Cipla Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Cipla Limited (CIPLA) Q3 FY24 Earnings Concall

• Financial Performance
  • Revenue grew 14% to INR 6,544 crores.
  • EBITDA margin expanded to 26.3% due to favorable mix and pricing actions.
  • PAT grew to INR 1,049 crores or 16% of sales.
  • R&D spend increased 10% YOY to INR 400 crores or 6.1% of revenue.
  • Reported strong growth across key markets like India, North America, and Africa.
  • India business grew 12% driven by branded prescriptions, generics, and consumer health.
  • North America sales hit all-time high, growing 18% to $230 million.
  • South Africa business grew 35% excluding asset sale.
• New Product Launches
  • Cipla continued to invest in R&D and new product pipeline.
  • Filed 2 new respiratory products in the US.
  • Have 4 peptide launches planned in FY25 with more in development.
  • Working to derisk launch of generic Abraxane and other key assets.
• Regulatory Update
  • Received warning letter for Indore facility, responded to FDA queries.
  • Focus remains on remediation efforts at Goa facility.
  • Submitted pending requisitions for Goa site.
  • Derisking key launches from Goa is a priority.
• Business Development
  • Received approval for Actor Pharma acquisition in South Africa.
  • Will help grow portfolio of leading brands in the market.
  • Integration expected in Q4 FY24.
• Guidance
  • Q4 margins to be impacted by seasonality.
  • FY EBITDA margin trending to higher end of 23-24% guidance range.
  • ROIC remains healthy at 29% for trailing 12 months.
  • Targeting around 6% of revenue as R&D spend.
  • Focus on fewer high potential assets in pipeline.
  • Expect similar trend of around 6% for next few years.
  • Attractive long-term growth potential from expanding reach in India.
  • Near-term outlook depends on WPI trends and ability to take price hikes.
  • Targeting higher than market growth next year through mix of price and volume.
• Abraxane Launch Plans
  • Fastest route is approval from Goa site, which could be ready for re-inspection in Q1 FY25.
  • If Goa not cleared, will require clinical trials from alternate site, delaying launch.
  • Timeline for approval unchanged if Goa clears, could be faster than expected.
• Advair/ Lanreotide
  • Expect to file Advair generic from alternate site by mid FY25.
  • Unlikely to need full FDA review cycle, could see approval in 6-9 months.
  • Approval possible by end of FY26 if no other queries from FDA.
  • Lanreotide now have 20% share, similar to last quarter, with incremental gains expected.
  • Seeing higher offtake this quarter, share should start picking up.
  • Supply issues fully resolved at this point.
• Symbicort Filing Strategy
  • Currently filed from Indore site.
  • Will add second site to file when get FDA queries.
  • By approval, will be two site filing or single site depending on strategy.
• US Pricing Environment
  • Currently in the 4-6% price erosion band, which is normal.
  • Expect it to shift to 6-8% band in 1-2 years as part of commodity cycle.
  • Quarter one usually sees more price challenges with new budgets.
  • Environment slightly calmer now but expect cyclical worsening.
  • Aims to have portfolio where no single asset is over $50 million.
• Peptide Contribution
  • Several peptide launches planned in next few quarters.
  • Peptides will be meaningful but respiratory remains largest category.
  • Respiratory has higher margins due to controlling more of value chain.
• India Consumer Health Business
  • Saw strong growth in Q1 but more moderate in Q2 and Q3.
  • Overall still in a growth trajectory supported by anchor brands.
  • Inventory rebalancing early in year impacted growth.
  • 35-40 stores have achieved ROI showing profitable model.
• Cash Deployment
  • Disciplined approach to IRGs will continue, not compromise just because of excess cash.
  • India M&A will be largest given confidence in growth.
  • Cipla Health bolt-ons continue to be evaluated.