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Lupin to buy branded drugs from Shionogi in Japan expansion

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An employee of Lupin works at a reception at their headquarters in Mumbai.   © Reuters

MUMBAI (NewsRise) -- Lupin, India's third-largest drug maker, has agreed to buy 21 branded products from Japan's Shionogi & Co. for 15.4 billion yen ($151 million), as it seeks to expand its overseas business amid rising competition in the generics medicine market.

Lupin, one of the earliest movers into the Japanese generics market, is already expanding its portfolio of branded products in markets including the U.S., focusing on therapeutic areas such as pediatric, women's health, inhalation, dermatology and ophthalmology. The acquisition is being done through Lupin's Japanese unit, Kyowa Pharmaceutical Industry.

"This acquisition marks Lupin's foray into the Japanese branded market, in line with our aspirations to build and strengthen our specialty business globally," Nilesh Gupta, managing director of Lupin, said in a statement.

In 2007, Lupin entered Japan through the acquisition Kyowa for an undisclosed amount. In 2011, it agreed to buy Tokyo-based specialty injectable drug maker I'rom Pharmaceutical Co. in a bid to enter the fixed-rate treatment hospital segment in Japan, where the government has sought low-cost healthcare services.

Under the terms of the agreement, Kyowa will book the sales of the 21 products after December 1, the company said. These products, that have combined sales of $90 million, cover therapies in areas ranging from central nervous system to oncology, cardiovascular and anti-infectives.

"Japan is a very important market for us," said Fabrice Egros, president for Lupin's Asia Pacific and Japan operations. "The acquisition strongly supports our future growth plans and the brands have robust synergies with Kyowa's existing portfolio, which will enable Lupin to build a wide customer base across the key therapies."

Japan is the largest pharmaceutical market in the world after the U.S., with sales of more than $115 billion. Generics account for 56% of total pharmaceutical volumes in Japan, growing at 8%. The country has set a target of reaching 80% generic penetration by the end of the decade as it grapples with mounting healthcare costs and an ageing population.

Lupin is setting up a new manufacturing facility in Japan, its third largest market that accounts for 10% of its $2.09 billion annual revenue. It has also set up a dedicated offshore plant for the region in the western Indian state of Goa.

Analysts say Lupin is taking advantage of its early entry in the region.

Total revenue from Kyowa and I'rom have grown at a compounded average rate of 16%, barring currency fluctuations, since the fiscal year 2008, IDBI Capital said in a note on Tuesday. "We believe this is a remunerative transaction, which will start to add to the Kyowa sales of 25 billion yen immediately."

In March, India's largest drug maker Sun Pharmaceutical Industries also entered the Japanese market by buying 14 prescription brands from Novartis AG for $293 million.

The expansion in Japan comes as Lupin and rivals face regulatory challenges in the U.S., where the federal regulator has flagged a series of safety lapses and quality control issues at the local manufacturing plants of Indian drug makers. In July, the regulator found two new shortcomings in one of Lupin's manufacturing plants in the western Indian state of Gujarat, even as it struggled to fully resolve some of the existing concerns about another plant.

Shares of Lupin ended 1.10% down at 1,704.35 rupees in Mumbai trading Tuesday, while the benchmark S&P BSE Sensex lost 0.08%.

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