Cipla’s American Dream
After a late entry into the United States, pharmaceutical company Cipla Ltd. now expects that market to contribute about a quarter of its total revenue in the next 3-5 years.
Cipla has a reasonably good product pipeline which will unlock value for the company, Global Chief Executive Officer and Managing Director Umang Vohra told BloombergQuint in an interview. The company has mainly focused on India and Africa so far. The U.S. is still a nascent market and contributes 15 percent to its annual sales.
But the “real trajectory” for Cipla starts now, Vohra said. The impact of the three big, recent launches – generic versions of Renvela, Dacogen and Pulmicort – will be seen mainly in the fourth quarter and the the company will fare better in the second half as compared to the first, he added.
The market for Renvela is crowded but Dacogen and Pulmicort are fairly large opportunities for the company. Pulmicort can be a $20-25 million opportunity while Dacogen can be slightly lower than $20-25 million. The opportunity of $40-50 million from these two drugs on a U.S. base of $400 million is large.Umang Vohra, Global CEO & MD, Cipla
Vohra believes that with increased competition and pricing issues, a margin of 22-24 percent could be the new normal for the pharmaceutical industry as compared to 25-28 percent earlier. Cipla’s margin currently stands at 19 percent and Vohra expects that number to expand to 20-22 percent in the near term. Achieving the new normal will take another 2-3 years, he said.
Despite weak financial performance in the past few years, management is confident of the growth path. Vohra said a 10 percent revenue growth “is acceptable” and will look at cutting costs to expand operating margins in subsequent quarters.
Here are other key takeaways from the interview.
On Domestic Markets
- Expects 13-15 percent growth in the domestic market.
On Drug Launches
- Still guiding for one drug launch per quarter.
On Regulatory Issues
- No pending regulatory issues at any of its plants
- Received Establishment Inspection Report for all plants inspected by the USFDA
- The U.S. drug regulator’s audit for Indore was a product specific one
On U.K. Markets
- Seretide did not pan out in U.K. as the company had expected.
- Will get share if pushed by competition as they are currently not being reasonable with pricing.
- Will look at acquiring speciality businesses in India, U.S. or South Africa.
- Will consider acquisitions in derma or CNS space in India.
- Don’t think Cipla is up for sale.