Lupin in the hunt for Latin America companies

Mumbai-based Lupin, which posted a 68.2% jump in quarterly net profit on robust growth in key markets like the US, India and Japan, is gung ho on acquisitions in new geographies.

The Rs 4,741-crore pharma firm is targeting the $40 billion Latin America market in particular. Kamal K Sharma, managing director, said, “Acquisitions will be lead by a strategy and not just a quest for augmenting our size. We currently don’t have a major presence in Latin America and organic growth there is not a very good proposition.”

Lupin has some registrations in Brazil and Mexico. Sharma said the market is complex, and the local industry is also very strong. “So, an acquisition there would provide us with a vehicle to ride ahead and establish ourselves.”

“Latin America is a place that can’t be ignored. It’s not easy for an outsider to make moves there as the local players are strong. Argentina is a slow economy, and again has a strong domestic industry. Mexico is a branded structure, which would undergo a shift towards generics like Germany,” said Sharma.

Lupin did a string of small buys in the past, starting with Kyowa (Japan) in 2007, followed by Hormosan (Germany), Pharma Dynamics (South Africa), Generic Health (Australia),  in 2008 and Multicare Pharma (Philippines) in 2009.

According to a senior executive from a professional services firm, Lupin’s strategy of buying small works in a sector like pharmaceuticals that is very challenging due to regulatory issues and timelines. “Smaller buys minimise risks. Moreover, in case the acquired entity fails, it can be handled easily and probable losses are also not that high.”

Bhavin Shah, research analyst with Dolat Capital Market, said Lupin has a history of buying something and then turning it around in its favour in a manner that adds to the company’s bottomline.

Meanwhile, the drugmaker expects sales in the US (its biggest market) to grow at 39% while domestic business would rise by 20-21% in FY11, Nilesh Gupta, group president and executive director, Lupin, said.

However, the company does not expect an easy run in the Japanese market. “The Japan (growth) is little tricky because we have to also worry about the forex variations... and the price cuts (of medicines) that are happening,” he added. He however said the increased use of generic drugs and new product launches would drive growth in Japan in FY11.