He may have acquired a formulations plant in Puerto Rico, but CEO D.B. Gupta will find it tough to storm the mainland.

By Nanda Majumdar

An acquisition in Puerto Rico could prove to be a profitable prescription. Soon, the Rs 632-crore Lupin Laboratories (Lupin) will ink a deal to acquire the cephalosporin plant of the American pharma major, the $6.40-billion Eli Lilly, for $25 million (Rs 100 crore).

Approved by the US Federal Drug Authority, the formulations plant manufactures oral cephalosporins, a range of third-generation antibiotics. BT learns that Lupin will also set up a 50:50 joint venture with the Canadian generics marketer, Movopharm Inc., which will fund 50 per cent of the purchase of the Eli Lilly plant.

Both will mesh into Lupin's strategy to concentrate on the global generics (off-patent) drugs market. At present, cephalosporins accounts for 40 per cent of the turnover of Lupin, which manufactures three orals (like cephalexin) and three injectibles (like cefotaxime) of this kind in the country. Explains Desh Bandhu Gupta, 59, Chairman, Lupin: ''By 2002, Lupin will be a $1-billion company, and cephalosporins will account for one-third of our turnover. In fact, over the next 6 months, we have lined up 5 new product launches in oral cephalosporins.''

While the portfolio of the Eli Lilly unit is not known as yet, its cost of production will be low. While the unit manufactures oral cephalosporins, like cephalexin and cefaclor, Lupin hopes to cash in on value-added cefaclor and cefotaxime, a third-generation cephalosporin that goes off patent in August, 1998.

So, Gupta is aiming at a 10 per cent volumes share of the $450-million cefotaxime market, where the global prices range between $8.50 and $9 per gm-vial against Lupin's output cost of $1. Opportunities also exist in ceftriaxone, (which goes off patent in April, 1999), and ceftazedime (September, 2000).

At one end, Lupin will ship the bulk drug manufactured at its plants in India to the Eli Lilly unit, where it will be formulated. At the other, Movopharm Inc. will provide marketing assistance to the company. In addition, Lupin has a profit-sharing agreement with Merck Generics, the generics wing of the $23.63-billion E. Merck, and marketing arrangements with Teva and Fujisawa (a part of the American Partners Group). Says Vinita Gupta, 28, Director (International Business Development), Lupin: ''Our future is in the developed markets because the market size is huge, and the prices are great.''

Certainly, but is Lupin-which has barely recovered from a liquidity crunch as a result of an unrelated diversification into real estate in 1995-geared to face the challenge? Financially, the company remains highly-leveraged although Lupin earned Rs 42.50 crore last year by selling a group company, Lupin Agrochemicals, to Cheminova, a Danish company. Points out Sanjay Chawla, 32, Vice-President (Research), Lloyds Securities: ''Lupin has displayed a knack for synthesis, cost-effective process chemistry, and mass-manufacturing capabilities.''

Still, Lupin will have to hold its own in the highly-competitive generics market. Warns D.G. Shah, 56, Managing Director, Vision Consulting Group: ''A strong field-force is a must if Lupin wants to make a dent into the intensely-competitive US cephalosporins market.'' Adds Tarun Gupta, 58, the President of the Ahmedabad-based Intas Pharmaceuticals: ''The opportunity for Lupin is enormous, but its ability to attract and retain talent isn't proven yet.'' An opportunity stares Gupta in the face. Now, he has to stare right back if it isn't to prove to be all hot air.

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