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Billionaire Gupta Chases Beauty to Boost Profit: Corporate India

Billionaire Gupta Chases Beauty to Boost Profit
Lupin Research Park stands in Pune, India. Lupin, which gets almost 30 percent of its local revenue from drugs to cure infections, is turning to skin treatments in a country where more than half the population is below the age of 35, to help lift margins. Source: Lupin Ltd. via Bloomberg

Lupin Ltd., the world’s biggest maker of drugs to treat tuberculosis, plans to add prescription skin treatments for the Indian market to help revive profit that expanded at the slowest pace in at least a decade.

The drugmaker controlled by billionaire Desh Bandhu Gupta aims to sell about 20 products by 2015 including treatments for psoriasis, steroidal ointments, dermal fillers and scar removers, Shakti Chakraborty, group president for India, said in an interview in Mumbai, where Lupin is based. The first product may be marketed early next year, he said.

Lupin, which gets almost 30 percent of its local revenue from drugs to cure infections, is turning to skin treatments in a country where more than half the population is below the age of 35, to help lift margins. Increased beauty awareness among the middle class in Asia’s third-largest economy has spurred demand for specialized products and cosmetic surgeries, according to Siddhant Khandekar, an analyst at ICICI Direct.

“This is for people who want to look better and the number of these people is going to increase,” Chakraborty said. “With economic growth, this market is going to really expand.”

The drugmaker may also acquire companies and brands to widen its dermatology portfolio, Chakraborty said. The skincare market, worth about 36 billion rupees ($687 million), is dominated by GlaxoSmithKline Plc’s Indian unit, Glenmark Pharmaceuticals Ltd. and Ranbaxy Laboratories Ltd., and there is scope for other players, Khandekar said.

Lupin, which has climbed 33 percent this year, fell 0.3 percent to 597.60 rupees at the close in Mumbai trading. The BSE Healthcare Index has advanced 30 percent in the period.

‘Emerging Segment’

“It is an emerging segment and its currently growing faster than the pharmaceutical market,” Mumbai-based Khandekar said. Sales of skincare products have grown at least 17 percent in the last couple of years, outpacing the industry average of about 15 percent, according to Khandekar.

Lupin may need to boost spending to create awareness about its cosmetic skincare products, according to Surya Narayan Patra, an analyst at Systematix Shares & Stocks Ltd. in Mumbai.

“As a lifestyle choice rather than a critical condition-related treatment, like say a medicine for psoriasis, it will be difficult to ensure stickiness,” said Patra, who rates Lupin fairly valued. This segment is like a consumer business and “requires a higher level of spending,” he said.

Net income at Lupin increased 0.6 percent to 8.68 billion rupees in the year ended March 31, the slowest pace of growth since at least 2002, according to data compiled by Bloomberg. Sales climbed 22 percent to 69.6 billion rupees in the period.

Lupin expects profitability to improve this year, President Finance and Planning Ramesh Swaminathan told analysts on a conference call in July.

Cosmetic Dermatology

“It’s a profitable business and the prices are very high,” Chakraborty said. “I think there are lots of drugs coming in cosmetology, so that’s an area we want to be.”

The bulk of India’s prescription dermatology market is comprised of anti-infective creams and lotions, that are acute therapies -- meaning patients only use them for about a week or less, Chakraborty said. Specialist skincare treatments for cosmetic usage will generate greater revenues, because people have to use them for longer, he said.

“You are going to use an emollient for skincare which is prescribed by the doctor for two to five months by people who want to be looking smarter and better,” Chakraborty said. The target is to get about 1.5 billion rupees from the dermatology business in three years, he said.

Chronic Treatments

Lupin, established in 1968 by Chairman Gupta, a masters-degree holder in chemistry, will operate the skincare business mainly by outsourcing production,, Chakraborty said.

“You give the formula, people are there who will manufacture it for you,” he said. “I won’t be manufacturing anything in my own stable, in my own company.”

Among the dermatology offerings the drugmaker is considering, include a possible new treatment for psoriasis and acne medicines that may involve different drug delivery systems to improve the efficacy.

The move would be part of the company’s strategy to focus on chronic diseases and treatments that require patients to take medicines for months or even years, as opposed to acute therapies that are needed only for a few days. Among the nation’s five biggest drugmakers, Lupin is second only to Sun Pharmaceutical Industries Ltd., in the percentage of the revenue it gets from chronic therapies, according to a Sept. 24 report by Edelweiss Securities Ltd.

Leguminous Flower

Sun, India’s biggest drugmaker by market value, gets 63 percent of its sales from such medicines, while they fetch Lupin 37 percent.

Lupin, which last year agreed to a collaboration with Eli Lilly & Co.’s India unit to promote and sell Lilly’s Huminsulin range of products in the local market, expects revenue from the diabetic treatments business to increase to at least 3.5 billion rupees, Chakraborty said.

The Indian drugmaker, named after a leguminous flower, is considering dermatology businesses with about 2.5 billion rupees in sales for acquisition, he said, without elaborating.

“It’s definitely ambitious, we keep ambitious targets,” Chakraborty said. “Because I know dermatology will be a big business tomorrow.”

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