While domestic sales in the second quarter are expected to be weak for major players, Lupin is likely to outperform the pharma sector on the back of a growing chronic portfolio.

Group president and executive director Nilesh Gupta talks about the company's US plans, acquisitions and growth prospects in India.

The company got an approval to launch its first oral contraceptive (OC) in the US. Isn't the OC space getting commoditised?

An increase in the number of players from two to six will impact us. While pricing pressure will be there, margins are still high in the business.

In OCs, we have filed for 25 products and have at least two-three firsts to files. The OCs should fetch us $100-$200 million in a two-year time frame.

You have made inroads in the US prescriptions market. What are your targets here?

In the US prescriptions space, we are in the fifth spot. The challenge now is to move to the number three position, but that will take time as other major companies have made inorganic moves to build that kind of market share.

How many US filings have you made and what are the new product launch prospects?

We have crossed about 158 abbreviated new drug applications so far. Thirty-five of them are in the market and we are awaiting approvals for the rest.

We add about 20-25 products to that (filing) list every year. In terms of launches, it is going to be pretty rich, especially in the next three years.

While we will launch 10-15 products each over the next two years, eventually our filing rates are likely to match our launch rates. So, expect 20-25 launches per year.

You have not made any acquisitions for a couple of years. Anything in the offing?

In Europe, which has not been our focus so far, some of the interesting markets are Turkey and Russia. We have ruled out any acquisitions in West Asia.

Thus, going ahead, we are looking at Latin America, select markets of Europe and Japan where we want to add to our existing acquisition.

How do you plan to expand your presence in Japan, which contributes 11

per cent to sales?

We are among the top 10 generics companies in Japan. After the Kyowa acquisition, we have grown 15-20 per cent every year.

One of the reasons it has not grown faster is the mindset towards generics companies and products.

However, government initiatives to promote generics would aid market switching (towards generics), which will drive growth rate.

Given the growth you have seen in the US, would the focus move away from the domestic market?

While the US and Japan are important, our focus on India will remain. We have grown faster than the pharma sector over the last five years.

Five years ago, India was not a huge profit contributor as we were dependent on tuberculosis and anti-infectives and these are low-margin products.

The switch from the acute to the chronic, which now constitutes 80 per cent of our portfolio, has been successful.

We have 4,000 representatives and add anywhere between 500 and 600 more every year. We should continue growing at 15-20 per cent in India, going ahead.

Do you expect operating profit margins to remain at 22 per cent?

We have a stated goal of increasing margins by 0.5 to 1 per cent every year. But we have struggled.

Last year, we launched very few products in the US; so the margin expansion did not happen as planned, but will happen this year.

Margin growth would be a function of our business model and how we can optimise on costs. As we grow and as our expenses grow at a slower rate, margins are likely to keep improving.

To reach the $3 billion target by FY14, you have to grow at double the current rate.

It is an aspiration and these aspirations help you build a high growth model. We are at Rs 5,700 crore (Rs 57 billion) and given the current growth rates we should end the year (FY12) at about Rs 7,000 crore ($1.4 billion).

The $3 billion number will have some inorganic component to it. It won't be a big bang acquisition. It will typically be smaller acquisitions to help fuel the growth faster.

Image: Nilesh Gupta