Ruling the Therapeutic Medical Segment Ft Cipla

Our One-India business continued the double-digit trajectory growing at 12% during the quarter led by branded prescription with sustained growth across chronic therapies. Our continued focus on differentiated portfolio has strengthened our US business which once again posted highest ever quarterly revenue at $ 222 Mn. South Africa Private Market bounced back from lows of last year to post a double-digit growth. Our core operating profitability continues to be strong at 23.6% expanding by 230 bps over last year

Umang Vohra, Managing Director

Stock data

Ticker	CIPLA
Exchange	BSE and NSE
Industry	Pharmaceuticals

Price Performance:

Last 5 days	-1.01%
YTD	+16.25%
Last 1 year	+22.58%

Company description:

Cipla Limited is a leading Indian multinational pharmaceutical and biotechnology company headquartered in Mumbai, India. Founded in 1935, Cipla has established itself as a global pharmaceutical powerhouse with a strong focus on research, development, manufacturing, and marketing of a wide range of pharmaceutical products. The company’s mission is to make healthcare accessible and affordable to people worldwide.

Business Segments:

1. Pharmaceuticals:

Cipla’s core business segment is pharmaceuticals, where it offers a diverse portfolio of prescription drugs, over-the-counter (OTC) medications, and active pharmaceutical ingredients (APIs). The pharmaceutical segment can be further divided into the following categories:

1. Branded Pharmaceuticals: Cipla markets a wide range of branded prescription drugs across various therapeutic areas, including respiratory, cardiovascular, anti-infective, central nervous system, and oncology. Notable products include Seroflo, Duolin, and Tiotropium.

2. Respiratory: Cipla has a strong presence in the respiratory segment with a focus on inhalation therapy. It offers a range of inhalers and respiratory medications for conditions such as asthma and chronic obstructive pulmonary disease (COPD).

3. Anti-Infectives: Cipla manufactures and markets antibiotics and anti-infective drugs, contributing to the treatment of infectious diseases globally.

4. HIV/AIDS: Cipla is renowned for its pioneering work in providing affordable antiretroviral drugs to combat HIV/AIDS, particularly in developing countries.

2. Global Access:

Cipla has a unique business vertical dedicated to global access, which focuses on providing affordable medicines to underserved and low-income populations in emerging markets. This segment plays a critical role in advancing Cipla’s mission to make healthcare accessible to all.

3. Consumer Healthcare:

Cipla’s consumer healthcare segment includes OTC medications and health supplements. The company offers products under brands like Cofsils, Nicotex, and ActivKids. This segment aims to cater to the growing demand for self-medication and wellness products.

4. Biotechnology:

Cipla’s foray into biotechnology includes research and development efforts in areas such as biosimilars and biologics. The company is actively involved in developing affordable biosimilar versions of complex biologic drugs, contributing to improved access to life-saving therapies.

5. New Ventures:

Cipla is committed to exploring new opportunities and expanding its product portfolio. This includes strategic collaborations, partnerships, and investments in innovative healthcare solutions, digital health, and other emerging segments.

Acquisitions:

In FY22, Cipla entered into definitive agreements for acquisition of 33% partnership interest in Clean Max Auriga Power LLP and 32.49% stake in AMP Energy Green Eleven Private Limited for setting up renewable power generation plants in Karnataka and Maharashtra, respectively.

Joint Venture:

The company entered into a joint venture agreement with ‘Kemwell Biopharma Private Limited’ for undertaking the business of developing, manufacturing, and other allied activities relating to biologic products.

Subsidiaries:

Two wholly-owned step down subsidiaries were voluntarily deregistered / dissolved as these were operationally inactive and not required, namely – Cipla Biotec South Africa (Pty) Limited with effect from 3rd February, 2022 and Inyanga Trading 386 (Pty) Limited with effect from 10th December, 2021. 

