What Makes Cipla Confident About Growth In Next Two Years
India’s drugmakers’ performance in the U.S., the biggest market for most, is improving as pricing environment is becoming stable, according to the nation’s fourth-largest pharmaceuticals firm by value.
One of the key factors for earnings of Cipla Ltd. and its domestic peers is improving business in the American market, Kedar Upadhye, chief financial officer at the drugmaker, told BloombergQuint’s Niraj Shah in an interview. That’s going to aid growth in the quarters ahead, he said.
India’s generic drugmakers faced pricing pressure, impacting their margins. as competition rose in the U.S. in the last few years. That led to several drugmakers rationalising their business. Others in the generic categories are likely to ride the upcycle, marked by lower competition and better pricing.
For Cipla, revenue growth in the U.S. for in third quarter ended December was partly offset by the recall of a gastric ulcer drug. Upadhye, however, is confident about the potential of Albuterol, an oral inhalation for respiratory issues that the company launched in the U.S. Recall by Perrigo Pharmaceutical Co.’s competitive product in the category is also expected aid Cipla. Upadhye said Cipla has been gaining market share every month.
Profitability in the U.S. business is nearing company average, having been lower for the past few years. The next 12-24 months have “a launch momentum” that Upadhye said the company expects to aid growth.
Cipla is unlocking benefits from value opportunities it build in the last few years by launching high-margin, complex products, according to Upadhye. That could increase U.S. business’ contribution to the top line, he said, as “Ebitda breakeven has happened”.
He, however, cautioned that investors need to keep in mind that while new products would gain steam, the existing product portfolio is subject to erosion and may have a small impact, even though the fresh launches would balance it out.
Cipla’s revenue rose 18% over a year earlier in the third quarter, aided by its product mix and performance across geographies. The company also cut costs during the quarter and received a one-time gain from its settlement of patent litigation pertaining to cancer drug gRevlimid.
Cipla expects the Covid sales contribution in India to start declining since December as the number of active cases fall in the country. The core business should gain traction as hospitalisations increase and recovery in acute therapy business that remained subdued during the pandemic. The management is optimistic about the company growing faster than the market.
Watch the full interview here: