Lupin plans to add plant in Japan

With Japan's government planning to shift the country toward using more generics to cut its burgeoning healthcare budget, analysts see a big opportunity for Indian generics companies like Sun Pharmaceutical Industries, Dr. Reddy's Laboratories ($RDY) and others. One of those others, Lupin, says it is the only one of its peers with production in Japan, and it's eyeing expanding there as demand for generics surges.

Lupin Managing Director Nilesh Gupta

Lupin Managing Director Nilesh Gupta indicated last week that the Indian drugmaker was planning to invest about $15 million to build a new manufacturing facility in Japan. Today the company disclosed in a filing more of what it has in mind for the world's second largest drug market.

In a filing with the Bombay Stock Exchange, Lupin said that its Kyowa Pharmaceutical Industry subsidiary is proposing to build a plant in Tottori that would be able to produce 2 billion tablets a year. It didn't give any financial parameters to the deal but said the request was made because demand for generics is outstripping the ability of its current facility in Sanda, Japan, to keep up. Tottori is about 150 kilometers north of Sanda.

Gupta acknowledged last week to the Economic Times that there will be some short-term challenges as Japan holds prices on drugs there but said that over time, Lupin expects 15% to 20% growth in the country. Lupin says it is the only Indian drugmaker with manufacturing in Japan.

The government, in an effort to cut healthcare costs, is putting more emphasis on generic drugs, saying it wants about 80% of prescriptions to come from generics in the next few years, up from about 50% now. While that is bad news for branded drugmakers, it presents a big opportunity for those with an expertise in generics. Last fall, the world's largest generics maker, Teva ($TEVA), said it was partnering up with Japan's largest drugmaker, Takeda Pharmaceutical, in a joint venture that was target the country's generics needs.

In 2013, Pfizer ($PFE) struck a deal for generics specialist Mylan ($MYL) to manufacture 350 off-patent Pfizer drugs for the Japanese market. Mylan, which already had a plant in Kawagoe, Japan, said it could also tap its extensive manufacturing operations in India, as well as a plant in Australia, to produce drugs for the Japanese market.

- here's the BSE filing
- more from the Economic Times

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