Billionaire Gupta Sees Opportunity in U.S. Ranbaxy Curbs

Lupin Ltd., founded by billionaire Desh Bandhu Gupta, expects to gain share in the U.S. amid increased regulatory oversight and curbs on competitors including Ranbaxy Laboratories Ltd.

Lupin’s track record on quality and the overlap of drug portfolios with Ranbaxy and Wockhardt Ltd. gives it an opportunity to add sales in its largest market, Chief Executive Officer Vinita Gupta said in a telephone interview.

“With the recent issues with Ranbaxy API, we’re still waiting to see what happens,” Gupta said Feb. 3 of the Food and Drug Administration’s ban on Ranbaxy’s Toansa plant, which makes a bulk of its drug ingredients for the U.S. “Whenever these events happen, we keep very close to the ground to look at any opportunities we may have to pick up additional share.”

Lupin, India’s third-largest drugmaker by market value, will look to tap demand for products such as cardiovascular medicines and heartburn treatment esomeprazole, or generic Nexium, that Ranbaxy makes, Gupta said. The Mumbai-based company could be one of the generic drugmakers that benefit if Ranbaxy isn’t able to secure an alternate source of ingredients or sell rights to its copy of AstraZeneca Plc’s Nexium, which had U.S. sales of $2 billion, according to Barclays Bank Plc analyst Balaji Prasad.

‘Worst-Case Scenario’

“This is the worst-case scenario for Ranbaxy,” Prasad wrote in a Jan. 27 research note on the implications of the FDA ban on the drugmaker’s Toansa plant. Competitors who had sought FDA approval for their versions such as Dr. Reddy’s Laboratories Ltd., Teva Pharmaceutical Industries Ltd. and Lupin would then probably be able to start U.S. sales, he wrote.

Ranbaxy, which today reported a net loss of 1.59 billion rupees ($25 million) in the quarter ended December, said it was facing some major regulatory challenges. The company has alternate sources for the drug ingredients made at its Toansa plant, Chief Executive Officer Arun Sawhney said on an earnings conference call.

“Ranbaxy has been working on derisking strategy for the last two years, where many of our APIs have more than one approved source and manufacturing site,” Sawhney told analysts on the call. “This has and will help us in ensuring continuous supply of most of our drug products to global markets.”

Shares of Lupin rose 0.4 percent to 915.45 rupees at the close in Mumbai trading, extending their gains in the past 12 months to 54 percent. The stock has outperformed the 16-company S&P BSE Healthcare Index, which has climbed 27 percent in the period, while Ranbaxy has declined 23 percent.

Alternate Sources

Ranbaxy may succeed in finding alternate sources of drug ingredients for the U.S. market, Surya Patra, an analyst at PhillipCapital (India) Pvt. in Mumbai, said before the Ranbaxy announcement. Also, Lupin would face a “competitive launch” for its version of Nexium with at least three other generic rivals even if Ranbaxy fails to secure supplies of ingredients for the treatment, Patra said.

Quality concerns have led to FDA bans on some manufacturing facilities of Ranbaxy, the Indian unit of Daiichi Sankyo Co., as well as curbs on a plant of Wockhardt in the past year. Lupin meanwhile had 30 of its product applications approved by the FDA in 2013, an all-time high.

FDA Inspections

Inspections of human drug facilities in India rose to 195 in 2012 from 11 in 2002, according to data from the FDA.

Ranbaxy’s Toansa plant was banned from producing or distributing drug ingredients for the U.S. market, according to a Jan. 23 statement from the FDA.

Two other Ranbaxy facilities in India that once supplied to the U.S. -- Dewas and Paonta Sahib -- have been barred from making products for the U.S. since 2008, and a third, Mohali, was banned in September.

“In the situations where we have an overlap, we have gained in the past,” Gupta said. “And continue to do that.”

Lupin gained market share in the area of cephalosporins, where it competed with Ranbaxy, as a result of the bans, Gupta said. Separately, the drugmaker plans to take advantage of its pipeline of 186 drug filings that are pending FDA approval to triple its market portfolio in the next few years, she said.

Limited Competition

Limited competition for Lupin’s copycat treatments in the U.S. has improved the outlook for sales growth in the market, according to Bino Pathiparampil, an analyst at India Infoline Ltd. who upgraded the stock rating to the equivalent of buy. Revenue from the U.S. climbed to 45 percent of Lupin’s 29.8 billion rupees in sales in the quarter ended December, from 42 percent a year earlier, according to data compiled by Bloomberg.

“The recently launched generic Trizivir and Trilipix are likely to remain limited-competition products in the U.S. generics market for extended periods,” Pathiparampil wrote in a Feb. 4 research note, referring to Lupin’s HIV medication and cholesterol drug. “Even generic Cymbalta will likely remain attractive for 2-3 quarters before more competitors enter and price erosion peaks,” he wrote about the antidepressant that was Eli Lilly & Co.’s bestseller drug last year.

Lupin expects to win about five generic drug approvals every quarter in 2014, Gupta said.

The FDA in August published a draft guidance on new stability testing requirements for Abbreviated New Drug Applications that it plans to implement from June 20.

“Our investments into the ANDAs are going to go up starting June, because the FDA requirements are changing quite a bit,” Gupta said. “We’re getting to a very similar level as the European system, which will require higher investment as well as time.”

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