ophthalmic formulations), Goa (oral solids), Mandideep Unit-1 (cephlosporins), Somerset (oral, derma and controlled substances), and active pharmaceutical ingredient (API) manufacturing site in Tarapur, Maharashtra.

All five have been classified as Official Action Indicated (OAI) by the USFDA. The warning letters and OAI bar them from getting new approvals.

There is some uncertainty around the inspection of Indian facilities as the USFDA is focusing on inspections related to COVID-19 vaccines and products now, Gupta said.

“We’re still trying to get clarity from the agency. We have made tremendous progress on (the resolution of) the Goa and the Pithampur units. In fact, in the last couple of months, we had a successful inspection of the Pithampur unit by the UK drug regulator MHRA," Gupta said.

A positive outcome of the Somerset inspection will allow us to participate in government business, Gupta added.

The Somerset facility manufactures controlled substances, and products related to dermatology, women’s health and other niche therapeutic areas.

Viswanath Pilla
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Aug 10, 2020 09:03 pm