August 25, Lupin Ltd. Building a Global Generics and Specialty Powerhouse Nilesh Gupta Managing Director

Transcription

1 August 25, 2014 Lupin Ltd. Building a Global Generics and Specialty Powerhouse Nilesh Gupta Managing Director

2 Disclaimer Materials and information provided during this presentation may contain forward-looking statements. These statements are based on current expectations, forecasts and assumptions that are subject to risks and uncertainties which could cause actual outcomes and results to differ materially from these statements. Risks and uncertainties include general industry and market conditions, and general domestic and international economic conditions such as interest rate and currency exchange fluctuations. Risks and uncertainties particularly apply with respect to productrelated forward-looking statements. Product risks and uncertainties include, but are not limited, to technological advances and patents attained by competitors, challenges inherent in new product development, including completion of clinical trials; claims and concerns about product safety and efficacy; obtaining regulatory approvals; domestic and foreign healthcare reforms; trends toward managed care and healthcare cost containment, and governmental laws and regulations affecting domestic and foreign operations. Also, for products that are approved, there are manufacturing and marketing risks and uncertainties, which include, but are not limited, to inability to build production capacity to meet demand, unavailability of raw materials, and failure to gain market acceptance. The Company disclaims any intention or obligation to update or revise any forwardlooking statements whether as a result of new information, future events or otherwise.

3 Index 1 Building a Global Generics Powerhouse 2 Building a Specialty Business 3 Lupin Update 4 Q&A

4 Lupin Ltd. Section 1 Building a Global Generics Powerhouse

5 Critical Success Factors for building a Global Generics Company 1 Strong Market Presence in Significant Geographies 2 Excellent R&D and Regulatory Capabilities 3 World Class Manufacturing 4 Stellar Execution Track Record

6 1 Strong Market Presence in Significant Geographies Global generics landscape is poised to grow from $242b to $400b by 2016 USA : Canada: France : Germany : UK : China : India : Japan : Italy : Spain : Australia : ` Brazil : Mexico : Source; IMS market prognosis, May 2012 Pharma market (US$ bn / 2011) Gx market (US$ bn / 2011) Gx market (US$ bn / 2016)

7 1 Strong Market Presence in Significant Geographies (cont d) Global Pharma Sales 1,200 Global Market Size 2012: US$ 900 bn 2017E: US$ 1,200 bn CAGR: 4.4% p.a. Pharmerging Markets: Significant Growth Potential 400 1,000 13% % US$ bn 600 2% % (F) Top 8 Mature Markets Other Developed Markets Other Emerging Markets Pharmerging Markets CAGR (F) % (F) Tier 1 (China) Tier 2 (BR, RU, IN) Tier 3 Higher Drug Sales per Capita Tier 3 Lower Drug Sales per Capita Source: IMS Health Global Market Prognosis, May 2013, at ex-manufacturer price levels, constant local currency (LC)$. Contains Audited + Unaudited data. Source: IMS.

8 2 Excellent R&D and Regulatory Capabilities R&D Focus Areas R&D and Regulatory Capabilities API Capabilities NCEs Formulation Capabilities Clinical Capabilities Para IV Filings Complex Generics Complex Injectable, Derm, Controlled Substance Inhalation, Specialty and Biosimilars Inhalation, Derm, Biosimilars Regulatory Understanding Ability to Manage Scale Ability to go up on Complexity ANDAs R&D capabilities driving broad product portfolio Do it sustainably

9 3 World Class Manufacturing Vertically Integrated and diversified manufacturing platform Control over entire supply chain right from early intermediates Ability to manufacture key products from two or more sites Extensive capabilities in multiple dosage forms solids, semi-solids, liquids, injectables and more Consistent Compliance track record

10 4 Stellar Execution Track Record Consistent revenue growth across key markets Differentiated market entry approach Consistent track record of product filings and launches Enhanced manufacturing and supply chain capabilities Quality culture across the organization Consistent Revenue and profitability growth Business needs to deliver from all key markets and products Substitution markets US, UK, Australia, etc. Branded Generic markets Japan, Eastern Europe, etc. Emerging Markets Steady flow of filings and approvals Vertically integrated manufacturing capabilities across dosage forms Responsive and agile supply chain No critical observations and no or few 483s in all audits 24x7 compliance and audit readiness

