Lupin Limited (500257) Earnings Call Transcript & Summary

Hello, and welcome to the JPMorgan Healthcare Conference. I am Neha Manpuria, the India Health Care Analyst at JPMorgan. We have several Indian companies lined up at the conference over the next 2 days, and we kick start the session with Lupin. From Lupin, we have Ms. Vinita Gupta, CEO, who will be taking us through the presentation. Thank you so much, ma'am, for joining us for the conference even though it's virtual, and over to you for the presentation.

Thank you, Neha. Good morning, everyone. I'm very pleased to join the conference albeit virtually. I miss my ritual of meeting all my colleagues and friends in San Francisco, starting the year with San Francisco, but very happy to join virtually. 2020 has been quite a year. It's a year where our industry stood tall as a beacon of hope, as we worked through a supply of essential medicines, as we worked through COVID therapeutics, as we worked through COVID vaccines. Our industry just grew in relevance through the year. At Lupin, we worked hard to safeguard our people while ensuring business continuity. And despite the challenges, we have been able to grow our business, improve our margins, make progress on strategic growth drivers. And I look forward to sharing our progress today with you. Next slide, please. Next slide. So this is Lupin Today. Just briefly, we are a leading generic company globally, 10th largest generic company in terms of global revenues, 5th largest company out of India. We have a very strong position across all our key markets. The U.S., our largest market. We are the third largest player by prescriptions dispensed. India, which is very close to the U.S. in terms of size for our overall business. The sixth largest pharma company by revenues. And South Africa, which is now our third largest market after our divestiture of Japan last year. We're the fourth largest generic company in the South African generic market. [ Every ] Lupin is present, and we have a very strong, dominant position, either the entire market or in our chosen therapeutic areas. We have significant scale, as you can see, in terms of our operations, manufacturing base, to be able to serve our generic markets globally and a significant pipeline to drive growth for the future. The company has been very focused on research and development. We spend -- we invest one of the highest amounts for R&D to drive future growth. Next slide, please. So talking about the events of 2020. 2020 has been quite a year for Lupin despite the challenges. It's been a year where we have grown the organization, advanced the organization and set the tone for a more efficient organization for the future. So right at the start of the year -- start of the pandemic, we established a dual mission of ensuring the health of our people, ensuring we had all the SOP practices in place to bring people into our facilities safely and continue the supply of essential medicines, which we have been able to do very effectively. So our team worked pretty hard to ensure that we continue supply through the pandemic. But nevertheless -- I mean the entire industry was impacted, as were we. And through April, May last year, business across multiple countries was fairly disrupted. It was not until June when the first spike started abating that we started to see the business improve. And since then, we have seen month-on-month, quarter-on-quarter improvement across majority of our geographies. We still have some parts of our business. Our women's health business in the U.S. The OB/GYN offices are pretty impacted. Our ophthalmics business in Mexico, our women's business in Philippines that are impacted. But for the most part, our business is back to growth quarter-after-quarter, which has been very encouraging to see. We have grown our pipeline as well through the year despite the challenges. We've had 16 ANDA approvals, 13 filings to the U.S. FDA and significant progress on our strategic growth drivers. On the complex generic front with biosimilars, we had our first biosimilar launch for Enbrel in Europe last year through our partner, Mylan. And in the U.S., we had -- we got approved and launched our first metered-dose inhaler, albuterol, this past year. We're very pleased with that approval. It came at a very good time. Albuterol demand through COVID grew. It's a rescue inhaler used by asthma patients that are at high risk of COVID complications. So we're really pleased to get the approval in time to be able to serve the need over the last many months. So far, we have been able to gain 8% share of the generic market with albuterol and continue to ramp it up. Through the year, we've been very focused on improving our EBITDA margins. Our goal has been to get our EBITDA margins to 20% plus, and we have made significant progress in that direction. We undertook multiple optimization efforts around SG&A, around restructuring teams that we felt through COVID had really needed a pivot on the business model like Brazilian dermatology franchise, a U.S. women's health commercial infrastructure to be able to really strengthen the business for the future. As a result, we have been able to grow our margin consistently quarter-after-quarter, as you can see, and continue to expect this in the quarters going forward. We also had strong momentum on the quality front in the year. We had 16 consecutive positive outcomes across all the major regulatory agencies around the world, including the FDA, MHRA and others. And we had 4 desktop audits with WHO and TGA, successful audits, that was very promising. Certainly, as we look at the next 12 months, as the vaccines really get out there, we believe that for the foreseeable future, the audits are going to continue to be in a virtual basis through this year, and we feel really well prepared to conduct them. We had a challenging inspection at our Somerset site that finished in November and are actively addressing the concerns raised by the agency. So as I look at calendar 2020, all in all, we were very pleased to get our business back to profitable growth, and have very good momentum starting 2021. Next slide, please. I'll talk a little bit more about 2 businesses, our U.S. generics business as well as our India business. Both businesses constitute 70% plus of our revenues and a bigger part of our margin. As you can see, we have established a leadership position in the