Storied Indian Drugmaker Eyes Acquisitions After Covid Windfall
With an arsenal of Covid treatments, Cipla’s cash and cash equivalents swelled 33% to $660 million from March to June.
(Bloomberg) -- Cipla Ltd., one of India’s largest drugmakers, has built up a war chest and is on the prowl for deals that can boost growth beyond the Covid-19 windfall it garnered this year.
With its extensive arsenal of Covid treatments, the Mumbai-based firm’s cash and cash equivalents swelled 33% to 49 billion rupees ($660 million) from March to June as a delta-fueled tsunami ripped across India. Cipla is on the lookout for targets in India and the U.S., its two largest markets, and may partner with smaller firms working on mRNA platforms after the technology came to the fore during the pandemic.
“We are completely open to M&A,” Samina Hamied, the company’s 45-year-old vice chairperson, said in an interview. “There’s lots of opportunity in India to build brands. We would over-index in therapies that are a complement to our business -- in the U.S., we would also look at certain therapy areas, certain complex generic pieces. We would definitely look at expanding our portfolio.”
Founded in 1935 by Hamied’s grandfather in then-colonial Bombay, Cipla made its name globally by pioneering the sale of cheap, generic HIV drugs across Africa at the turn of the millennium. Since then the Hamied family has sought to build Cipla into a major global pharmaceutical player, with a current focus on expanding in North America. It currently makes up about a fifth of the firm’s sales.
Funding Frenzy
Yet with a funding frenzy currently underway in India, Cipla may struggle to find attractive targets. Closing 0.3% up on Friday, the 20% rise of the company’s share price this year is indicative of the wider gains across Indian stocks.
“Getting something cheap at this point of time is difficult,” said Vishal Manchanda, a pharma analyst at Mumbai brokerage Nirmal Bang. “They’ll not go aggressive in terms of overpaying for deals.”
Cipla needs to ensure its growth after the intense demand for Covid medicines started to wane following the brutal wave in the South Asian nation earlier this year, Hamied said. Official case rates have fallen below 30,000-a-day, a steep decline since May’s peak of more than 400,000.
Hamied said she hoped the worst is over as the country’s vaccination drive ramps up and antibody surveys show the majority of Indians have a natural wall of immunity. Yet she warned the second wave came “from nowhere” and said the company has stocked up on treatments following widespread shortages earlier this year.
The unprecedented demand caused prices for some Covid treatments to rocket on the black market. Many Indian families fell into crippling debt after scraping together enough money to buy medicine for their loved ones. Hamied defended the drugs, including Gilead Sciences Inc.’s remdesivir, which it has a license to manufacture and market in 127 countries including India and South Africa.
While the medicine remains on India’s Covid treatment guidelines, the World Health Organization last year recommended against its use. A controlled trial involving 562 patients showed early treatment kept high-risk Covid patients out of hospital, Gilead said last month.
Post Pandemic
“We’d never push a drug that a patient doesn’t need,” Hamied said.
Still, she acknowledged that there wasn’t a wealth of information available. Anecdotal evidence suggests it does offer life-saving benefits when used early enough, she said.
Beyond the pandemic, Cipla is focused on expanding in the U.S. with generic versions of complex medicines, including GlaxoSmithKline Plc’s asthma drug Advair and the cancer treatment Abraxane from Bristol-Myers Squibb Co. It will have to overcome regulatory hurdles as the company awaits pandemic-delayed inspections of its factories.
While the U.S. regulators haven’t indicated when those may take place, “in the last couple of weeks a couple of our competitors have gotten investigated,” Hamied said. “We are hoping that we can be next and we’re in audit readiness.”
Cipla is also working to augment its pipeline in Brazil and in China, where it’s building a factory to produce respiratory products. That plant may open in about 18 months, once regulatory approval is granted, Hamied said.
Brazil and China, she said, will be “big markets for the future.”
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