Mumbai-based Lupin appeared to signal a rethink of its purchase last year of Russian generic drug maker ZAO Biocom as conditions laid down by regulators prove a stumbling block, the company said after reporting solid first-quarter earnings.
In July of last year, Lupin said it was on track to buy a 100% stake in the company, with terms and price details not disclosed. The move would have been the company's first step into Russia's pharmaceutical market.
But in fairly terse remarks on the Aug. 9 earnings call, with one company source unidentified in the transcript, IIFL analyst Abhishek Sharma asked whether the Biocom transaction had been completed.
"We haven't done that as yet," an unidentified executive said, with CEO Vinita Gupta then adding: "We didn't conclude it."
"It hasn't closed yet?" Sharma asked.
"No, because the Russian government came out with certain conditions, which said that you need to do it, the order outlay needs to be at least four times that of the current outlay. We thought it was pretty encumbering," the unidentified executive said.
"So what's your timeline to close that, sir?" Sharma queried.
"We are still working with the government to resolve a lot of this," was the reply from the unnamed executive. No other questions on the subject came up after that.
The bureaucratic roadblocks come even as Russia and India have had deep diplomatic and commercial ties through defense and other dealings for decades.
Still, Lupin said in a release that net profit for the first quarter ended June rose 55% to INR8.8 billion ($132 million) though analysts questioned costs and pricing margins that Gupta chalked up to normal business flows.
"So as far as pricing goes, we have seen a good amount of price pressure over the last couple of years," Gupta said.
"But in the last 6, 8 months, pricing has settled down on the baseline products. So we have seen a single-digit price erosion, which is made up by volume as well as mix. So if you look at Q4 versus Q1, so as the base business growing not materially but growing, we any day take growth over erosion. And then Glumetza, of course, made a significant contribution, but that's also compared to Q4 because they were the [lowest] in Q4."
Lupin launched its metformin generic of Glumetza originally from Santorus in February in the U.S.
Gupta did however note that U.S. sales jumped 82% as recent acquisitions of products in the market and Glumetza and another metformin generic diabetes therapy, Fortamet, boosted offerings.
- here's the release