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Lupin in deal to develop product portfolio for Merck

Agreement can add up to 20 new products to the current portfolio and will cater to 4-5 key therapeutic areas

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Pharma major Lupin said it has entered into a long-term strategic partnership with Merck Serono, the biopharmaceutical division of Merck, for implementing the Germany-based company's general medicines portfolio expansion initiative in emerging markets. The company is also looking at expanding its presence in Russia, Turkey and China, though no definite plan is in place at the moment for the latter, said a senior company official.

Vinod Dhawan, group president, Asia Pacific, Africa, Middle East, & Latin America (AAMLA), Lupin told dna, "We have a good relationship with Merck Serno for sometime and we have earlier developed some products for them.

We have worked together for the last four years in markets like Brazil and Mexico and they are satisfied with us. So we thought of taking this relationship at the global level. This is a 10-year old agreement which can be renewed."

As per the agreement, Lupin will develop products, provide product dossiers and supply finished products to Merck Serono, which will then market the products, leveraging its strong commercial and medical teams in emerging markets to bring new medicines in its portfolio to customers, Lupin said in a press statement.

Lupin will receive upfront and milestone based licensing fee. However, both companies have agreed on not to release any financial details of the transaction.

Dhawan said, "We will explore some more product opportunities with them, but we are not looking at any more markets with them at the moment. As per the agreement, we can add up to 20 new products to the current portfolio but we can increase it as we go ahead. The agreement will cater to 4-5 key therapeutic areas, such as cardiovascular, diabetes, endocrinology etc." The first product launches are expected in 2016.

The partnership would cover major markets such as Brazil, Mexico, Indonesia, Philippines alongside several countries in Africa and Central Eastern Europe as well as other countries in emerging markets. Sales in the emerging market regions are one of the key growth drivers for Merck Serono, amounting to close to 1.8 billion euro in 2013.

Dhawan also said that Lupin is looking at strengthening its presence in Japan, Brazil, Russia, Turkey and China through acquisition or strategic partnerships. "In terms of geographical expansion, Brazil, Russia and Turkey where we are interested. We are closely examining China though we have no definite plan. We have a small presence in Russia and Turkey historically but those are large markets and we are examining ways that will allow us to have a larger critical mass so that we can develop much faster. But we are talking to a number of players. But we are definitely not looking at any big acquisitions."

"The kind of acquisitions that would make sense to us in most of these markets will ideally be between $50 million and $80 million of sales," he added.

Ranjit Kapadia, senior VP – pharma, Centrum Broking, said, "The deal will be beneficial to both companies. Lupin will be able to make more capacity utilisation and its per unit costs will come down. For Merck, it would be able to keep a low price for the product. Emerging market is price-sensitive market and Merck would be able to take advantage of Lupin's low cost manufacturing base in India. The effect of this partnership will start showing in 2016-17. But as per the upfront payment, Lupin should get some payment immediately depending on the kind of agreement it has entered. The other milestone payment will come as and when it will develop the dossiers."

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