Lupin says buyouts tough as firms clinging to brands

Lupin, the Mumbai-based drugmaker which is looking to acquire brands on war footing, said it is becoming challenging to forge deals as large companies are not parting with their assets easily.

“Everyone is trying to conserve cash flow from existing products and are very sensitive to losing anything out of their earnings,” said Vinita Gupta, director, Lupin, on the second quarter earnings call on Tuesday.

She said the company is looking at every possible acquisition opportunity, both in terms of products and firms. Lupin has been looking to buy drug brands overseas mainly in the US for some time to reduce reliance on less profitable generic medicines.

“From a corporate development standpoint, it is a priority area and the majority of our focus is on processing and closing opportunities to add to our brand business,” she said.
The company has been targeting multiple assets in the areas including pediatric, dermatology, ophthalmology and respiratory ailments.

Gupta during the first quarter earnings call had said the company was looking to close one or two opportunities in the current fiscal.
On the kind of valuations the company was ready to offer, Kamal K Sharma, managing director, Lupin, said it was dependent on the depth of intellectual property, the competitive dynamics around the product, the therapeutic group and the potential of the drug.

“So one can talk of multiple of sales, Ebitda, etc and it could vary from one time to four times sales. We as a company have strong norms and discipline. While we have to match business interest, we also have to match financial interest. We are very actively looking and brand portfolio in the US. It is a very important part of our business, but we won’t acquire something for the heck of acquiring,” said Sharma.

Meanwhile, the company plans to introduce at least 15 new generic products in the US this fiscal. “Oral contraceptives will form a major chunk with about 8 to 10 products,” said Gupta. The drugmaker has launched five products in the US thus far this fiscal.

Lupin reported a 8.84% year on year rise in consolidated net profit to `290.5 crore on the back of robust sales across the US, India and Japan. Net sales increased 29% to Rs2,239.3 crore year on year.

During the second quarter, the company’s formulation sales across the US and Europe grew 40% to Rs835.5 crore year on year, while India formulations business grew 18% to Rs606.4 crore. Japan sales grew 85% to Rs301.8 crore.