Company Overview

Established in 1935, Cipla (NSE:CIPLA) is a global pharmaceutical company focused on responsible and sustainable growth through deep & wide portfolio and strong customer relationships across its home markets of India, South Africa, US and other key regulated and emerging markets.

The company's strengths in the respiratory, anti-retroviral, urology, cardiology and CNS segments are well-known. The company's 46 manufacturing facilities around the world produce 50+ dosage forms and 1,500+ products using cutting-edge technology platforms to cater to its 80+ markets. Cipla is ranked 3rd largest in pharma in India (IQVIA MAT Mar’19) and 3rd largest in the pharma private market in South Africa (IQVIA MAT Mar’19). For over eight decades, making a difference to patients has inspired every aspect of Cipla’s work. The company's paradigm-changing offer of a triple anti-retroviral therapy in HIV/AIDS at less than a dollar a day in Africa in 2001 is widely acknowledged as having contributed to bringing inclusiveness, accessibility and affordability to the centre of the movement. A responsible corporate citizen, Cipla’s humanitarian approach to healthcare in pursuit of its purpose of ‘Caring for Life’ and deep-rooted community links wherever it is present make it a partner of choice to global health bodies, peers and all stakeholders

Geographical Presence

India

Cipla is the 3rd largest pharmaceutical company in India, with product portfolio spanning across various therapeutic areas including Respiratory, Anti-infectives, Cardio-metabolic, Gastro and Urology.The company's strong brand equity, product range and unique dosage forms help it stand out in the fiercely competitive Indian pharmaceutical industry environment. Moreover, Cipla is the market leader in Respiratory and Urology and have 22 brands feature among the top 300 brands of IPM. In FY 18-19, Cipla’s overall domestic business contributed to 39% of the global revenues.¹

USA

Cipla USA Inc., the US subsidiary of Cipla Limited, is the first Indian company to be approved by US FDA in 1985. Headquartered in Miami, FL, Cipla USA Inc.has supported the development of more than 170 ANDAs till date. Over last 5 years, Cipla has significantly expanded its portfolio and presence in the world’s largest pharmaceutical market of US. Building further on the commercial front end acquired through InvaGen Pharmaceuticals Inc. and Exelan Pharmaceuticals Inc, Cipla has remained amongst the top 12 most dispensed companies in the US during FY 18-19. The North America business today represents 21% of its overall revenues.

Europe

Cipla is present in almost all countries in the European region with 4 DTMs in Germany, Norway, Spain and the UK. The change in the business model for the European countries, moving from DTM model to a partnership- led B2B model, has improved profitability significantly. From a Therapy standpoint, while respiratory continues to remain a focus area, Oncology and complex injectable will be a part of the differentiated product portfolio strategy in the region.²

Emerging Markets

merging Markets region for Cipla comprises of all markets outside of India, North America, South Africa/ Sub-Saharan Africa and Europe but includes North Africa and Australia. Cipla has presence in 52 countries in this region including direct to market models in 13 countries. Cipla has continued to be present in traditionally considered risky geographies to ensure medicines access to patients. Over years, respiratory has been a key business growth driver for Emerging Markets. Cipla continues to be a Respiratory leader in Sri Lanka, Nepal, & Morocco. The Company continues to focus on deepening its presence in Australia through respiratory portfolio and in markets such as China, Brazil & Indonesia through in-house pipeline products and JV partnerships.

South Africa, Sub-Saharan Africa and Cipla Global Access (SAGA)

Cipla Medpro, a 100% subsidiary of Cipla Limited, has a strong presence across various therapeutic categories in South Africa. Cipla is one of the largest pharmaceutical companies in South Africa by volume and third largest by value. Cipla is recognised widely in Africa for the pioneering role it played in ensuring access to HIV/Aids medication with its innovative tripe-combination anti-retroviral (ARV) in 2001. This was available to patients at less than $1 a day – a significant cost saving – thereby allowing access to millions of people living with HIV/Aids and saving millions of lives in Africa alone.