11 Growth of Indian Pharma Players Phase Building Base Expansion Widening Horizon Consolidation Acceleration Business Dynamics Macro Backdrop API players in India and emerging markets Growing branded formulations business in India New patent regime in India product patents not recognized Good process chemistry skills Rising formulation presence in India and Emerging Markets DMF filings API supplies to US begin Hatch Waxman Act Rising competition in the home market US and EU Generics opportunity - Para II/III ANDAs In the late 90s, some companies start taking the P- IV route Ramp up in US DMF filings Formulation facility approvals Slow growth in India India market growth accelerates ANDA portfolio ramp up, some success with P- IVs More Indian cos enter the US Acquisitions to boost presence/ portfolio Rising India GDP drives penetration Rising competition and pricing strain in US Robust India market growth US scale up, success in P-IV/complex products Pipelines quality and quantity Focus on other Emerging markets Big patent expiry wave in the US Regulatory pressure on pricing, especially in Europe Timeline Key Enablers Reverse Engineering Reverse Engineering, Low Cost Structure Vertical Integration, Regulatory Expertise Source: Citi Research. Formulation capabilities, Regulatory Expertise R&D Skills, Brand Building, Marketing Muscle

12 Indian Generics US market share by value Indian companies have doubled their dollar market share in the US in the past 5 years % 8.4% 9.5% 10% 8% ($bn) % 4.7% % % % 4% 10 2% US Generics Market Market Share (by Value) % 0% Source: MOSL

13 Indian Generics US market share by volume Indian companies volume share has increased to ~25% from ~12% five years ago Source: HSBC

14 Pipeline Evolves to More Complexity Indian company pipelines, esp. of lead companies is rapidly evolving to more complex products, platforms and dosage forms Biosimilars Ophthalmic Oral Suspension Oral Solid Controlled Substances Derm Oral Contraceptives Complex Injectables Complexity Complex Controlled Release Inhalation Barriers to Entry

15 Biosimilar Opportunity Opportunity is large. High variability seen in the forecasts due to uncertainties around regulatory pathways and uptake. Source: IMS

16 Value of patent expiries remains strong, esp. biologics Worldwide sales of all products losing U.S. patent protection USD billions, net sales 66 7 Biologics Small molecule SOURCE: EvaluatePharma (2012)

17 Strategy for Generics going forward Building Blocks to deliver the next phase of Growth Market Focus US to remain the biggest generic market Maximize opportunities in markets like Europe and Japan Focus on emerging markets India, Russia, LatAm and China Product Portfolio Ensure sustainable, predictable product pipeline Build and acquire capabilities for complex generics and specialty areas (e.g. complex injectables and inhalation) Biosimilars Driving Operations Excellence Focus on margin enhancement and overhead optimization Best practices in supply chain management Attract global talent and build leadership pipeline Regulatory and Quality Compliance

18 Lupin Ltd. Section 2 Building a Specialty Business

19 Why Specialty? Specialty has strong fundamental growth drivers underpinned by significant barriers to entry Specialty Pharma Set to Grow at the Expense of Big Pharma 10% 9% 8% Specialty Pharma Positioning High revenue visibility and sustainable earnings 20% 27% 39% Significantly higher margins than Generics Barriers to entry Focus on differentiated products 70% 64% New technology and creation of IP Clinical expertise and expense Low 53% Life cycle management High E Patented Generic Others Lower R&D and sales force costs compared to Innovator / Big Pharma Stepping stone to Big Pharma game Low

20 Why the shift to Specialty? Moving to a mix of specialty + generics because of market dynamics Generics Specialty Generics Key Drivers Volume driven business Price risk à Low margins High competition à Saturation Low cost manufacturing challenging Lesser small molecules LOEs Value driven high margin business High prices Lower competition Complex manufacturing Life Cycle Management High promotion expenses In 2013, performance of Big biotech and specialty pharma companies exceeded that of Big pharma, in terms of topline, valuations and M&A premiums Big Biotech & Specialty, 15% Market Valuations Share Evolution Big Pharma, 85% Big Biotech & Specialty, 30% Big Pharma, 70% Source: EY

