Can Lupin make it into the pharmaceuticals big league? Or, has it left it too late? That's the question analysts are asking after Desh Bandhu Gupta stepped down after 40 years as managing director.

Gupta, who is still the company chairman, knows that the Rs 1,120 crore (Rs 11.2 billion) company must move quickly before the new rules on product patents come into force in January 2005.

That's why he has given the company a new look and hired Kamal Sharma as the new managing director. Sharma joined the company at end-September.

Gupta has lofty ambitions of overtaking pharma giants like Ranbaxy and Dr Reddy's. But he knows the company must be restructured first.

Says Gupta: "As a chairman, I've realised that I cannot micro-manage the company, there are limitations of the chairman knowing the problems of the organisation."

The new managing director is the latest in a series of key personnel changes in the last eight months.

Lupin has hired a human resource head, a chief financial officer and a chief information officer (the last two are firsts for the company). Also, it has promoted business heads for its three strategic business units.

That isn't all. Lupin is also revamping its drug portfolio and undergoing a financial restructuring. Also, the company will depend less on the Gupta family (his daughters are involved in the business).

What has put Gupta into action-mode? The company was hit badly as growth slowed sharply during the last two years in the domestic market and cheaper me-too products forced steep price cuts.

So, while sales grew from Rs 956 crore (Rs 9.56 billion) in 2001-02 to Rs 1,120 crore in 2002-03, net profits only grew marginally from Rs 72.18 crore (Rs 721.8 million) to Rs 73.07 crore (Rs 730.7 million) during the period.

The company also has a heavy debt burden because it spent heavily on capacity expansions. There's also a loan to an associate company, which invested in real estate that hasn't been repaid.

All of this, resulted in Lupin growing slower than its rivals. "Our investments have been high and profits, till now have not been commensurate," says Gupta.

It's not tough to figure out one glaring error that Lupin made. Giants like the Rs 2,768 crore (Rs 27.68 billion) Ranbaxy and Rs 1,598 crore (Rs 15.98 billion) Dr Reddy's have focused on selling formulations or finished dosages (those are actual tablets or capsules) in advanced markets (US and UK).

Lupin, by comparison has exported only active pharmaceutical ingredients or bulk drugs to these markets. "It may be too late for them to enter these advanced markets now with so much stiff competition already there," says one analyst.

Despite this late start, Gupta says the company will start selling formulations in advanced markets.

Currently, API exports to the advanced markets account for only 16 per cent of turnover. Gupta would like 60 per cent of its sales to come from developed markets in the next few years.

"To put it in perspective, other players definitely have a stronger pipeline of products, but we're also getting there," says managing director, Sharma. This is his second stint in the company.

The company is also diversifying into sectors where returns are higher. Till now it was known for its large portfolio of anti-tuberculosis drugs.

Now, it's diversifying into areas like cardiovascular, diabetology, neuro-psychiatry.

The share of anti-TB drugs to turnover has come down from 41.9 per cent in 2000-01 to 30.1 per cent in 2002-03 while cardiovasculars, for instance, have gone up from 3.9 per cent in 2000-01 to 10.5 per cent in 2002-03.

The cardiovascular drug market grew at 30 per cent two years back and at 13 per cent last year. By comparison, the anti-TB market is growing at a mere 4 per cent to 5 per cent annually.

What's the proof that Lupin is making up for lost time? The company has already filed five abbreviated new drug applications last year in the US - three of which have already been approved.

Out of these, one has already fetched Rs 32 crore (Rs 320 million) in the quarter ended September and the second one will bring in cash after the patent expires in June 2005.

With the pipeline of generic drugs opening up, Lupin expects to launch more than 10 products annually. It has also launched Ceff-ER, the world's first once-a day cephalexin dosage used to treat bacterial infections.

Apart from this, Lupin has spent Rs 15 crore (Rs 150 million) to ramp up manufacturing for Lovastatin in Mandideep, Bhopal. Also, this year it has spent Rs 20 crore (Rs 200 million) to boost production of cardiovascular drug Lisinopril in Tarapore.

Then, it is setting up a new factory to make non-cephalosporin drugs in Goa. The company will spend Rs 110 crore (R 1.1 billion) this year as capital investment.

A centralised R&D centre has been set up in Pune and it aims to licence out at least one molecule every year. Also on the cards is a plan to launch products from its phyto-medicine (ethical herbal medicines) stable by early 2004.

Gupta is also restructuring debt and talking to potential investors for fresh money. This week, CVC International -- a Citigroup Global Investments Unit - finally acquired a 12.55 per cent stake for Rs 125.9 crore (Rs 1.25 billion), bringing the promoter's stake down to 54.62 per cent.

A similar deal with Hong-Kong based firm Newbridge Capital fell through earlier this week.

Gupta aims to retire at least half of the debt by the end of this fiscal year. The company has also written off Rs 80 crore (Rs 800 million).

The changes of the last few months have made the markets take a second look at Lupin. Back in 2001 the share price had plunged at one point to Rs 8.

Then, from Rs 95.50 in mid-October last year, the scrip closed at Rs 540.60 on Wednesday after the Newbridge deal fell through. Lupin has, of course, moved upwards like all other pharma stocks.

However, despite these clean-up efforts, analysts are watching closely. "Some of these measures seem half-baked only to attract funds. Time will tell where they actually lead," says one leading Mumbai-based broker.