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India's Lupin targets generic potential of biotech drugs

Expiring patents open window for launch in Japan and Europe by year end

A worker conducts an inspection at Lupin's biosimilar plant in Pune, India. (Photo courtesy of Lupin)

MUMBAI -- India's third-largest drugmaker by sales, Lupin, has diversified into biosimilars -- cheaper versions of expensive biotech drugs -- in a bid to stimulate growth amid a slowdown in recent years.

Lupin plans to supplement its traditional business in generics and specialty drugs with biosimilars slated for launch in Japan, Europe and other markets by the end of the year, Lupin Biotech President Cyrus Karkaria told the Nikkei Asian Review.

The company joins a growing list of Indian pharmaceutical makers that seek to take advantage of a window of opportunity that will open up when several major biotech drugs lose their patent protection soon. Biotech drugs, also known as biologics, are medicines made using living organisms, compared to conventional pharmaceutical drugs which combine chemical compounds.

The market for biosimilars is now dominated by bigger players, such as Switzerland-based Novartis and American groups Amgen and Pfizer, as well as South Korea's Celltrion. The entry of a major Indian drugmaker will heat up competition.

Karkaria said the pivot toward biosimilars is part of the company's strategy for sustainability as its traditional business shrinks. "What's very evident is that for small-molecule [drugs], the [discovery] cycle is actually running out," he said.

"Most of the blockbuster products coming out with patents are now biotech drugs. Most of the multimillion-dollar drugs -- say seven out of 10 -- would be biotech drugs," Karkaria noted. "We had to rethink our strategy."

Many key biotech drugs are scheduled to lose their patent by the year 2020, according to a team of experts represented by Bikash R. Meher of the All India Institute of Medical Sciences.

More than 100 Indian biopharmaceutical companies are engaged in the manufacturing and marketing of biosimilars, consultancy Frost & Sullivan estimates.

Biosimilar drugs are nearly identical to the biotech drugs they replicate and accomplish the same clinical results. Both have very complex structures compared to the more common, small-molecule synthetic drugs like aspirin.

As the biotech drug market continues to grow, demand for less costly biosimilars is expected to keep pace. McKinsey estimates that global sales of biosimilars could triple to $15 billion by 2020.

"Health care experts and physicians are optimistic that use of biosimilars may reduce the cost of biologics and eventually lead to better patients' access to these lifesaving drugs," the team of Indian experts wrote in a recent journal. "The biosimilars have huge potential to reduce the overall cost of treatment."

Lupin produces and sells generics and their active ingredients, and has a significant presence in the cardiovascular, diabetes, asthma, pediatric and tuberculosis segments. The company derives 35% of sales from the U.S., with India its second-biggest market.

But Lupin has been struggling to grow its core business in the U.S., where medicine prices have been sliding as the Food and Drug Administration rapidly approves generics, fueling competition that is forcing prices down.

Lupin suffered another setback in December when the FDA raised concerns about its Mandideep facility in the Indian state of Madhya Pradesh. The plant is now subject to regulatory or administrative action, and the FDA may withhold approval of any pending applications that list the facility.

The company announced on May 15 that net profit after exceptional items increased to 6 billion rupees ($85.4 million) for the year ended in March, but that was only one-fourth the level of two years ago.

Sales of biosimilars, especially in Japan and Europe, will be important to offset the dimming outlook for the company's legacy drugs. According to Karkaria, Lupin hopes to capture at least 10% of the biosimilar market over the next five years and have it contribute significantly to consolidated sales.

By the end of March, Lupin's biotech division had filed three Indian and three international patent applications. It was also granted one patent in the U.S. and three in South Africa.

Lupin plans to work with Dutch pharmaceutical group Mylan for sales in most overseas markets, but has partnered with generic drug company Nichi-Iko Pharmaceutical for its Japanese operations.

HDFC Securities analyst Amey Chalke feels that while a number of Indian companies have a head start in biosimilars, Lupin took a different route: first establishing itself in the U.S. with legacy products as regulators sorted out rules for the relatively new biotech sector. "What [Lupin] is also trying to do now is to build niche products that have fewer potential competitors," Chalke said.

India's leading player Biocon expects to cross $1 billion in revenue on the back of a strong biosimilars pipeline, including the U.S. launch of a biosimilar version of Roche's breast cancer drug trastuzumab by the end of this year. Another strong player, Dr. Reddy's Laboratories, is focusing on scaling up in its major markets, which include Russia, China, Brazil, South Africa and Ukraine.

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