The company's manufacturing facility at Durban provides a competitive edge and is the first Pharmaceutical Inspection Convention (PIC) compliant facility in the South Africa. The company also have a world-class distribution centre in Cape Town and satellite offices situated throughout the country to house commercial and regulatory functions.

Australia

Based in Melbourne, Cipla Australia has a vast pipeline of products that are supplied in Australia as well as US & EU. Millions of Australians have access to a Cipla manufactured product through its community pharmacy partners around Australia. The company's state-of-the-art manufacturing facilities are TGA approved as well as being USFDA (USA) and MHRA (UK) approved. Cipla Australia has over 200 registered; formulations; with TGA through partnerships with market leaders and on its own.³

Product and services

The company's diverse portfolio of drugs spread across therapies is the result of its uncompromising commitment to research, quality and manufacturing.⁴

Generics and Branded Generics

The company's Generics business in India has contributed 19% of the domestic pharmaceutical revenues with 4,000+ partners covering the entire country. The business operates within an extremely competitive environment in a highly fragmented market with 5,000+ pharmaceutical players. Despite competitive pressures and on-going regulatory challenges, the business delivered strong growth in the year under review and continued its leadership position in the market. The company's focus lies in strengthening its position in Tier 3 and Tier 4 towns along with expanding the product portfolio to cater to the needs of its patients. The Generics business continues to operate in a challenging regulatory environment with uncertain policies governing trade margins, branded generics, DPCO and product approvals.

Specialty

Over last 2 years, Cipla has been focusing towards establishing its Engine 2.0 of growth based on the foundation of Innovation and Specialty medicine. The Company has committed significant capital towards acquiring and in-licensing assets which address unmet clinical needs of patients.

The focus has been to establish a franchise of specialty medicines in the areas of Respiratory, CNS and Critical Care with a focus to build Institutional Specialty business. The operations of a Specialty focused company differ significantly from the operations of a generic company and hence to establish a robust business model, Cipla Technologies LLC (CipTec) has been established with its headquarters in San Diego, California. This also gives the Company ability to participate and operate in the biotech and life sciences innovation hub in the US.

Consumer Health

Over last 2 years, Cipla has been focusing towards establishing its Engine 2.0 of growth based on the foundation of Innovation and Specialty medicine. The Company has committed significant capital towards acquiring and in-licensing assets which address unmet clinical needs of patients.

The focus has been to establish a franchise of specialty medicines in the areas of Respiratory, CNS and Critical Care with a focus to build Institutional Specialty business. The operations of a Specialty focused company differ significantly from the operations of a generic company and hence to establish a robust business model, Cipla Technologies LLC (CipTec) has been established with its headquarters in San Diego, California. This also gives the Company ability to participate and operate in the biotech and life sciences innovation hub in the US.

Consumer Health

With a vision of becoming the most preferred consumer healthcare company in India, Cipla Health Limited (CHL) (a Cipla subsidiary) has focused on driving innovation and simplifying healthcare by creating solutions which address unmet consumer needs and seamlessly mesh in their lifestyle. Nicotex, its flagship smoking cessation brand, is the undisputed market leader in its category and has supported thousands of smokers on their journey of quitting smoking. ActivKids ImmunoBoosters, a kids’ nutritional supplement in chocolate format, became the first Cipla product to be available in modern trade (such as Big Bazaar, D Mart, Reliance, Spencers, Tesco), e-commerce (such as Amazon, Flipkart, Big Basket) high end grocers, B2B channels (Walmart C&C, Metro C&C, Reliance B2B). It also partnered with Kidzania, a kids’ edutainment property active in Mumbai and Delhi with a permanent establishment to generate aided trials. Brand participated in School contact programs to garner reach and sampling to 7 lakh kids. Cofsils cough drops, launched as a part of brand extension strategy across all trade channels (chemist, grocer and pan plus) at H1 price point, enabled Cipla Health to enter the Herbal throat lozenge category. Within 15 months of launch, CHL’s probiotic brand UnoBiotics became the #1 player in LRGG (Lactobacillus Rhamnosus GG) market. With this increased product portfolio, CHL is poised to achieve its mission of “Improving Consumers’ Lives, Everyday”.