U.S. generic industry. Third largest company by prescriptions dispensed; very strong market share, as you can see, and a significant portfolio and pipeline to drive growth into the future. So a strong ranked position is supported by a robust base business of 25 products -- top products that really have been rock solid to drive our share in the country. It's been pretty much at this #3 for the last couple of years. We've had a strong focus, in particular, through COVID through supply chain to ensure continuity of supply of not only our baseline products, also the other products that we have had the opportunity to bring to market. And I have to say our team has really done a stellar job in making that happen despite all the lockdowns, despite disruption in transportation, freight cost increases. To give you an example, Azithromycin, a product that we are a market leader on, we had a material spike in demand early in the pandemic in the March/April time frame, the demand went up 3x. And our team found a way to make it happen to meet the demand despite the challenges. So we're very pleased to be able to really demonstrate our strengths on the supply chain front and continue the supply of essential medicines to the market. We had a very strong clip of launches in the year, led by our largest launch, albuterol, in August, as mentioned, was very timely, just given the additional risk for asthma patients through COVID. And we have 8% share at this point and continue to work to ramp this up in the current quarter as well as the next fiscal year. We also have a very strong pipeline on the inhalation front. This albuterol launch certainly validated our capabilities on the R&D front in inhalation as well as manufacturing. We manufacture the product at Pithampur site, and have a significant pipeline of inhalation products that we are pursuing to drive growth over the next couple of years. As I look at our pipeline for the future, the next 5 years, 65% of the products that we plan to launch are filed to the FDA. So significantly derisked pipeline that gives us confidence of growing our business in the U.S. generic market going forward. So apart from building and executing on the pipeline front, which is a significant growth driver for this business, we're also building into new channels. In particular, we are focused on hospital institutional channel for injectables portfolio as well as biosimilars portfolio. We intend to launch a few products in the next 18 to 24 months and building capabilities to be able to access that market effectively. On the injectables front, we have a very nice pipeline of complex injectables based on internal efforts in Nanomi, Netherlands, long-acting injectables from there, depot injectables, have made progress. Our peptide products out of India, iron colloid products out of India. And we've been supplementing our internal pipeline to accelerate our growth in the injectable market through partnerships. We have multiple partnerships in place on the injectable front. One that I'd like to mention here is ForDoz partnership that gave us access to liposomal products that are pretty far advanced. We hope in the next fiscal year, fiscal year '22, to file at least one, if not both, of the products that we have partnered with them. So as you can see, we are set for growth on the generic side of the business in the U.S., our largest potential growth driver in the next few years. Next slide, please. In India, we have been a consistent outperformer, growing at a faster pace than the market. And as a result, you can see our rank and share has grown over the past few years from #7 to part of last year at #5. So we now are between #5 and #6, trying to solidify a #5 position as soon as we can. And likewise, in all of our material therapeutic areas in anti-diabetes, cardiac, respiratory, we have outperformed the market and have grown our share and rank in these therapeutic areas. We have one of the richest portfolios of in-licensed products, leveraging our commercial infrastructure and execution capabilities, as you can see. And we have leveraged our position in India to get into adjacencies like OTC. We started this OTC business from -- with a few products, prescription to OTC switch has done exceedingly well for us through COVID as we ramped up our DTC, direct-to-consumer, reach and frequency. Through the last year, we were also very pleased to be able to join the fight against COVID. We brought our own brand of favipiravir, Covihalt, in the market, as well as through our OTC division, a line of Lupisafe sanitation products. So very strong performance in India. The market in India through COVID, again, like the rest of the world, at the start of the spike, March, April, May, had declined significantly, but since then has stabilized and in the last few months has started to grow. So we're very pleased to be positioned to really grow our India business now, both based on our own strengths and capabilities as well as market growth. Next slide, please. So that brings me to our strategy and growth plans. Lupin was founded by our Chairman, Founder, Dr. Desh Bandhu Gupta on -- for the purpose of meeting the need for the cause of affordable medicines in areas of high priority. And we continue to be very strongly committed to affordable medicines. Generics is the foundation of our business. So as we look at our future, as we grow our business, we intend to grow both our business on the generic front, but also on the innovative front with specialty products and novel products. We hope to be able to bring innovative products in the market as well. So I will start at the bottom. As you can see, our foundation, we have a very strong foundation in generics and branded generics. The U.S. generics market, in particular, I talked about our position, very strong position that we intend to build upon with a strong pipeline of increasingly complex products that I will talk about more in a minute. India region, again, I talked about our strong position. Our plan is to grow from our share and our rank, get from #6 -- #5 or #6 to #3 over the next few years by a combination of portfolio and footprint expansion, entering select adjacencies like OTC that I just mentioned and opportunistic acquisitions. So apart from U.S. and India, that are just over 70% of our business, other growth markets, Latin America, EMEA, Asia Pacific and our global institutional business, which is