21 Case Studies in Creating Value through Specialty Transformation Grew by $10 bn in Revenues in 2 years Market Cap up by $52bn in 2 years Grew by $3 bn in Revenues in a year Market Cap up by $10 bn in 2 years

22 Watson / Actavis Transformation Evolution to Global Generics Leadership Schein ANDRx Arrow Specifar Ascent Actavis Generics Nephrology Controlled release tech Generics distribution Ex-US Euro distribution Asia Pacific 3 rd largest generic global Biologic / biosimilar base European manufacturing Regional marketing 10% US share Rev.: $0.8 B $2.0 B $2.8 B $4.6 B $5.4 B $8.0 B Evolution to Specialty Business at Scale 2014E - Balanced US Brand/ Generic/Intl/Distribution Revenues Actavis 4/12 WC 5/13 Forest 2/14 Deal Value ($B) Pre Mkt Cap Post Mkt Cap % 15% 48% N America Rx N America Gx 27% International Anda Distrib Post Warner Chilcott: 25% Brand; Post Forest: 48% Brand Watson/Actavis: scale Adds global footprint 3 rd largest global generic company Actavis/Warner Chilcott Specialty brand/pipeline Irish domicile/tax efficiency Actavis/Forest Specialty brand/pipeline 10x Mkt Cap increase in 2.5 Yrs Post Forest: $15B Revenue

23 Mylan: From US Generic to Multinational Specialty/Generic Hybrid Merck Generics (includes Dey Labs) 90 country presence Epipen brand Matrix (72% stake) API vertical Asia presence Pfizer respiratory Platform for Advair and others Partnership with Pfizer for Japan Agila Abbott Japan generics injectables ex-us specialty brands and branded generics Ex-US branded infrastructure (2000 reps) Improves ex-us tax structure Revenue: $1.6B $6.1B $6.8B $6.9B Projected ProForma: $10B Rev/$3B EBITDA Europe 24% ROW 16% Specialty 15% Mylan North America 60% Mylan Generic 85% Specialty / Branded Gx 31% Mylan+Abbo+ ROW 19% North America 48% Europe 33% Mylan+Abbo+ Generic 67% OTC 2% Mkt Cap: $9.6B Mkt Cap: $19.2 B Evolving specialty/branded generic presence over time From 70% external manufacturing to 80% internal manufacturing Globalization of generics and branded footprint Significant multi-years investment in high barrier generics and in capacity to produce (inhalation/ biosimilars/complex inj) Balance of organic growth and M&A

24 Specialty pharma market has seen significant rise in approvals No. of 505(b)(2) approvals has been constantly increasing over the last few years No. of 505(b)(2) approvals Specialty pharma companies account for >$65B in revenues with a 6-8% annual growth rate and much higher valuation ratios than generic pharma companies Leading players include Allergan, Endo, Forest, Hospira, Jazz, Teva and Valeant 505(b)(2) pathway is seen as a low-cost way to enter branded markets, adding $15-20B in overall new pharma sales with approvals recently outpacing those of NMEs SOURCE: FDA Website

25 Specialty product approvals (cont d) Specialty drug approvals inch out traditional drugs More specialty drugs than traditional drugs have been approved every year since Drugs approved (FDA) Till July Traditional Specialty Source: FDA and PWC

26 Specialty in US Spending Specialty drugs will account for nearly half of US drug sales in coming years Global Spending on specialty drugs is expected to increase by 361% from $87bn in 2012 to $402bn in 2020 as they carry a higher price tag Global Spending US Spending % 34% % 39% % 38% % 47% Specialty Traditional Source: pwc and Express Scripts

27 Specialty Barriers to Entry Many challenges for a generic manufacturer to crack the Specialty business Challenge Description Therapy Area Focus Need to identify and work on select niche therapy areas with a long term perspective in mind Large therapy areas are domain of Big Pharma Product Development High development cost Life Cycle Management Specialized research and clinical/regulatory capabilities needed Need clear medical advantage in products identified Clear differentiation advantage to payors also Complex and expensive R&D required including clinical trials High development cost compared to generics Clinicals usually involved Spend $3-25 million per product Need to have clear LoE strategy Sustainable pipeline

