Sun Pharma, Lupin Surge on New Drug Approval

Sun Pharma and Lupin shares surged on Thursday in an otherwise weak market after both the companies got approval for new drugs from the US Food and Drug Administration (USFDA). The new drug approvals for Sun Pharma and Lupin can offer millions of dollars in revenues to these companies.

Lupin has received approval from the US FDA for Fenofibrate tablets in dosages of 160 mg and 54 mg, which is used to reduce cholesterol level in human body and reduce risk of cardiovascular disease.

Analysts say, total annual revenues expected from the drug is about $154 million and the competition in this drug is limited to only three generic players.

Lupin has got approval to manufacture the drug from its Goa plant, which had got Form 483 (observation letter) from the USFDA in July. However, this approval indicates that observations at Goa plant are not disruptive and pushed its shares as much as 8.1 per cent higher.

Similarly, Sun Pharma shares advanced over 4 per cent after the pharma major received approval for generic drug Xenazine, which is used for treatment of acne.

Analysts say the market for Xenazine is around $319 million annually and Sun Pharma can expect sales of $6-7 million per month from this drug. Sun Pharma expects to launch this product in last quarter of 2015.

Lupin shares closed 5.30 per cent higher at Rs 1,890.55 and Sun Pharma shares ended 0.91 per cent higher at Rs 935.65 apiece, compared to 1.44 per cent loss in the broader Nifty.

Lupin's appetite for growth

It’s always a tough call for companies to decide on the need—or otherwise—for an acquisitions-led growth strategy. Oftentimes one has seen business owners examining the pros and cons of potential acquisitions and then going back to an organic growth strategy, keeping in mind current compulsions, cash flows and the impact an acquisition could have on the balance sheet. In this context, Lupin Ltd’s recent, and aggressive, acquisitions-driven growth recipe deserves special attention. The company, founded by Desh Bandhu Gupta in the ’60s, is India’s third largest pharma company by sales, and the next generation of the Gupta family—CEO Vinita and MD Nilesh—are currently busy implementing what is arguably one of the more aggressive buyouts-driven growth plans seen in the pharma sector. The target the two have set for themselves is daunting: A $5 billion turnover by FY2018. In rupee terms, it means the company will have to vault from a current turnover level of Rs 12,600 crore to Rs 31,875 crore in three years. And Lupin realises that if this has to happen, acquisitions would have to be an integral part of the company’s plans.

The first big steps have already been taken in that direction. The company announced three important buys in July, which includes a hefty $880 million one of Gavis, an American generic drug maker, which has become the largest acquisition by an Indian pharma company, bigger than the Dr Reddy’s-Betapharm deal of over $560 million in 2006. The Gavis acquisition will provide Lupin a stronger foothold in the American market, which accounts for 45 percent of Lupin’s FY15 revenues, apart from bulking up its portfolio with specialised products. 

The Gavis buy, as Associate Editor Aveek Datta writes in the cover story, is an important piece of a broader ‘string of pearls’ strategy drawn up by the pharma major, whereby smaller companies will provide flanking support by way of a mix of specialised products, new markets and technologies. Not surprising then that the Guptas are already talking of further acquisitions to the tune of another $500-700 million over the next year. That the buyouts strategy has gathered serious momentum is also borne out by the fact that half of the 12 companies Lupin has acquired thus far have been bought over the past year-and-a-half. The strategy seems to have pleased shareholders, particularly billionaire investor Rakesh Jhunjhunwala, who has given the Guptas a firm thumbs-up.

This issue also brings you the coveted Forbes list of America’s Top 200 Colleges. The listing and the stories show that colleges and universities in the US are increasingly focusing on providing greater value to students, given the steep cost of higher education. And importantly, many are proving to be excellent launchpads for the next generation of entrepreneurs.

Source: 

http://forbesindia.com/column/column/lupins-appetite-for-growth/40931/1#ixzz3jeHEgN1Q

Lupin pharmaceutical firm opens research center in Broward

A pharmaceutical firm from India opened a $13 million facility in Coral Springs, where it plans to create 45 jobs.

 

Mumbai, India-based Pharma Major Lupin received a $315,000 public incentive package in a deal with local officials and the state after working with the Greater Fort Lauderdale Alliance, the Florida Department of Economic Opportunity and Enterprise Florida. The company will conduct research and development work in Coral Springs for inhalation products to treat asthma, allergic rhinitis and chronic obstructive pulmonary diseases.

“We are delighted to be making our mark in South Florida,” Lupin CEO Vinita Gupta said. “With the talent and resources this state provides, our Coral Springs expansion will further strengthen our ability to bring quality, affordable pharmaceuticals to patients in the United States and other key markets globally. The new inhalation research and development facility is a significant step forward in our journey to emerge as a global specialty pharmaceutical player.”

Lupin is the sixth-largest generic drug manufacturer in the U.S. mart, according to IMS Health. It’s U.S. headquarters is in Baltimore. It has a pending deal to acquire New Jersey-based Gavis.

 

Source: http://www.bizjournals.com/southflorida/news/2015/08/10/lupin-pharmaceutical-firm-opens-research-center.html

JPMorgan to fund Lupin’s $880-million Gavis deal

PMorgan will bankroll Lupin for its $880 million acquisition of Gavis, a New Jersey-based generic drug firm.

The Wall Street bank will act as guarantor till the date of payment, which is some weeks away, and then lend the full deal amount that Lupin will have to repay over a medium term period, said a person who is aware of the transaction

The loan, it's understood, is not backed by hard collateral or claims on future cashflow, but based on pure credit assessment. "Lupin will have enough time to arrange funds to pay off the loan...JP is not holding a gun to their head," said a source.

