Transcript Lupin Limited

Lupin Limited
Presentation
October 2003
Disclaimer
The information presented in this presentation contains
forward looking statements that involve known and unknown
risks, uncertainties and other factors that may cause actual
results to be materially different from any future results,
performance or achievements expressed or implied by such
statements. Many of these risks, uncertainties and other
factors and include failure of clinical trials, delays in
development, registration and product approvals, changes in
the competitive environment, increased government control
over pricing, fluctuations in the capital and foreign exchange
markets and the ability to maintain patent and other
intellectual property protection. The information presented in
the following materials represents management's expectations
and intentions as of October 2003. Lupin expressly disavows
any obligation to update the information presented in this
presentation
Section I
Corporate Overview
Background and Origin
 Founded in 1968 by the Chairman, Dr. Desh Bandhu Gupta
 Now spread over 6 locations in India and a joint venture in Thailand
 Represented through Sales offices in UK, USA, Hong Kong, Japan
and CIS
Refer Disclaimer
Lupin Limited Today
 Integrated player with significant presence in both API and
Formulations
 Turnover : Rs. 11,200 mn (FY 2002-03)
 Amongst the Top 10 Pharmaceutical Company in India
 Increasing global presence
 9 out of 10 plants US FDA approved
 110 Patents filed to date, 50 granted
 3,300 employees
 Shareholding Pattern:
– Promoter Group - 67%
– FIs / FIIs/ MFs - 5%
– Public- 28%
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Section II
Business Profile
Product & Geographical Mix
Rs./Mn - 9,028
100%
80%
46%
9,569
45%
11,200
39%
100%
26%
32%
37%
74%
68%
63%
2000-01
2001-02
2002-03
80%
60%
60%
40%
20%
54%
55%
61%
0%
40%
20%
2000-01 2001-02 2002-03
API
Formulations
Domestic
Exports
 Exports continue to be the key growth driver
 Advanced markets contribution to top line increasing
 API Sales from Developing markets contribute significantly to the top line
 Domestic formulation sales growing and continues to be a key focus
market for the company
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Therapeutic & Market Mix
(FY 2002-03) 9%
11%
 Increase presence in Cardiovasculars
Further strengthening in Cephalosporins
 Maintain leadership in Anti TB
 Building chronic lifestyle segment
30%
50%
63%
Anti TB
14%
2%
India
SEA & China
Cepha
Cardiac
Others
Key focus market and the
growth driver
21%
US/EU
Others
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API – Regulated Markets
 Growing generic acceptance  increased opportunities
 Preferred supplier status
 Strengthening tie-ups – long term supply arrangements
 Manufacturing capacity to meet the alliance partners requirements
 Comprehensive process for managing intellectual property  leading to
virtual exclusivity (Cefotaxime)
 Inherent strengths in process chemistry leading to development of
products  creation of strong entry barrier
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API – Unregulated Markets
 Cost, quality and capacity  the differentiating factors
 Customer focus – price, reach and delivery  the building blocks
 Amongst the top 3 in our area of focus
 Strategic alliances  long term supply arrangements
 Increasing exports thrust
 Leadership in anti TB continues
 Consolidation in Cephalosporins
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Generic Formulations
 US generic market at $11 bn, expected to grow to $20 bn by 2010
 EU generic market expected to grow rapidly in the next few years:
 UK - is already a well developed substitution market
 Germany - is the largest Generic market in the EU, branded Generic at
present, however converting to a substitution market
 France – Growing aggressively post substitution bill being passed
 5 ANDAs filed, 3 approved including Ceftriaxone – first Indian company
to receive approval for an injectable outside US/EU
 Gearing up to file 6-8 ANDAs per year
 First generic launch in the US with Cefuroxime Axetil
 Suprax TM (Cefixime) licensed from Fujisawa. Product launch post
receipt of product approval from US FDA
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Formulations – Domestic Market
 Strong forte in Anti-TB maintained
 Force to reckon with in Cephalosporins
 Building chronic life style segments – cardio, anti-diabetes
 900 strong sales force, 28 sales points, 1900 distributors
 Ranked 13th in the domestic formulations industry
 8 brands in the Top 300
 Broad therapeutic portfolio and wider product basket
 Key player in Indian Generic Generic market
 Rablet, an anti peptic ulcerant rated as the 2nd best launch in
the industry in year 2002-03 and continues to perform well
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Formulations – Unregulated Markets
 Presence in South East Asia & Africa
 Increasing focus in the CIS markets
 Facility upgraded to WHO standards for Global TB business
 Developing partnerships for marketing in SEA & Africa
 Stepping up product registration in the markets of interest
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Research & Development
 State of the art research park at Pune
 Team of 140 scientists conduct leading edge research in the field of:
New Chemical Entity (NCE)
Novel Drug Delivery System (NDDS)
Process Chemistry
 Collaborations with leading research institutes - CSIR, IISc. Bangalore,
IICT Hyderabad etc.
