Cipla to tweak its global strategy

To reduce dependence on India market; to double revenues from the US

Indian drug major Cipla is gearing to spruce its global focus. Under the leadership of Subhanu Saxena, the chief executive officer who took charge last year, Cipla is planning a makeover with a balanced portfolio across global markets.

At present, Indian and African markets contribute 80 per cent of Cipla's annual revenue. In comparison, competitor Sun Pharma earns 60 per cent of revenue from the US, the world’s largest drug market.

Except Cipla, none of the other top five companies depends too much on the Indian market for revenue.

India contributes about 45 per cent to Cipla's revenue, while contribution from Africa is 35 per cent and only 20 per cent from the rest of the world. Cipla earns 10 per cent of its revenues from the US, the $350-billion drug market.

One of the targets by Saxena is to double the revenue from the US market to 20 per cent by 2020. He plans to bring another 20 per cent from Europe, especially the UK and Germany. Apparently, revenue from India will come down to 30 per cent and Africa to 20-25 per cent. “The margins are pretty good in the US market and we have realised that we can't ignore world's largest pharma market,” said Saxena.

Cipla plans global expansion in three phases, which includes entering partnerships for the US and European market, and expanding the respiratory and injectable portfolio. Capacity expansion of Indore and Goa plants are also on the agenda.

“From 80 per cent revenue from India and Africa, Cipla will reduce it to below 50 per cent and better participation will be seen from market like the US and UK in our revenues by 2010,” said Saxena.

Cipla’s expansion into the US and Europe will be mainly supported by its plans over inhaler products such as Advair and Symbicort, two largest-selling drugs in the world. For the copycat of GlaxoSmithKline's asthma treatment, an Advair Abbreviated New Drug Application (ANDA) will be submitted to the US Food and Drug Administration this year, while generic Advair metered dose inhalers (MDI) were already launched in Germany, a $35-million market, and Sweden ($25-million market) last month. “Advair MDI is a $600-million opportunity in EU (European Union), with the UK alone accounting for 50 per cent. Although the launch is in line with expectations, the indication of the launch in the UK ($400-million market) by 4Q, FY15 is a positive surprise,” said a recent report from HDFC Securities. The patent of Advair, the world’s fourth-largest selling medicine with $8.25-billion annual sales, expired in 2010.

OPERATION GLOBAL

• Goal: Cipla aims to double the revenue from the US market to 20% by 2020, bring another 20% from Europe, especially the UK and Germany
• Phased expansion: Cipla plans global expansion in three phases — enter into partnerships with US and European markets, expand the respiratory and injectable portfolio and capacity expansion of Indore and Goa plants
• Revenue targets: The 80% revenue together from India and Africa, will be reduced to below 50%. This is to seek better participation from markets like the US and the UK
• Products to look forward: Cipla's expansion into the US and Europe will be mainly supported by its plans over inhaler products such as Advair and Symbicort, the two largest selling drugs in the world
• JVs and acquisitions: Cipla will consider options like joint ventures and acquisitions for expanding the front-end operations. Partners in the US and Europe will be provided with technology as well APIs in order to launch the novel formulations
• Rise in capex : The pharma firm will improve its capital expenditure to 7-9% of its annual sales from 6% at present
• India plans:Cipla wants to be the preferred partner for multinational companies who want to launch their innovative drugs in India

The global respiratory market is worth $35 billion, with the US and the EU accounting for 50 per cent share. The launch of Advair and proposed launch of Symbicort are expected to boost Cipla's revenue from the global markets. Cipla has filed for 10 inhaler products in the EU market, including copycat of AstraZeneca’s Symbicort, which had sales of $3.5 billion in 2013.

According to Saxena, Cipla will consider options such as joint ventures and acquisitions to expand the front-end operations. Partners in the US and Europe will be provided by technology as well as active pharmaceutical ingredient (APIs) in order to launch the novel formulations. As part of the expansion, Cipla will improve its capital expenditure to seven to nine per cent of its annual sales from the present figure of six per cent. Cipla recorded annual sales of Rs 9,753 crore in FY14.

Since 2013, Cipla has made eight acquisitions in various countries including pharmaceuticals manufacturing and distribution business in Yemen and Sri Lanka.

Last year, it had acquired joint venture partner of Cipla Medpro for $512 million. Other deals include stake buyout in Uganda-based Quality Chemical Industries and 100 per cent buyout of Croatia-based Celeris.

Cipla has started its expansion in full swing after Saxena came on board in 2013. With an experience of 25 years, he joined from Swiss major Novartis where he was heading global product strategy and commercialisation functions at Novartis Pharma.

However, Saxena ruled out any large buyouts by Cipla in foreign markets. "We have enough organic opportunity in hand and are not keen on expensive buyouts. We prefer buyouts, which will provide a better technology platform for drug discovery,” he said.

For Indian markets, Cipla is keen to enter in-licensing deals with global counterparts. “We wanted to be the preferred partner for MNCs (multi-national companies) that want to launch their innovative drugs in India,” said Saxena. Recently, Cipla had joined hands with Gilead to launch hepatitis drug in various markets.