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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.
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