Cipla Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from Cipla Limited (CIPLA) Q2 FY24 Earnings Concall

• Financial Performance
  • Highest ever quarterly revenue of INR6,678 crores, up 15% YoY.
  • EBITDA margin stood at record 26%.
  • Profit after tax was INR1,131 crores, about 17% of sales.
  • Cash balance stood at around INR6,811 crores post dividend payment.
  • Debt primarily comprises ZAR720 million in South Africa.
• Growth Across Core Markets
  • Double-digit growth in India, North America and South Africa.
  • One India franchise grew 10% YoY despite weaker anti-infective sales.
  • North America delivered highest ever revenue of $229 million, up 28%.
  • South Africa grew 9% in local currency led by private market and OTC.
• Focus on Chronic Therapies
  • Share of chronic therapies in India portfolio improved by 140 bps to 60%.
  • Growth in India driven by branded prescriptions focus on chronic therapies.
  • South Africa private market growth aided by focus on oncology, CNS and other chronic therapies.
• New Product Launches
  • Multiple new product launches in India across branded prescription and OTC.
  • Good traction seen in new launches in South Africa private market.
  • Progress made on pipeline for North America with focus on complex generics.
  • Semaglutide oral and injectable launch planned for India market.
  • Generic Symbicort filing planned from multiple facilities.
• India Business Growth
  • Expects 12% CAGR growth for India business over next few years.
  • Growth driven by strong performance in key therapies like pediatric, respiratory, urology, anti-infective, cardiac.
  • Branded prescription business grew around 12% YTD despite muted volume growth.
  • Cipla aims to increase Albuterol market share to 16-17% by building share for its specific variant.
• US Business Outlook
  • Seeing volume and price improvement in select US products.
  • Shortage situation in US market preventing price erosion in some products.
  • Differentiated portfolio now comprises 70-75% of pipeline.
• Margin Expansion and Impairments
  • Gross margin improvement driven by favorable product mix and pricing.
  • Chronic portfolio expansion improving margin profile in India.
  • INR43 crore impairment related to non-operational domestic facility.
  • Additional impairment due to intangibles write-down for acquired US product.
• Cipla’s US Albuterol Market Share Trends
  • Cipla has seen slight increases in Albuterol share recently after previous declines.
  • Share gains are incremental over time rather than large deltas.
• Lanreotide US Outlook
  • Cipla sees scope for incremental gains in Lanreotide like they’ve seen historically.
  • The gains don’t tend to be large deltas but rather creep up slowly over time.
• India Margin Outlook
  • India margins last quarter were highest ever, largely due to favorable mix, not sustainable changes.
  • More anti-infectives in winter months will likely reduce margins from the highs.
  • Investment in complex products and new launches may impact mix and pressure margins.
  • Q4 typically has seasonally lower margins in India business.
• South Africa Growth Strategy
  • Focus is on growing private market where they are currently #2 and targeting #1.
  • Growth calibrated for profitability, not just volume gains.
  • Shift from tender to private market and new OTC launches will drive profitable growth.
  • Synergies from acquired Actor Pharma portfolio also a source of growth.
• US Revlimid Sales Trend
  • Revlimid sales have been broadly steady after initial launch period.
  • Expect similar levels through H2 with no major gains projected.
• Strong Performance Of Subsidiary/Access Markets
  • Sales in subsidiary and access markets (South Africa, sub-Saharan Africa) doubled quarter-on-quarter.
  • This was driven by growth in QCIL in Uganda, as well as South Africa and other sub-Saharan markets.
  • However, the growth is not expected to be sustainable long-term as it is tender-driven and lumpy.