Therapies

Forty years ago, Cipla started its fight against heart disease with innovative and high-class drugs. Over the years, Cipla has been developing several products that help treat various diseases like MI, angina, heart failure, hypertension, arrhythmia, lipid abnormalities and diabetes, and obesity.⁵

API

The company's mission of providing affordable medicines across many therapeutic areas globally is duly supported by the relentless efforts of its team of over 300 dedicated and talented scientists.

To maintain the gold standard in its innovations, the company house state-of-the-art research facilities for its API process development at three locations in India, with dedicated teams working on synthetic, organic chemistry, process engineering and analytical development at multiple locations.⁶

The company's API pipeline consists of 75+ complex developments in the therapy areas of Oncology, Hep C, ARV, Diabetology, CVS, CNS, Respiratory etc.

Manufacturing

The company continuously work towards enhancing the affordability of medicines worldwide by investing in its manufacturing capital through facilities that are cGMP compliant and approved globally.⁷

Cipla has leveraged and invested in its manufacturing capital through facilities that are cGMP compliant and approved globally. This has facilitated the company to attain a global leadership position in the pharmaceutical sector.

Cipla has over 1500 products in 65 therapeutic categories available in over 50 dosage forms. These capabilities range from the development of a simple molecule to highly complex multi-chiral centres molecule with a distinction of affordability and highest quality. The company's capacities include its own facilities and in licensed facilities which support both generic and the biotech business. The company's investments in manufacturing capital include development of new drug delivery systems, facilitation of infrastructure supporting API and formulation developments and strengthening of platform technologies.

Cipla has scaled up several key APIs through yield improvement, cycle time reduction and cost improvement projects. The continued focus on process and operational improvements has resulted in reducing solvent losses to less than 15% thereby reducing environmental impact. Similarly, batch size increase of about 45 products in formulations was carried out during the year resulting in improvement in productivity. Cipla is now on a path to digitise the manufacturing operations by integrating all process-related machines to server to capture real-time process parameters for better operations control, improvement in productivity, and enhanced compliance status.

Cipla’s state-of-the-art manufacturing facilities are cGMP compliant in conformity with national and international standards. Several dosage forms and APIs manufactured at these facilities continue to be approved by major international regulatory agencies including the US FDA, MHRA (UK), TGA (Australia), Federal Ministry of Health-Germany, MCC (South Africa), the Department of Health (Canada), INVIMA (Columbia) ANVISA (Brazil), the Danish Medical Agency, WHO and Ministry of Health of various countries.

API

The company's API legacy spans over five decades of having serviced the world’s largest pharmaceutical companies.

With its 50+ years’ experience in manufacturing APIs, Cipla has produced 200+ generics and complex APIs. The company's API Business covers 60 countries across the globe. The Company continues to be a preferred partner to some of the largest generic formulators globally due to its focus on niche molecules and quality. A strong dedicated team of over 250+ scientist aids the Company to differentiate itself with the capability to handle wide range of chemistries and complex molecules. Cipla has a strong partnership with the world’s largest generic pharmaceutical companies.

The Company plans to enhance its API R&D and manufacturing capacities in therapeutic areas such as Respiratory and Oncology and conduct backward integration for manufacturing of Key Starting Material and critical API intermediates to have more control on the supply chain. Cipla is keen to partner with leading generic companies for their new products to further expand in markets such as Japan, China and the Commonwealth of Independent States (CIS) countries. Cipla has four sites with dedicated facilities for high potent APIs, corticosteroids, polypeptides, hormones, steroids and oncology with a total capacity of over 1,000 MT across.