The acquisition financing arrangement was cobbled together after the seller insisted on a guarantee.

A spokesperson for JP Morgan India declined to comment on the deal while ET's email to a Lupin spokesperson went unanswered till the time of going to press.

On Thursday, Lupin, a Mumbai-based pharmaceutical company, announced that it would take over Gavis, which is run by Veerappan Subramanian.

It would be the biggest outbound transaction in the Indian pharmaceutical industry.

JP Morgan is also the sell side advisor in the deal. "What's unusual is the absence of other bankers and JP writing the cheque for the entire amount which is not small," said a seniior banker.

Two industry sources said that Lupin had placed the bid for Gavis and another UKbased drug firm specializing mainly in dermatological brands, which was also valued at $700-900 million.

Earlier in the year, Lupin's name had cropped up as a bidder for Kremers, the US generic drugs business of Belgian drug firm UCB.

Analysts are divided on the Gavis deal. Being valued at 9 times 2014 sales and 6 times 2015 sales, some feel it's an expensive acquisition.

Indeed, one Mumbai-based investment expert said the deal does not give comfort on the payback time, especially due to a lack of clarity on the potential upsides from the launch pipeline of Gavis. However, another analyst thinks Lupin that has paid full price for a good asset in contrast to some generic peers who typically acquire assets at distress value. "If the margins are sustained at 35% to 40%, we see Gavis to give the right push to Lupin," he said requesting anonymity.

Lupin itself has been a conservative buyer and has not paid a very heavy price for any of its global deals.

On the Gavis deal, Lupin said that it hoped to leverage on at least 50 of the 66 future filings of Gavis to treble revenues by 2017-18. On Friday at the BSE, Lupin stock ended down 3% at Rs 1672.

Lupin acquires specialty portfolio from German company

Temmler Pharma has a specialty portfolio of 13 products including key Central Nervous System (CNS) products

A day after announcing a $880-million acquisition in the US, drug maker Lupin said it will acquire speciality product portfolio from German company Temmler Pharma for an undisclosed amount.

Chief executive Vinita Gupta said Temmler’s business had a “strong strategic fit with Lupin’s Hormosan business in Germany and enables Lupin to bring an enhanced specialty central nervous system (CNS) portfolio to the German market.” Established in 1917, Temmler is a part of Aenova Group, a pharmaceutical contract manufacturer. Hormosan, also a German pharmaceutical company, was acquired by Lupin in 2008.

Based in Marburg, Germany, Temmler has a specialty portfolio of 13 products including key CNS products and specialty products that address rare disease areas like myasthenia gravis, huntington’s disease as well as fast-growing dermatology products for anti-wart treatment.

The announcement came after the close of business hours at the stock exchanges. On Friday, Lupin stock closed at Rs 1,672, down 3.27 per cent from the previous day’s close. This is the second consecutive day of decline in the stock price. On Thursday, the stock lost over five per cent after it announced a 16 per cent drop in consolidated net profit for the June quarter. The Mumbai-headquartered drug maker has lost Rs 6,844 crore of market value between Thursday and Friday owing to a drop of over eight per cent in stock price.

Earlier this week, the country’s biggest pharma company, Sun, lost over Rs 34,000 crore of market value in a day after the company said its profit will be ‘adversely impacted’ due to expenses related to integration with Ranbaxy, a company it acquired last year.     

This is Lupin’s sixth acquisition in 18 months. In February 2014, it had acquired Netherlands-based Nanomi.

A month later, it acquired control of Mexican company Grin. In May, it bought Brazilian company Medquimica Industria Farmaceutica. Earlier this month, Lupin acquired ZAO Bio Biocom in Russia. On Thursday, it announced acquisition of New Jersey-based generic drugs firm GAVIS for $880 million. GAVIS is the largest overseas acquisition 

What took mighty Lupin down!

In an interview to CNBC-TV18, Praful Bohra, VP- Research, Religare said that US business is one of the most profitable markets for Lupin, and seeing a decline there has resulted into overall weak numbers. 

Besides, absence of big bang approvals and Aurobindo Pharmax entry into generic Suprax also impacted Lupin sales, he said. He also feels the price Lupin paid to acquire Gavis is too high. 

Below is the transcript of Praful Bohra's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. 

Sonia: How to approach Lupin  ? 

A: The numbers were weak. On the operating front - that's largely led by the sequential decline in the US business. However, some part of it would also be driven by the entry of Aurobindo Pharma  in Suprax; I think that would have led to some sequential decline. Having said that I also believe that there would be some erosion in the base business because there were no big bang approvals for Lupin in the last quarter. The US business is one of the most profitable markets for Lupin and that seeing a decline the overall numbers are weak. 

Latha: How are you looking at the Gavis acquisition? Is the price right?  

A: First on the acquisition and what it brings to the table. If you look at the portfolio of Gavis, they have a portfolio of control substances products, dermatology products where Lupin is negligibly present as of now, so that way the acquisition fits. The only thing is the price that they are paying; my sense is it is pretty expensive. So they are paying almost 9x the sales. We have seen such kind of valuations in the past only for domestic acquisitions like Ranbaxy and Abbott 's acquisition of Piramal. I think for US geography this is an expensive acquisition, much higher than what the past acquisitions have been in the range of four-five times sales. So price is one thing which I am concerned about but from a strategic perspective initially this can be return on capital employed (RoCe) dilutive in the medium-term for the company. 

It is okay portfolio wise because it fits in the strategy of Lupin but whatever the price they have paid is obnoxious.