Japan - Lupin makes second buy in Japanese market

Purchase of I’rom Pharma will add new portfolio and give the firm more marketing, distribution strength.

Lupin Ltd agreed to buy Tokyo-based I’rom Pharmaceutical Co. Ltd, the Indian drug maker’s second acquisition in Japan, to add new products and strengthen marketing and distribution in Asia’s second largest economy.

I’rom Pharmaceutical produces injection-based medicines and had reported sales of 5,361 million yen (around Rs.354 crore) in the year ended 31 March, according to a Lupin statement on Thursday. In 2007, India’s fourth largest drug maker had bought Kyowa Pharmaceutical Industry Co. Ltd, which currently contributes nearly one-third of Lupin’s overseas revenue.

The new purchase will add a new portfolio of injectable drugs to Mumbai-based Lupin’s product range in addition to more marketing and distribution strength in the Japanese market, Kamal Sharma, managing director, said in interview.

“Japan is a growth market of strategic focus for Lupin,” said Vinod Dhawan, president of the Asia-Pacific region for Lupin. “I’rom Pharma’s strong presence in the DPC (diagnosis procedure combination) hospital segment in Japan, through its line of injectable products, is an ideal fit with our existing oral business portfolio in Japan.”

Lupin’s chief financial officer S. Ramesh had in June last year announced his company’s intention to make an acquisition in the injectables segment in Japan. The company has a strong presence in the US and Japan besides India, and is in the process of identifying an acquisition target in Europe, where it entered comparatively late.

“Looking at the current market scenario in many of the European markets, we may take a little more time to consolidate our position and the acquisition in that market,” said Nilesh Gupta, group president and whole-time director of Lupin, last week.

Analysts say the timing is perfect to make acquisitions at low valuations.

“Lupin has been always a low bargain hunter and has always bought companies at reasonable valuations,” said Bhavin Shah, an equity analyst tracking pharma industry at Dolat Capital. “They play a patient game and have taken time to understand the Japanese market before adding another asset to their basket.”

“The Japanese market has always been attractive and Lupin is one (company) that has made an early foray, and there is a hint that they are making profits,” said Shah.

Not many Indian drug makers have made a successful entry into that Japanese market because of a stringent regulatory environment and a traditional resistance to buying generic drugs. Japan’s new policy to encourage the use of generic drugs to reduce high healthcare costs has encouraged Indian generic drug makers such as Lupin to enter the market.

Shares of Lupin fell 1.98% to end trading at Rs.446.65 on the Bombay Stock Exchange on Thursday, while the benchmark Sensex fell 1.87%.

Namrata Nandakumar & C.H. Unnikrishnan

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