Cipla: All-round show, prospects up

Firm's 19% y-o-y growth is way ahead of peers, Dr Reddy's and Glenmark, which delivered 2.0-6.6%

Cipla reported strong numbers for the quarter ended December 2016 (Q3), marking rebound. In the demonetisation-impacted quarter, when Dr Reddy’s and Glenmark reported a muted domestic sales growth of 2-6.6 per cent, Cipla’s 19 per cent year on year growth is commendable. 

Even US business posted robust growth. Though the geography still contributes just nine per cent to overall revenues, Cipla saw a 127 per cent growth there. While year-ago quarter had seen one-off benefits from supplies of a heart-burn drug, Q3 is reaping acquisitions of Invagen and Exelan. In FY17 so far, Cipla has filed for 21 ANDAs (abbreviated new drug applications) in the US, including nine Para-IV filings, couple of them first-to-file where the company can expect an approval for generic launch on exclusivity basis. The company is on course for achieving full-year forecast of 20-25 ANDAs, which includes a good portion of limited-competition products. The filings for the quarter included its first metered dose inhaler Albuterol.

The respiratory segment is where expectations remain high from Cipla. End of the quarter has seen UK nod for launch of generics of Seretide inhaler. The company can reap up to $40 million in annual revenues from sales of the product. Europe contributes about five per cent to overall revenues. 

South Africa remains of importance to Cipla as it contributes 13 per cent to revenue. The South African growth of 18 per cent, coupled with strong India and US performance, helped Cipla clock 16 per cent year on year increase in revenues to Rs 3,647 crore in Q3. Though it was lower than Bloomberg estimate of Rs 3,756 crore, the rebound is encouraging.

Cipla had seen a regular dip in its earnings before interest, tax, depreciation and amortisation (Ebitda) in FY16, from Rs 1,045 crore in June 2015 quarter to Rs 445 crore in March 2016 quarter. Lumpy margins had been a major concern. However, FY17 has seen Cipla post quarterly Ebitda in excess of Rs 600 crore.