It gives me immense pleasure to share our second Integrated Report with you. At Lupin we are committed to the wellbeing of society at large and ensuring that we provide great quality products to our consumers at affordable prices. The last two years have been challenging for the world at large as a result of the pandemic — however, we at Lupin had to also contend with headwinds in some major parts of our business. These tough times have made us more resilient and more determined to overcome the challenges around us and come out much stronger as a company. There is now a lot more vigour and rigour behind initiatives to maximize growth, enhance profitability and reduce costs across the entire value chain – efforts that would make us a lot more efficient, agile and fit for purpose.
Last year, we articulated our initiatives around the six capitals that are embedded in the ESG framework. This year, we would be happy to share with you our progress on each of the pillars in the subsequent chapters. Our materiality assessment framework is in line with our philosophy to make the world a better place to live, and embraces steps to give back to nature, communities at large and most importantly to our various stakeholders. This document reflects the confidence that the organization has a strong value ethos and a governance framework that places emphasis on delivering strong financial performance whilst not losing sight of the larger goals brought out by the ESG framework.
We went past the INR 16,000 crore mark for the first time in five years thanks to strong business growth across key geographies.
However, both the topline and bottom line in the U.S. were marred by strong headwinds. Intensifying competition, double digit price erosion in our U.S. generics portfolio, inflationary pressures across all our inputs caused tremendous stress for the generics industry in general. The U.S. being a large part of our overall business, the impact on the overall business was quite high.
Amidst all of the negatives in the U.S., there were several remarkable developments — we continue to build a strong inhalation generics business with the ramp-up of Albuterol market share to 22.8% in Q4 FY22 and the launch of the Brovana authorized generic which together supported the U.S. business to register almost 3% growth.
The India business continues to shape our growth story in many ways. We maintained our 6th rank2 in the India Pharma Market and improved our overall market share. With the re-opening of the economy, our sales force was able to better physically connect with the doctors and the trade. In the meantime, the pandemic had also enabled us to become more digitally savvy to provide a better customer experience.
Business in Growth Markets was strong with robust performance across markets, especially in the Philippines and Australia. We acquired Southern Cross Pharma in Australia – a company with a portfolio of ~ 60 registered products. We expect to drive synergies through this acquisition and enhance Lupin’s value proposition and market share in the Australian market.
In Europe, we continue to expand the specialty business with NaMuscla®. Launch of branded generic beclomethasone/formoterol – Luforbec® in the U.K. provided further fillip to our efforts to grow our global inhalation franchise. The South African business continues to do well led by growth in Cardiovascular, Central Nervous System and the OTC franchises.
In the aftermath of the pandemic and the concomitant slowdown of acute therapies across the globe, the API business had a very challenging year with very low offtake particularly in the area of Cephalosporin antibiotics. However, we believe that the worst is behind us and that we should be able to come back strong.
We were also subject to further pressures as a result of product recalls, penalties on failures to supply due to supply chain disruptions during the pandemic, a one-time settlement of claims on account of Glumetza, and impairment of our specialty business asset Solosec® and certain IP from our Gavis stable in the U.S.. This impacted the overall results that the company posted for the year, but sets us up strongly going forward.
Lupin has always been in the forefront of bringing quality products at affordable prices to the consumers. Our manufacturing facilities continue to be the fulcrum around which the entire value chain revolves. Continuous improvisation and optimization on the cost front is an important imperative. Our manufacturing footprint is indeed global, domiciled in 15 manufacturing sites spread across India, United States, Brazil and Mexico. The fact that several of our sites, Mandideep (Unit-2) and Pithampur (Unit-1) have won the Gold Medal in the National Awards for Manufacturing Competitiveness 2021 (NAMC) and received Special Award for Advanced Manufacturing Systems whilst our site at Dabhasa was awarded the Silver Award at India Green Manufacturing Challenge 2021-22, is reflective of our manufacturing prowess and environmentally friendly practices.
