Cipla Limited Q4 FY23 Earnings Conference Call Insights

Key highlights from Cipla Limited (CIPLA) Q4 FY23 Earnings Concall

Management Update:

• [00:05:08] CIPLA said its U.S. business crossed $200 million in 4Q23, growing over 23% from last year, with a focus on pipeline and execution.

Q&A Highlights:

• [00:17:57] Tushar Manudhane at Motilal Oswal asked about the drivers of depreciation QoQ from INR270 crores to INR346 crores. Ashish Adukia Global CFO said that the increase is on account of some of the impairment in the intangible assets that CIPLA had taken.

• [00:18:45] Kunal Dhamesa of Macquarie asked about the reason for the Domestic Consumer Health business having a QoQ run rate deceleration going from INR300 crores a quarter to INR47 crores. Umang Vohra MD replied that the deceleration is seasonal due to a large portfolio of summer products like ORS, resulting in higher sales in 1Q and 2Q.

• [00:21:02] Prakash Agarwal with Axis Capital asked about an update on the progress of other pipeline products, besides Respi and Peptide. Umang Vohra MD said that to derisk CIPLA’s product filings and expedite the process, it is adopting a strategy of filing every product from two sites, including major ones, while prioritizing the derisking of externally sourced products, such as peptides, to mitigate inspection-related risks.

• [00:23:40] Prakash Agarwal at Axis Capital asked about the new and existing areas of R&D investment for the next three years. Umang Vohra MD clarified that it is largely respiratory; Respiratory, Peptide, so I think between these, there is a fair number of assets that we have. Some of CIPLA’s assets are in clinical stages, which is why expenses are higher. Biosimilars are also being developed, beyond respiratory and peptide drugs.

• [00:24:23] Prakash Agarwal from Axis Capital asked did the price cut in 3Q due to DPCO impact have a material impact on the sales of inhalation products in 4Q and the impact of the price hike in April on the sales of inhalation products. Umang Vohra MD said the market has not seen any significant change due to the price impact. The volume growth continues to be strong, and the price decreases are already reflected in the numbers.

• [00:27:47] Damayanti Kerai from HSBC asked about the Indore plan audit status. Umang Vohra MD clarified that the Indore plant audit has happened and the final FDA classification is expected to be heard sometime in May.

• [00:29:11] Damayanti Kerai from HSBC enquired about the rationale behind the Galvus deal with it being a competitive space. Umang Vohra MD replied that CIPLA believes that the diabetes market is a stable and growing market, and that it can increase sales of Galvus by leveraging its reach and penetration.

• [00:29:36] Damayanti Kerai from HSBC enquired about the statement of adding 1,000 plus people between FY23 and FY24. Ashish Adukia Global CFO replied that the 800 is for FY22 and FY23 and the 1000 number is for between FY23 and FY24. Only the incremental will be added in FY24. CIPLA’s investment focus is on specific therapies, particularly in chronic conditions such as respiratory and diabetes and not to add field force across the board.

• [00:31:55] Suryanarayanan Patra at PhillipCapital asked that compared to the prescription trend, why the growth number for both the US and India businesses looks relatively lower. Ashish Adukia Global CFO said that the sales and contribution of Revlimid for different companies may vary depending on the arrangements it has with the branded player.

• [00:35:39] Suryanarayanan Patra at PhillipCapital asked how will the competition from Albuterol and the opportunity from Revlimid impact CIPLA’s growth in the US in FY24. Umang Vohra MD replied that Revlimid is already factored into CIPLA’s growth numbers, and CIPLA is confident that it can participate in the growth of the Albuterol market in the US.

• [00:36:47] Neha Manpuria from Bank of America asked that given Lanreotide is a new product with no competition, how much market share can CIPLA expect to gain, and is this limited by capacity. Umang Vohra MD expects the product to gradually gain market acceptance over the next couple of quarters.

• [00:39:56] Neha Manpuria from Bank of America enquired about the R&D guidance for FY24. Ashish Adukia Global CFO said that it will continue to be in the same range of about 6-6.5% due to the derisking strategy, etc.

• [00:46:51] Tarang Agarwal from Old Bridge queried about the respiratory revenue for the U.S. for FY23. Umang Vohra MD answered that it’s $160 million.

• [00:57:03] Kunal Randeria from Nuvama asked that considering the company’s current cash balance, how will CIPLA approach future U.S. business expansion. Umang Vohra MD said that the company’s previous strategy of expanding through in-licensed assets did not work out, so CIPLA has reconfigured its strategy to focus on developing its own internal pipeline. CIPLA believes that this will allow it to have a more sustainable business in the long term.