 Ceff-ER, the world’s first once-a-day Cephalexin tablet developed and
launched in the domestic market
 110 patents filed till date, 50 granted
 12 DMFs and 5 ANDAs filed with the US FDA
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Section III
Financials
Lupin over the years
CAGR 11%
12000
CAGR 22%
1000
10000
800
8000
2000-01
6000
2001-02
4000
2002-03
2000
0
600
400
200
0
Sales
Rs’ mn
Sales
PBT
PBT
2000-01
9,028
650
2001-02
9,569
964
2002-03
11,200
971
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Key financial parameters
Particulars
2000-01
2001-02
2002-03
P&L Ratios
Sales growth
-
6%
17%
15.9%
19.0%
16.4%
1.77:1
1.51:1
1.24:1
Debtors (Days)
119
123
109
Current Ratio
4.19
3.98
3.30
14.57
17.67
18.08
2.07
2.07
2.26
ROCE (%)
12.8%
15.1%
15.0%
RONW (%)
17.2%
21.7%
19.1%
EBITDA Margin
Balance Sheet
Debt Equity (incl. Deferred Tax)
Others
EPS(Rs.)
Fixed Asset Turnover
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Section IV
Lupin Ahead
Entry of Financial investors
 Pursuant to an internal realignment, promoters have signed an
MOU on July 2, 2003 for placing 12.55% of their holdings in
Lupin Limited to CVC international, part of Citigroup Global
Investments
 In parallel, the promoters have also entered into an MoU to
place 12.55% of their holdings in Lupin Limited to Newbridge
Capital, a leading private equity firm
 Induction of these financial investors is expected to assist the
company in its growth plans
Refer Disclaimer
Summary of Legal & Financial Review
The company undertook review of its internal processes and controls with the assistance of reputed
accounting & legal consultants and some highlights of the report, including its recommendations are:
1.
Provision against certain overdue receivables on conservative basis.
2.
Company gave security deposit against leased property and recovery needs
to be expedited against certain leased property.
3.
Company has placed deposits for leasing of certain plant facilities and the
cumulative return till FY 2002-03 has not been commensurate to the interest
on the deposit and the company should look at the reduction of the quantum
of deposit.
4.
Estimated shortfall in certain gratuity provision applying conservative
actuarial norms, which the company should consider providing for.
5.
The average interest rate for the company as a whole has reduced from
13.1% (FY 2000-01) to 9.4% (FY 2002-03).
6.
Company has advanced to certain parties towards freehold land for the R&D
center and out of this, certain amount of advance is under dispute and
should be provided for.
Refer Disclaimer
Summary of Legal & Financial Review
The company undertook review of its internal processes and controls with the assistance of reputed
accounting & legal consultants and some highlights of the report, including its recommendations are:
7.
Company’s subsidiary Lupin Chemical Thailand Limited (LCTL) has
accumulated losses exceeding its networth by Rs.35 Mn. Accumulated
losses of Rs.225 Mn in 1996-97 (due to devaluation of Thai Baht) has been
recouped fully through operating profits.
8.
The company has accrued Octroi refund on accrual basis, which on a
conservative basis should be reckoned on cash basis.
9.
Contract manufacturing agreement for manufacturing certain intermediates
with an external company is under dispute and the matter is being currently
under arbitration proceedings. However, the company is confidant of a
favourable outcome.
10. Certain claims have been filed against the company (Rs.22 Mn) for
violation of DPCO, 1995 which is being contested by the company.
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Ongoing initiatives
 Continuing our focus on reduction of debt, the company
intends to further reduce the debt to the tune of Rs. 750 mn in
FY 2003-04 (FY 2002-03 – Rs.480 Mn)
 In the current year, the company is planning to settle certain
overdue receivables and given the growth plans, the company is
focusing its efforts to optimize its investment in working capital
 The company is in the process of setting up a US FDA
approvable non-Cephalosporins oral finished dosage plant at
Goa to address the advanced market requirements
 Consequent to the commissioning of the Goa plant, the profit
generated from this plant will be eligible for income tax
exemption
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Target for FY 2003-04
• The company expects a sales growth of 30-35% in FY 2003-04 over
previous year. The growth is fuelled through its sales of generics
products in advanced markets as well as strong recovery in domestic
dosage market.
• Supported by the growth in volumes, the company expects operating
net income growth of 85-90% over previous year.
Key factors:
• foreign exchange rate fluctuation
• expansion of prils, statins and cephalosporins facilities in H2 FY 2003-04
• product approval and consequent launch in the advanced market in H2 FY
2003-04
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Setting the Goals
 Turnover expected to rise by 20-25% per annum YoY till FY 2005-06 based
upon business expectations.
 Advanced markets is expected to fuel the growth by contributing around 2025% to the top line in FY 2005-06 (10% in FY 2002-03)
 Moving up the value chain  Formulations is estimated to contribute 4550% of the turnover in FY 2005-06 (39% in FY 2002-03)
 In the current year FY 2003-04, the company has set a target of improving
the Operating Profit (EBIDTA) to the level of 20-22%, which is expected to
sustain during the next two years
 Company is also focused on reducing its existing levels of COS. It is
expected to achieve this through implementation of ERP and process
improvement plans.
 Company will continue to focus on R&D and leverage the same for business
 Company is targeting to convert 50% of his aggregate borrowings into dollar
denominated borrowings on the strength of its growing exports
Refer Disclaimer
Lupin of the future
 Infrastructure in place to meet the future challenges
 Professionalization of Mgmt by inducting top notch senior
professionals
 Continue strong QA program
 Leveraging R&D strengths for business
 Leverage IT initiatives for business
 Maximize value for all stakeholders
 High degree of focus on Corporate Governance
Refer Disclaimer