28 Specialty Strategy Market Focus Developed markets US is the biggest market but markets like Western Europe and Japan are interesting also Market needs to incentivize innovation Product Portfolio Focus on niche Therapy Areas Dermatology, Pediatrics, Gastroenterology, etc. Proprietary platforms like inhalation device is a plus Build capability to develop product portfolio, esp. research, clinical and regulatory capabilities M&A The best Specialty companies have been built by a series of acquisitions Technology Platforms, Products and Companies

29 Lupin Ltd. Section 3 Lupin

30 Lupin s Journey Market Cap Rs. 22 bn. Rs. 418 bn. CAGR 39% Revenues Rs. 1,161 cr. Rs. 11,087 cr. CAGR 28% PAT Rs. 84 cr. Rs. 1,836 cr. CAGR 41% PAT% 7% 17% FD% 45% 90%

31 Lupin Today Lupin is a vertically integrated global generics player with an emerging specialty presence Business spread across regulated and emerging markets Extensive R&D capabilities across API, formulations, Biosimilars and Drug discovery R&D expense at 8.4% of sales for FY ANDAs filed, of which 103 are approved as of June 30, 2014 Manufacturing facilities 12 sites across the globe (10 in India & 2 in Japan) 9 Formulations sites and 5 API sites Team of over 1,400 scientists and 15,000 employees FY14 Revenue Mix Total Revenue: US$1,848 mn API 10% Japan 12% ROW 9% India 22% API 10% By Market Europe 3% By Business Mix US 44% Formulations 90%

32 Our Market Position Advanced Markets Emerging Markets 5 th Largest US Generics Player (by prescriptions 2 5.3% ) Market Size: $95 bn 4 8 th Largest Japanese Generics Player 2 Market Size: $10 bn 4 2.8% IPM Market Share (by total sales 1 ) Market Size: $13 bn 4 4 th Largest South Africa Generics Player 2 No. 1 in CVS No.1 In Anti-TB Globally Market Size: $4 bn 4 Globally 6 th Largest Generics Player (by market cap 3 ) 10 th Largest Generics Player (by sales 3 ) 3 rd Largest Indian Pharma Player (by total sales) 11 th Largest Player in Indian Pharma Market (5) 1. AIOCD AWACS March IMS MAT March Bloomberg as on August 19, Street research. 5. IMS July 14.

33 Lupin has historically delivered outstanding shareholder returns Total return index Dec 2000 = 100, INR Total return to shareholders CAGR Percent, INR Lupin 6,000 5,500 India Pharma BSE Sensex Dec Jun 2014 Mar 2012 Jun 2014 Market capitalization 1 (USD bn) 5,000 4,500 Sun Pharma ,000 3,500 Lupin ,000 2,500 2,000 DRL ,500 1,000 Cipla Mylan Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Teva Market capitalization as of Jul 18, 2014 SOURCE: DataStream

34 Lupin s Transformation 2002 First 5 ANDA s filed Exports cross INR 1bn 2003 Lupin Pharmaceuticals Inc founded in USA 2005 Suprax launched Pre-2005 Anti-infective and API focused domestic player Generics business launched Acquired Kyowa in Japan Indore SEZ and Biotech facility 2009 Acquisitions in Australia, Germany and South Africa Sales crossed US$ 1 bn Acquired I rom in Japan No.1 amongst US generics players with 99.6% fill rates Foray into OC s, ophthalmics and derm Generics and branded generics player focusing on domestic and regulated markets 2014 Mexico acquisition leads entry in LatAm Market Yoshindo JV for Biosimilars Nanomi acquisition marks entry in complex injectables space 2 new research centers in US Brand build through Alinia and Locoid cream 2014 Global specialty and generics player

35 Business Growth Last 12 Quarters Revenues doubled growing at a rate of 6% compounded per month, and EBITDA tripled growing at a rate of 12% compounded per month for last 12 quarters % 40% Rs bn % 23% 21% 20% % % 26% 26% % 28% % 29% % 20% % 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Revenues EBITDA EBITDA Margins EBITDA margins at 35% in Q1 15 vs 19% in Q1 12 0% Note 1 - Compounded monthly growth rates

36 Lupin Ltd. Q&A