Cipla profit rises 4.6% but misses estimates

Changes in distribution policy, higher spending on R&D impacted profitability

Drug maker Cipla's net profit rose 4.6% to Rs 343 crore in Q3 FY16 over same period last year on the back of 12% revenue growth.

The result was however below street expectations and the company missed estimate both on revenue and profit. Bloomberg had estimated Cipla's profit at Rs 402 crore and the result was 14% below estimate.

Changes in distribution policy, higher spending on research and development ahead of product launches and depreciation of South African Rand impacted profitability. The company's earning before interest tax and depreciation declined 18% to Rs 454 crore.

Revenue rose 12.3% to Rs 3,107 crore largely due to 28% growth in in exports. However the domestic sales fell 0.4% due to changes in drug distribution policy. The company said this was an one time impact.

Cipla management said it is scaling up presence in the US with new product filings and is close to conclude its $ 550 million dollar acquisition of US drug maker Invagen and Exelan.

"The deal closure is imminent and will be funded through debt. We are hoping to raise debt at attractive rates," said Cipla's chief operating officer Umang Vohra. He however refused to comment on US Food and Drug Administration's adverse observations on InvaGen's manufacturing unit in the US.

He added that Cipla had made 4 product filings in the US and is prepared to make 3 filings each quarter. This had resulted in increased expenses on research and development and which accounted for 8% of revenue compared to 6% in Q3 FY 15.

"We are seeing strong underlying growth in all key markets and we continue to invest in research and development, consumer healthcare and biologics," added company's chief executive officer Subhanu Saxena.