While pharmaceutical firm Lupin beat street expectations on its Q2 bottomline, the company missed topline estimates. This weak performance, Nilesh Gupta, managing director, Lupin says is due to both competition and seasonality of products.
In an interview to CNBC-TV18, Gupta says Q1 was expected to be stronger quarter for the company as its product Niaspan was launched in the end of March.
“This helped Q1. Also we were expecting competition in Duloxetine, and further competition in Niaspan itself at the end of Q1. So, this was expected in the US. Hence, there has been a decline in the US on a sequential basis,” says Gupta.
Furthermore, Gupta says seasonality of products too weakened the company’s Q2.
“We are probably the number one Cephalosporin company globally. Cephalosporin typically follows the seasonal pattern where Q3, Q4 are the strong seasons, Q1 is weaker and Q2 is the weakest. So, that entire seasonality is playing out as well,” he explains. Below is the transcript of Nilesh Gupta's interview with CNBC-TV18's Archana Shukla.
Q: How has growth been?
A: As usual a bunch of things drive the growth. The US grew at 21 percent, India grew at 20 percent, Japan grew at 21 percent as well. So, overall growth coming from the usual suspects. The US as you know is our biggest market, India is number two, Japan is number three and pretty much the same kind of growth from each one of them.
Q: In the US particularly we did not see the kind of growth what we saw in Q1 of this year. Is this because of increased competition in some of your products? What were the metrics in the US market?
A: This was kind of expected as well. We knew that Q1 was going to be particularly good. We had Niaspan that just came to market at the very end of March. So, we had all of Q1 for that. We were expecting competition in Duloxetine, we were expecting further competition in Niaspan itself at the end of Q1. So, this was expected in the US. So, there has been on a sequential basis there has been a decline in the US, expected on price counts and stuff. Importantly, it is also the seasonality. We are probably the number one Cephalosporin company globally. Cephalosporin typically follows the seasonal pattern where Q3, Q4 are the strong seasons, Q1 is weaker and Q2 is the weakest. So, that entire seasonality is playing out as well.
Q: Which were the particular key products that have contributed in this quarter in the US market and particularly to go over Niaspan and Cymbalta if you could share what is the current market share in these two products and also for Trizivir?
A: We don’t share individual product revenues or market shares. We have got very strong share in each of these products in Duloxetine, in Niaspan we have great share as well. In Fortamet we still remain the only game in town. So, we have known to have the 25-30 percent market share and that is what we would have for most of our lead products.
The great thing is that there wouldn’t be one contributor, there would be a whole bunch of products contributing to the overall sales. The sales are at USD 202 million. So, as you can imagine it is obviously a lot of products driving that.
The one good thing about Lupin is that we have always had a very strong baseline business and we have seen very little erosion on that baseline. We have seen increases at times as well and that trend continues.
Q: If we talk about branded business versus generic business in the US market how has that performed and going forward for the next half of this year what is the kind of product line-up that you have that will drive the growth?
A: The branded business in many ways has been the one damp spot on the overall performance. The business has really been flat. It is less than 10 percent of our US sales. So, at one level it is disappointing. It used to be 30-40 percent at one point of time. We basically had two products one of them has gone generic and we are now looking how to build back that portfolio. So, Suprax continues to do fine, it continues to do well. We launched a whole bunch of line extensions, so we have chewable, we have drops, we have single strength, double strength, so there are a lot of products there. So, Suprax continues to do well but in many ways it has plateaued out at this point.
The brand business has to be built with acquisitions in the near term. There is a pretty vibrant product portfolio we are putting for the longer term but that is going to be at least two years out from now.
On the generic side things go well. It is more than 90 percent of our US sales. We will probably have anywhere from 8-10 launches in the next 2 quarters. So, all in all things are pretty healthy on the generic side.
Q: Let me ask you about the profitability growth for the company. The EBITDA margin for the net profit at these levels, how well are you sustaining them and what is the plan going forward?
A: EBITDA margin is about 30 percent of sales. The PBT and the PAT grew as well. The PBT grew by 23 percent, PAT grew by 55 percent. I think the important line to focus is the EBITDA line. We have always said that 28-30 percent EBITDA is where we feel comfortable. We had 34 percent in Q1 and that was on the back of the new launches and on back of some of that business, we also knew that there would be some correction on that. So, that correction is already in place. I think the EBITDA margin is pretty sustainable.
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