Japanese boost for Lupin

Lupin, a pharma company with market cap of Rs 19776 cr, has acquired a Japanese pharmaceuticals firm, I’rom Pharma, through its Japanese subsidiary Kyowa Pharmaceutical Industry Company. The financial details of the transaction are not available currently. I’rom Pharma is a Japanese company that has a significant presence in the injectables segment, and has an annual turnover of $69 million (Rs 330 cr). Lupin expects a growth rate of about 8% in I’rom Pharma. The growth will mainly be driven by the growth in the ageing population and healthcare expenditure.

In order to enter the Japanese market, Lupin acquired Kyowa Pharmaceuticals in 2007, when it had revenues of about 7.5 billion Yen (Rs 500 crore). Since the time of acquisition, Kyowa has grown by a four-year CAGR of 12%, and its revenues currently stand at 11.6 billion Yen (Rs 770 cr). Kyowa contributes about 11% of the total revenues of Lupin. With the acquisition of another company in the Japanese market, Lupin expects its revenues from the Japanese business operations to rise from $140 million in FY11 to $300 million by FY13. 

I’rom has a significant presence in the DPC (Diagnosis Procedure Combination) hospitals segment, and expects good growth opportunities in the injectables segment. There are over 1400 DPC hospitals in Japan, which represent about 35% of the overall national beds.

I’rom holding company limited is a parent company of I’rom Pharma. According to the website Bloomberg total liability remained at $136.6 million as per its balance sheet for the year ended 31, March 2011. For the same period company reported total revenues of $182.4 million, up by 1.27 per cent on YOY basis.  Its net profit remained merely at $2.9 million for the year. Company had reported losses in earlier 3 years according to the same website.

Japan represents the largest healthcare market in Asia and the 2nd-largest in the world after the US. Average life expectancy in Japan is about 86 years, which is the highest in the world, way ahead of that in China (82 years) and India (64 years). This health awareness and expenditure is also one of the main reasons for the current position of Japan in the healthcare market.

Japan is  the world's 10th most populous country, a with population in excess of 12 cr. After showing negative growth rate for several years, the country as registered a rise in its birth rate and population figures recently. The ageing population in Japan is rising rapidly due to this negative growth in the birth rate as well as higher life expectancy, indicating very good growth opportunities for pharma companies. Besides, Japan is a regulated pharmaceutical market, and like other regulated markets, one of the growth factors for pharma companies is the government's boost for generics  

Lupin is the only one among the Indian pharma companies to have a significant presence in the Japanese pharma market.We believe with such a stable market in the portfolio, company may see revenues rising however at the net level impact may not be very significant. This deal provides opportunities to Lupin to set its foot firm in Japanese market and create more opportunities in future.