Cipla Q2 results | 9.6% growth in revenue and PAT rises to Rs. 711 Cr

India sales increased 15.6% YoY at Rs. 24.2bn on core therapies growth but decreased 10.8% QoQ on account of lower COVID-19 sales. Cipla believes the broader Indian pharmaceuticals market (IPM) can sustain 10-12% annual sales growth without any obstacles in the way. The Indian market sales grew on account of demand in core therapies portfolio (e.g. respiratory, urology, cardiac, etc.), it expects to continue outperformance for its Rx sales (~85% of sales) growth vs the market. Over the next 2 to 3 years, the company expects to increase CHC sales to 12% of total company sales from the current ~7% level.
 
US sales grew 0.7% YoY and QoQ at USD $142mn were steady with traction in key respiratory launches (gProventil and gBrovana) balancing the deterioration of base portfolio. It has garnered ~16% volume share in the US albuterol inhalers market and has room for higher volumes but its main focus remains on the consistency of supplies in a highly complex supply chain. US sales are expected to be in the USD $140-150mn range for the rest of FY22, supported by the scale-up in respiratory sales, improving reach in institutional channels and new launches. The company is dealing with formalities for gAdvair and is waiting for final FDA approval for gAbraxane and clearance for its Goa facility for manufacturing. 

The company reported 8% YoY increase (Rs. 9.9bn) from the SAGA segment. South African private market region alone accounted for 20% YoY revenue growth in constant currency terms. Even the emerging markets saw a strong recovery after slump in supply in the previous quarter.

On 25 August 2021, Cipla expanded its operations by entering into a joint venture (JV) agreement with Kemwell Biopharma Private Limited, a leading biopharmaceutical Contract Development and Manufacturing Organisation (CDMO), to develop, manufacture and commercialise biosimilars for global markets. 

Cipla spent Rs. 2.7bn for research and development in 2QFY22. The company expects R&D to be capped at ~7% of sales. The trajectory depends on the progress in clinical trials for its pipeline assets, and it earmarked capex of Rs. 8-9bn for FY22. The company’s focus remains on measured investments towards respiratory products, specialty portfolio, debt reduction and strategic inorganic growth opportunities. 

Cipla maintained a net cash position as of 2QFY22. Delays in the resolution of pending cGMP issues at its Goa plant can delay approval and launch of gAbraxane in the US, delays in key launches and poor execution in the US, Indian formulations growth slowdown and higher and longer R&D slowing down the pace of operating margin improvements could be the few of the things in the list of risks that may hinder Cipla’s future prospects.