also substantial based on our TB legacy as well as ARV pipeline build. We intend to grow both scale as well as operating leverage through a combination of internal pipeline as well as external opportunities. So on the generic side of the business, our plan to build our business over the next few years, to grow our business is through complex genetics, for which we have made significant investments over the last 5 to 6 years. We have invested into 3 major areas; inhalation platform, biosimilars as well as long-acting injectables -- complex injectables that I'll talk about a bit more in the next slide. And then lastly, on the novel products front, we intend to build our specialty position as well as novel products through our NCE efforts. On the specialty front, we are focused in women's health in North America as well as now building into Canada and neurology in Europe. On the novel product side, we have decided to focus on oncology. Over the years, we had a focus on multiple therapeutic areas, but with the kind of capabilities that we have built in oncology as well as success that we have had in oncology, we intend to build -- we focus on oncology going forward to be able to build an innovative pipeline. So our goal here is to really build a well-diversified business that is set for sustainable long-term growth with the combination of strong foundation in generics and a building presence in innovation. Next slide, please. So material progress on our complex generic growth drivers, both platforms as well as pipeline, I mentioned inhalation, which has already started in a material manner this fiscal year -- this past calendar year with the launch of albuterol that we continue to build into the next year. We have multiple filings in place that we expect to bring to market over the next 12 months -- the next couple of years. We have, apart from our albuterol, Fostair that we intend to bring to market in the U.K. We have a few nebu products in the U.S. In fiscal year '22, we have additional MDI products as well as Spiriva, our first DPI that we plan to bring to markets, material growth drivers in the inhalation platform over the next couple of years that will help us drive the generic business, not only in the U.S. but also in Europe as well as other parts of the world. In particular, we see also an opportunity in China with our inhalation portfolio. On the injectables front, I've talked about the fact that we now have a pretty strong suite of pipeline with -- in multiple different areas that I've mentioned about in the past. So I won't repeat myself. We've made material progress on this front as well with meetings -- and the meetings with the FDA on some of these complex products. We are now in a very good position to start the clinical studies on our 2 depot products out of the Nanomi facility in Netherlands. Our complex injectables will start contributing to our U.S. business really materially fiscal year '23 onwards. Biosimilars that we've already started in Japan and then Europe this past year. We continue to build on Etanercept, our first biosimilar, over the next couple of years, rolling it out across all the key markets ex-U.S. And we are in very good position now to file our pegfilgrastim product in the U.S. We met all the primary endpoints for the study and intend to file this calendar year. And ranibizumab, we made significant progress as well and started the Phase III study with the product. We intend to commercialize our biosimilar portfolio across the globe, wherever we can ourselves, otherwise through partners in the U.S. for products like pegfilgrastim and ranibizumab, we intend to commercialize ourselves. We've also built capabilities in Somerset on the women's health platforms in long-acting contraceptives and LARCs, and have multiple products in our pipeline that are a little bit later, given the clinical studies that we need to do on the products, but making good progress through our pipeline. So significant pipeline in place, making progress to be able to drive our growth on the generic front over the next couple of years. Next slide, please. On the specialty front, I mentioned our focus has been on women's health in the U.S. in the last couple of years with Methergine and now SOLOSEC. We had business disrupted in SOLOSEC. Our women's health market has been -- offices have been -- OB/GYN offices have been -- access has been disrupted through COVID. So it's been a challenge. Nevertheless, we have material growth drivers for the near term. We have strong commercial as well as Medicaid wins that we intend to maximize as well as a new indication coming along in the summer, trich indication that will put SOLOSEC, a lead product, in a position where it will be the only single dose both for BV and trich. We are also looking to expand our portfolio through acquisitions and partnerships as well as internal pipeline that I talked about in the previous slide. In Canada, we have established a very strong GI business, products that we licensed from Salix and now Bausch; Zaxine, rifaximin as well as Relistor. We've built Zaxine into the largest IBS brand in Canada and expanding the portfolio through BD&L activities as well as leveraging our women's health portfolio into -- from the U.S. into Canada. In Europe, we launched our first neurology orphan drug, NaMuscla, very successfully in U.K., Germany and France and continue to build it in the next 12 months and going forward. We've established very strong partnerships across all of the European Union and intend to roll out the product across the different countries in the EU. Next slide, please. Our mission is really to serve the need of patients, to make a difference in the life of patients. And one way we are doing this is through our oncology pipeline where we made significant progress, licensing 2 major products and have material programs in the pipeline that we intend to find ways of bringing to market to serve patients. Last slide, please. So as we look at 2021, we see light at the end of the tunnel with COVID, and I intend to continue to live our values as we grow our business by executing on our strategic growth drivers, delivering quality products and our commitments there, building innovation as well as expanding operating margins to secure a more resilient and robust tomorrow. Thank you. Hopefully, that gave you a very good idea of where we are and how we are set for 2021 and forward.