The travel restrictions imposed by several governments and the institutions themselves on employees inhibited audits of sites by FDA authorities. This in turn stymied approvals and impacted our ability to launch new products for the U.S. markets. With easing of travel restriction, we saw the resurgence of our sites getting audited during the year. Goa site which was under Official Action Indicated (OAI) for quite some time was upgraded to a satisfactory Voluntary Action Indicated (VAI) classification basis the inspection in FY22 by the US FDA.
We embarked on a digital roadmap, ADAPT, for all manufacturing sites with a view to make our manufacturing operations best-in-class from an efficiency and quality perspective. The program aims to create a culture of sustainable cost optimization through digital monitoring of various parameters along the manufacturing value chain and uses data points and technology to ensure maximisation of throughput, optimisation of resource utilisation and ensuring delivery of “first time right batches”.
COVID-19 highlighted more than ever the need to have agile and adaptable supply chain operations. After the initial hiccups, post the pandemic, we have made significant progress in ensuring that the supply chain is geared to take any such challenges in the future. We made significant strides in our supply chain operations for the U.S. through the adoption of an Integrated Business Planning (IBP) process during the year. The IBP framework has brought in transparency of data, clear insights and identification of any existing/emerging gaps, enabling us to take right decisions to ensure that we maximize our ability to service the market and mitigate costs of Failure to Supply.
The inflationary environment was a dampener to our plans to optimize overall procurement costs and shore up margins. We have put ESG at the core of our operations and have initiated an ESG focused risk assessment for all our critical suppliers. This will enable us garner maximum transparency into our supplier’s performance on environment, social & governance grounds, and allow us to take pointed action to meet the highest standards of sustainability. We continue to drive our focus on ‘Project Inspire’ to help us optimize on procurement costs and conversion costs.
At Lupin, the consumer has always been at the center of our operations. Safety of our operations and good health of our patients is of utmost importance to us. We believe that digital adoption will revolutionize healthcare through a thoughtful approach to data and design benefitting not just patients but health care providers as well.
In the same vein, we believe that there is an opportunity to fuse service and technology and serve patients interests better through diagnostic services. Whilst not being the dominant theme for our India formulations business, it is an important service offering in India. Given the immense possibilities for healthcare related services in India, we see this as an important growth engine for the future and is in line with our ethos of patient-centric healthcare.
We are hopeful that given our preparation levels, our manufacturing sites in India would find acceptance from the regulators and move to VAI status in FY23. This would bring in its wake long awaited approvals for select ANDAs submitted in the past. Along with the complex generic pipeline submissions, this would position the company very strongly in the near future.
As we rebuild the health of the U.S. business and sustain strong growth momentum in other parts, we expect that we would be able to regain growth from the second half of FY23. The launch of Spiriva DPI generic and Pegfilgrastim in the U.S. in the second half of the year would be important developments. To sustain growth momentum over time, we have a suite of products in the complex generics space straddling inhalation, injectables and biosimilars. These products would be the mainstay of the U.S. business over time.
In India, we successfully completed the acquisition of the portfolio of brands from Anglo-French Drugs & Industries Limited in April 2022. The acquisition will strengthen our India Region Formulations (IRF) business by adding a fast-growing portfolio of vitamins, minerals, supplements and neurological products. This coupled with calibrated field force expansion would help us sustain growth rates above that of the industry. New businesses such as Lupin Diagnostics will also gather pace in the quarters to come.
On the API front, we are optimistic about the prospects of a bounce back for the acute therapy products led by the cephalosporins range. Equally, we are also excited by our entry into the large market for Anti-Retrovirals (ARVs) globally.
We will also be focused on strategic inorganic strokes to supplement the organic efforts. We remain confident that the growth from the newer pipeline along with our initiatives across all fronts – cost and footprint rationalization, productivity improvement, digital roadmaps would collectively contribute to robust and sustainable topline and the bottom line growth over the years.