Scheme of Arrangement:

The Board at its meeting held on 25th January, 2022 approved the transfer of the India based US business undertaking to Cipla Pharma and Life Sciences Limited (CPLS) for a consideration of Rs. 1,400 crores and the Consumer Business Undertaking to Cipla Health Limited (CHL) for a consideration of Rs. 80 crores as a going concern on a slump sale basis through a Business Transfer Agreement. The Co. is currently in the process of completing the regulatory and legal process for transfer as on 31st March, 2022. 

R&D Capabilities:

The company has five state-of-the-art R&D facilities that are located at New York in the US and at Maharashtra and Karnataka in India. In Q1FY23, total R&D investments stood at Rs. 348 crores or 5.5% of total revenue. As on 31st June, 2023, Cipla has 161 approved ANDAs and NDAs, 31 tentatively approved ANDAs and 77 under approval ANDAs and NDAs for the US markets. In FY22, the company was granted 38 patents and had filed 13 patents. 

Financials:

What we like:  

1. Market Leadership:

Cipla is the 3rd largest pharmaceutical player in India and leader in therapies such as respiratory and urology. It also ranks 2nd in the overall chronic business. It continues to be the third largest player in the South African private market with 7.5% market share, growing ~4.3% greater than market. It is the 2nd largest Indian exporter in emerging markets.

2. Diversified Product Portfolio:

The company has a diversified product portfolio of 1,500+ products in 50+ dosage forms and 65 therapeutic categories. In FY22, it launched 93 products across the globe. It also has a lot of geographical diversification. This global footprint reduces dependence on any single market and enhances revenue stability.

3. Tremendous expansion plans to keep the company forefront:

Cipla intends to scale up offerings and expand access to medicines, inhaler devices, diagnostics, as it aspires to become the number one company in lung specialty and going ahead, expects the segment to contribute 25%-30% from medications, and another 10% from consumer offerings such as cold and cough brands. 

4. Strategic partnerships play a vital role in company’s growth:

The company entered into a licensing agreement with Merck Sharpe Dohme for themanufacture and distribution of Molnupiravir, the investigational oral antiviral drug for Phase 3 trial for the treatment of non-hospitalised patients with confirmed COVID-19. Additionally, it collaborated with Dr Reddy’s Laboratories Ltd., Emcure Pharmaceuticals Limited, Sun Pharmaceutical Industries Limited and Torrent Pharmaceuticals Limited for the clinical trial of Molnupiravir for the treatment of mild COVID-19 in an outpatient setting in India. Further, it signed a royalty-free, non-exclusive voluntary licensing agreement with Eli Lilly and Company, US, for the manufacture and commercialisation of the drug Baricitinib for the COVID-19 indication. It continues to support Terra Carta and this provides the company opportunities to drive the Environment, Social and Governance (‘ESG’) discourse across the pharmaceutical sector globally and at the regional level. 

5. Affordable Healthcare Access:

Cipla’s historical commitment to providing affordable medicines, especially in critical areas like HIV/AIDS, has not only had a positive social impact but also generated goodwill and brand recognition globally.

Factors to consider:

1. The pharmaceutical industry is highly regulated, with stringent compliance requirements. Delays in regulatory approvals, changes in regulations, or compliance issues can impact product development timelines and increase costs.
2. The pharmaceutical sector is intensely competitive, with numerous global and local players vying for market share. This competition can lead to pricing pressures and reduce margins.
3. While R&D is a strength, it also requires significant investments. There is always a risk associated with the success or failure of R&D projects, which can impact profitability.

Conclusion:

Cipla Limited is a prominent player in the global pharmaceutical industry, known for its commitment to affordable healthcare solutions and innovative research. With a diverse portfolio, strong global presence, and a focus on research and development, Cipla has positioned itself as a significant contributor to improving healthcare access worldwide. However, investors should consider the industry’s regulatory challenges and competitive landscape when evaluating Cipla as an investment opportunity. Conducting thorough research and staying informed about the company’s performance and developments is essential before making any investment decisions.