US Cipla’s biggest opportunity despite hurdles, says MD Umang Vohra
Mumbai: Despite a challenging environment, the US remains the biggest opportunity for Cipla Ltd with the company looking to file at least 20 generic drug applications annually, said managing director and global chief executive officer Umang Vohra.
While rivals such as Sun Pharmaceutical Industries Ltd, Dr. Reddy’s Laboratories Ltd and Lupin Ltd are facing significant pricing pressure in the US, Cipla is optimistic about strong growth in the market owing to a low base and pipeline of niche, complex and limited-competition products.
“The US is actually our biggest opportunity because we don’t have a business that is at risk of erosion in the same manner as it is for the rest of the industry. We are relatively new in the US. For us, every million dollar is an opportunity, so we look at it very differently,” Vohra said during the company’s post-earnings press conference on Tuesday.
Cipla’s primary markets are India and Africa. It has been a late entrant in the US compared to other big Indian firms, but got a major boost when it acquired two US-based companies, InvaGen Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc in 2015.
“At this stage, we feel that 20-25 products filing is optimum. More importantly, (the) products we are selecting should have some uniqueness. It just cannot be a product which other 10 or 12 or 15 players will do because then the price erosion will kill us. We have been thoughtful about the product choices,” said Vohra.
About 35% of the company’s filings in the US will be products which are complex in nature, Vohra added. Such complex products usually have limited competition and higher value.
In financial year 2016-17, Cipla’s North America business clocked revenues of $392 million, up 21% from a year ago. That’s just 18% of overall revenues compared to peers such as Sun Pharma, Lupin and Dr. Reddy’s whose US sales account for nearly half of their overall business.
Vohra said certain complex products may start contributing to the company’s earnings by end of fiscal year 2018-19. “A good launch trajectory in the near term with a favourable mix of limited competition opportunities should aid Cipla’s Ebitda (earnings before interest, taxes, depreciation and amortization) margin. Cipla’s earning visibility and limited exposure to US is a positive relative to peers, but we believe the current valuation is pricing in the upside from execution of its own US pipeline,” brokerage J.P. Morgan said in a report on Tuesday.
Nomura Financial Advisory and Securities (India) Pvt Ltd said in a note on Wednesday that Cipla currently has 98 abbreviated new drug applications (ANDAs). About 27 have got tentative approvals from the US Food and Drug Administration (FDA). It added that Cipla is the first-to-file on more than 12 filings with a market size of $20 billion.
Cipla is also working on developing three specialty products for the US market and is open to acquisitions of such assets, Vohra said.
On Wednesday, shares of Cipla rose 2.1% to Rs620.95 on BSE, while the benchmark Sensex shed 0.5% to end the day at 33,218.81 points.
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