 "An employee works at the reception area of Cipla at its headquarters in Mumbai")
Cipla, the pharmaceuticals major, is exiting non-core businesses to build a stronger pipeline in its key therapies on offer, of respiratory, oncology and anti-HIV drugs.
This comes at a time when it faces pricing pressure in both India and America. The move will mean more capital for key growth areas and reduce investment risk.
One step is the decision to scale down the biotechnology business. Last week, Cipla said it would not manufacture biosimilars. It also put on hold an earlier plan for a manufacturing unit in South Africa. The announcement was made after a Rs 62 crore loss in the March quarter.
It is, however, not exiting the biotech segment. It will look for in-licensing opportunities and partners for two biosimilar drugs which are under trial.
Umang Vohra, chief executive officer, said they now aimed to strengthen business in the core markets (India, the US and South Africa) and core therapies such as respiratory, oncology and anti-HIV drugs. “You will see us doing lot more in these therapies and these markets. We are going to be focusing deeper in priority areas,” he stated.
Adding: "We plan to disproportionately grow the US business and will have more than 20 Abbreviated New Drug Application filings in FY18. We will begin to see some launches from the 32 filings we had last year.”
Cipla will commence clinical trials and file for products in the respiratory space in the US in 12 months.
Only 18 per cent of Cipla's consolidated revenue comes from the US market. Sun Pharma, Dr Reddys Laboratories and Lupin earn 40-50 per cent of theirs’ from here.
“Pricing pressure is there in the US. I think bigger players feel it more. From our perspective, we see the US as an opportunity and not as a threat because of business size is relatively small,” said Vohra.
The India business contributes nearly 40 per cent to its revenue. Also now under pressure, as about 40 per cent of its portfolio is under government-imposed price control.
Cipla has entered a strategic partnership with drug maker Novartis and has in-licensed a cardiac and anti-asthma drug. “It has guided (said it expects) for a few limited competition launches in the US market in FY18/19. Sereflo (asthma inhaler), launched in the December quarter in the UK, is expected to ramp up in FY18. In our view, margin improvement will not be possible unless monetisation of Sereflo and niche launches in the US are successful,” said Deepak Malik of Edelweiss Institutional Securities in a post-results note.
More capital for key areas
- Cipla has been scaling down and exiting non-core businesses to build a leaner and more profitable firm
- Will not manufacture biosimilar drugs, which will result in improved capital allocation for key growth areas
- It sold animal health business in South Africa
- Sold 16.7% stake in Chase Pharma, a biopharmaceutical company