Formulation development

Cipla is consistently developing a formulation portfolio and pipeline across its formulation facilities:

• Formulation development is focused on Respiratory, Oncology, ARVs, Ophthalmology, CNS, CVS among others
• Over 60% of the products are developed for international markets
• The pipeline has over 250 products, including complex formulations

Global pharmaceutical industry

As per a recent IQVIA1 report, the global medicine spending is expected to reach nearly USD 1.5 trillion by 20231 , representing 3-6% CAGR over the next five years. The increase in spending will be driven by net price increases on patented products, focus on new specialty drugs and expansion of access to healthcare services through government reforms on insurance in various emerging markets including India. On the other hand, the loss of exclusivity and launch of generic versions will continue to drive significant savings for patients globally. For decades now, Cipla has been spearheading this by launching multiple generic products in global markets.⁸

Diabetology, Oncology, Cardiology and Autoimmune will continue to be key therapeutic areas driving the increased spending. These therapeutic areas along with Respiratory and Anti HIV drugs are a key component of the Company’s growth.

The share of Specialty medicines will continue to increase and is projected to reach 50% of the total spending by 2023. In its journey up the value chain, the Company has also started investing towards building a portfolio of specialty products which are targeted towards serving unmet clinical needs and is a critical component of the growth strategy.

Evolving regulatory framework

Pharmaceutical companies operate under a rapidly evolving regulatory framework. Governments across the globe have taken multiple initiatives through regulatory interventions to enhance patient access to affordable and newer life-saving medications. In this environment, pharmaceutical companies are constantly investing towards re-imaging the ecosystem – be it moving up the value chain to Specialty drugs, driving technology implementation in areas of drug development, efficiencies in supply chain and driving product demand in the market. Increasingly, Pharmaceutical companies are investing a larger share of their R&D investments towards complex and niche product portfolios which provide sustainable cashflows. Along with expanding their differentiated portfolio offering to patients, companies are also consolidating and deepening their presence in their focused markets where they believe they can drive long-term and sustainable growth.

Financial highlights

On February 05, 2020: Cipla Limited announced its unaudited consolidated financial results for quarter ended December 31, 2019.⁹

Growth and Profitability: Growth across key business drives overall revenue growth of 9% on a year on year basis with adjusted EBITDA at 18.5% and reported EBITDA at 17.3%

India: Strong growth across both prescription and trade generic businesses with overall business growing 13% year on year; prescription business grew 14% year on year while the trade generics business recorded growth of 7% over previous year

South Africa private business continued the strong growth momentum to deliver growth of 20% on a year on year basis in local currency; continues to outpace themarket significantly

US business delivers $133mn to grow at 13% on a year on year basis

R&D investments stand at INR 308 crores or ~7% of sales

Cipla Consolidated December 2020 Net Sales at Rs 5,168.69 crore, up 18.25% Y-o-Y ¹⁰

February 02, 2021; Reported Consolidated quarterly numbers for Cipla are:

• Net Sales at Rs 5,168.69 crore in December 2020 up 18.25% from Rs. 4,371.00 crore in December 2019.
• Quarterly Net Profit at Rs. 748.15 crore in December 2020 up 113.13% from Rs. 351.03 crore in December 2019.
• EBITDA stands at Rs. 1,317.82 crore in December 2020 up 58.69% from Rs. 830.46 crore in December 2019.
• Cipla EPS has increased to Rs. 9.28 in December 2020 from Rs. 4.35 in December 2019.

References

1. ^ https://www.cipla.com/our-presence
2. ^ https://www.cipla.com/our-presence/europe
3. ^ https://www.cipla.com/our-presence/australia
4. ^ https://www.cipla.com/our-offerings
5. ^ https://www.cipla.com/our-offerings/our-therapies
6. ^ https://www.cipla.com/our-offerings/api
7. ^ https://www.cipla.com/about-us/manufacturing
8. ^ https://www.bseindia.com/bseplus/AnnualReport/500087/5000870319.pdf
9. ^ https://www.cipla.com/sites/default/files/Q3FY20%20Press%20Release_0.pdf
10. ^ https://www.moneycontrol.com/news/business/earnings/cipla-consolidated-december-2020-net-sales-at-rs-5168-69-crore-up-18-25-y-o-y-6432471.html