BackStrong US sales growth, sustained domestic momentum helps Cipla Q1 net profit beat estimates
US sales grew 52% year-on-year, and India sales, contributing more than two fifth to revenues, also grew 11.6% year-on-year despite weakness in acute segment sales
PremiumCipla's performance in the April-June quarter came better than expectations largely due to strong US sales performance. The net profit of ₹996 crore that grew 45.1% year-on-year (YoY) beat Bloomberg consensus analysts' estimates of ₹860.4 crore.
The company's income from operations at ₹6,329 crore was up 17.7% YoY. The reported Ebitda at ₹1,494 crore also grew 30.7% YoY.
The North American sales in constant currency terms at $222 million were up 43% YoY and came better than the $204 million of the previous quarter. Analysts had been expecting some weakness in the US business sequentially on the back of higher competition in a key respiratory product. However, support is likely to have been provided by other product contributions. In rupee terms, at ₹1,822 crore contributing 29% to overall revenues, the North America revenues were up 52% YoY.
The company said that its pipeline and execution have been a substantial driver to this growth. Key asset of Lanreotide has improved its market share to 18%. Focus continues on limited competition launches. The analysts feel that contributions from multiple myeloma treatment drug Revlimid generics also contributed to the US sales growth.
Umang Vohra, MD and global CEO of Cipla, in the press briefing post the results announcement, said that there has been some decline in market share in the respiratory inhaler Albuterol generics during the last four months. But on YoY basis, the market share may be at similar levels and is likely to remain stable. The base business in the US has been growing well despite continued pricing pressure, said Vohra.
Meanwhile, the company’s performance in the domestic market also remained strong despite the season not remaining supportive for acute segment of products. The other therapies such as respiratory and cardiology did much better. The India sales contributing almost 44% to overall revenues at ₹2,772 crore also grew 11.6% year on year.
The South African market that has remained a weak link in the recent past also rebounded well. South Africa Private Market business grew at 13% YoY in local currency terms backed by double digit growth in both prescription and OTC business, said the company.
Moving forward, the India business is likely to see momentum continue with the September quarter being seasonally good for acute range of products. The new product launches (30-35 in a year) are also likely to be supportive for revenue growth.
In the US, the launch of another respiratory inhaler Advair generics however hinges on clearance of the Indore facility by the US drug regulator (USFDA). If the facility gets clearance, the launch may happen soon. However, in case the facility does not get cleared, the launch of the product from another site may take time. The site transfer needs to be cleared by the USFDA and the completion of procedures may mean product launch getting delayed by a year.
However, the launch of other products and base business growth is likely to remain supportive for US sales growth. Vohra expects US sales to maintain a quarterly run rate of $210-215 million.
The company also plans to launch four to five peptides with a couple of products expected to be filed in the next 18 months.
Prathamesh Masdekar, Research Analyst at StoxBox, said that “We expect Cipla to work towards establishing a strong foundation for growth in upcoming quarters led by the continuing the leadership in chronic therapies in branded prescription business in India. Its expanding differentiated pipeline in the US business and strong demand continues within South African private business, with an aim to be the biggest prescription business in South Africa. Also management’s continued focus on cost optimization measures".
The stock price of Cipla ended 2.30% higher on the NSE on Wednesday.
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