Japan

After 6 years of having entered the Japanese market, Lupin is one of the few global generic majors and the only Indian pharmaceutical player having a significant presence in Japan.

Almost all Japanese citizens are covered through National Health Insurance (NHI) which is funded by the Government. Increased health insurance burden has propelled the Government to promote the adoption of generic medicines in the market. These measures have resulted in creating strong growth opportunities for generic pharmaceutical players.

As one of the measures, the Japanese government introduced a fixed fee based system at designated hospitals known as DPC Hospitals. Of the total USD 110 billion market, the DPC market contributes about USD 11 billion, of which the injectables market alone accounts for USD 9 billion. The number of hospitals has been increasing consistently over a period of time, from 359 in 2006 to 1,449 hospitals in 2011. DPC hospitals cover approximately 35% of all hospital beds (representing 17% of the total hospitals nationwide). The DPC hospitals are managed under a “fixed-rate” payment reimbursement system providing incentives to use generics. This has resulted in higher generic penetration in DPC hospitals at approximately 12% in value terms as compared to about 9% overall.

Lupin operates in Japan through its subsidiary, Kyowa Pharmaceutical Industry Co., Ltd. (Kyowa). Kyowa is a market leader in the generics space and has over the years built a strong presence in the Neurology, Cardiovascular, Gastroenterology and the Respiratory therapy segments. Kyowa is one of the fastest growing Japanese generics company and has grown on a sustained basis, outperforming the Japanese generics market. It is today one of the most profitable generic companies in Japan. During the year Kyowa launched 11 new products and now has a portfolio of 283 products. The Company filed applications for 7 new products during the year. In order to meet the growing demand, Kyowa has initiated construction of a new facility at its Sanda site.

During the year, Kyowa consolidated its presence in the Japanese market by acquiring I'rom Pharmaceutical Co., Ltd (IP), a niche injectables company with significant presence in the DPC hospital segment. IP is in the business of manufacturing and marketing injectable products, mainly ampoules and bags. It is headquartered in Tokyo with a manufacturing base at Atsugi, Kanagawa Prefecture. The IP marketing team covers roughly about 80% of the DPC hospitals in the country.

IP's strong presence in the DPC hospital segment in Japan, through its line of injectable products, is an ideal fit with the Company's existing oral business portfolio of Kyowa in Japan. The acquisition will not only strengthen Lupin's presence in the Japanese market but would also provide for a stronger growth footprint.

Over the past 5 years, Kyowa has grown from JPY 7,815 million (` 2,789 million) to JPY 14,194 million (` 8,607 million). Kyowa is amongst the fastest growing Japanese generic businesses registering a growth of 39% over the previous fiscal and contributing to 12% of Lupin's consolidated revenues.

Going forward, with patents for products worth USD 9 billion coming off in the next 5 years, Kyowa along with IP, is poised to capitalize on this opportunity.