Drug maker Cipla is one among a few pharmaceutical companies that have delivered a robust all-round performance in Q1FY22. The performance was led by core therapeutic segments firing, healthy off-take of COVID-related products and operational cost efficiency.
In an interview to Moneycontrol, Cipla's Global Chief Financial Officer Kedar Upadhye expressed confidence that the company will outperform the domestic formulation market and clock EBITDA margins of 22.5–23 percent for FY22. Upadhye also said that the import of Moderna vaccine is expected to take some more time.
Edited excerpts.
Q: How much has COVID-19 portfolio helped in Q1FY22 earnings?
A: Even if you take COVID-19 out, we grew by 47 percent; there is a perception that it is only COVID contributed. COVID-19 products contributed roughly around high single digit at the company level; outside COVID, our core therapies such as acute, respiratory, cardiology, dermatology, trade generics and consumer health have grown well. It is a very diversified growth.
Q: Will you be able to maintain this growth in India?
A: In Q2FY22, there will be moderation. Remember, we have grown on a low base. This level of growth is unsustainable but with the normalised growth, our attempt would be to continue the momentum. Things are looking good. Activity is back in the market, our field force is now fully engaging with customers and channel partners, and all that work is going on. It will be good going forward.
Q: Will you be able to outperform IPM growth?
A: IPM growth is predicated upon how well the activity shapes up in the market. Whatever it is, wherever we are present, we have to outperform. Our launch momentum has been good. Three-four years back, the kind of products that we launched, cardio-metabolic therapies are excellent, we have fantastic products under Roche portfolio, we had a Boehringer Ingelheim relationship. Our execution remains robust. Our attempt is to outperform the market in chosen therapies.
Q: Any update on the import of the Moderna mRNA vaccine?
A: As of now we are not manufacturing or developing vaccines ourselves. Our exploratory conversations are on. Importing a vaccine is a complicated matter. So it is going to take some time. In my view, it is not near-term anymore. But I am not too sure why we have to depend on imported vaccines. The quantity of the imported vaccine is going to be quite marginal. The manufacturers of mRNA vaccines, whoever they are, Pfizer, Moderna, they need to have capacities, they need to have stocks to supply to us. By the time we sign all these agreements, we decide on the supply arrangement, the supply is going to take time.
What is the situation in the US market, is there intense competition?
As the base becomes big, some of the companies have annualised revenues of $1 billion, you have to grow 10 percent on that. But what happens is $1 billion goes down 5-10 percent with price erosion. So $1 billion will become $900 million. If you have to grow 10 percent, it will be $1.1 billion, so you have to add $200 million. So higher the base, higher the difficulty of growth. It is not that launches are not there, adequate high-value launches are not around.
Q: Do you think USFDA inspection delays are holding up new generic approvals?
A: Partly true, it is not that new launches necessarily wait for inspections, unless one of the plants is under the Official Action Indicated (OAI) status. Also as per the patent expiry calendar itself, this period may be dry. Every company is positive on FY23.
Q: How is the US looking up for Cipla?
A: We have a bigger portfolio. It is not only Albuterol, we have budesonide. Next year we have big approvals lined up, there is anti-cancer generic drug Revlimid, anti-cancer drug Paclitaxel (Abraxane), generic Advair (anti-asthma drug). Next year is big for us.
Q: What is the EBITDA margin guidance for the year?
A: There are two drivers - one is the quality of the revenues and this time I think there was some timing deferral of Middle East supplies because of currency issues. That should settle. Secondly, in India, the core therapies for us should grow faster and the cost control measures remain robust.