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Lupin looks to revive U.S. growth with $880 mln GAVIS deal

By Zeba Siddiqui

MUMBAI (Reuters) - Lupin Ltd (LUPN.NS), India's third-largest drugmaker by sales, is buying U.S. peer GAVIS Pharmaceuticals LLC for $880 million in its largest ever acquisition, seeking to revive its flagging growth in the United States, its largest market.

The acquisition will give Mumbai-based Lupin access to a number of speciality generic drugs that tend to command a higher price as they are used to treat niche diseases.

Lupin Chief Executive Vinita Gupta said the company expected to triple GAVIS's revenues by 2018 from $96 million last year.

"(The deal) significantly boosts Lupin's existing business and growth prospects over the next few years," she said. "It puts us in a tremendous position from the pipeline perspective to capitalise on generics opportunities."

Lupin's U.S. growth has been hampered by a slower pace of new generic drug approvals since the U.S. Food and Drug Administration (FDA) overhauled its generics review process, as well as by consolidation between drug distributors there.

The company has also recently run into regulatory troubles, with the FDA expressing concerns about manufacturing processes at its Goa plant in western India last month. However, Managing Director Nilesh Gupta said none of the concerns were "serious" and the company had responded to the FDA.

He separately warned the pace of U.S. drug approvals would remain modest in the September quarter, but would pick up through the rest of the year. The company is expecting "material" U.S. approvals of so-called controlled substance products acquired through the GAVIS acquisition, he said.

The deal will give Lupin access to dermatology drugs, big-selling controlled substance products that can only be dispensed with a doctor's prescription and other speciality generics, it said. Lupin will also gain a portfolio of 66 generic drugs for which the New Jersey-based drugmaker has sought regulatory approval, with a potential market value of $9 billion, it said.

Lupin's U.S. sales fell 31 percent to $180 million in April-June, leading to a 16 percent drop in its net profit to 5.25 billion rupees ($82.35 million), it said on Thursday.

"In general, we see Lupin in a challenging phase, because they don't have any speciality products," said Nimish Mehta, founder and director at Research Delta Advisors. "They really need this acquisition."

Some analysts, however, expressed concern about Lupin paying nine times GAVIS's sales, but Lupin said that was in line with similar deals.

The Indian drugmaker expects GAVIS to contribute to earnings in the first full year after purchase, and the deal to close in the December quarter.

GAVIS did not immediately respond to a request for comment.

The deal follows three other acquisitions this year by Lupin, aimed at building its presence in Latin America and Russia. It plans to look for more businesses in the speciality generics space in the United States, CEO Gupta said.

Lupin shares closed 5.3 percent lower, compared with a 0.5 percent fall in the broader market.

($1 = 63.7500 rupees)


(Editing by Sumeet Chatterjee and Mark Potter)