A big opportunity is beginning to unlock for us in the US: Cipla

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A big opportunity is beginning to unlock for us in the US: Cipla

Edited excerpts of an interview with Mr. Umang Vohra, Managing Director (MD) & Global Chief Executive Officer (CEO), Cipla:

Our ambition is to dominate the inhaler space across all markets and offer solutions to patients, says Umang Vohra, MD & Global CEO, Cipla.

• His comments on Profit Margins: Company has guided at the beginning of the year and that is standing up at close to 19% range. The fourth quarter is usually off-season for the company and therefore historically, have always been subdued. There are some of the specific one-offs:
o Company was not able to invoice about Rs 2000 odd mn of sales on account of the last week of Covid closure and that is pretty high margin sales. The impact would have been directly on profitability.
o In comparison to the base in the previous year where there was a huge amount of cinacalcet sales, that is not the right comparison for 4QFY20 and for 1QFY21E too.
o Cinacalcet itself had some charges in 4QFY20 as exclusivity has ended.
o In the last six to nine months, a fair amount of cost and effort on the remediation was required for Goa which is now completely in numbers. The remediation effort and work for Goa that is required will finish approximately by June/July, 2020. The charges have largely been taken in 3QFY20.

• His views on sale pick up in the year to come – A pretty solid year is expected on account of Sensipar, Albuterol approval and also esomeprazole granules approval received in the last week of 4QFY20.
• When asked about the US market he informed that US is a 55 mn unit market and with the recent shortage of Albuterol in the US, it moved to a 50-65 mn unit market. On the branded side, it is close to 4 bn in sales across the three brands of Albuterol. It is a very significant and sizable market for Cipla to play in.
• When asked about the main growth drivers going ahead he commented that respiratory franchise might be boosted by another complex inhaler filing. The inhaler opportunity can add to position Cipla as the lung leader. Already, Cipla is number two in terms of both Metered-dose inhaler (MDI) and Dry-powder inhaler (DPI) sold worldwide, just with the number of devices that Cipla sells worldwide in both these categories. Company’s ambition is to dominate this space across all markets and offer solutions to patients which they are not getting today.
• Cipla had albuterol approved that is a great validation for MDI. The trial just finished and a filing is imminent in the next one or two days for the Advair product which is a product that many companies have struggled to get a first part clinical trial approval and Cipla have just passed that.
• Cipla also filed another product which cannot be disclose right now due to IP. It has also filed another product which is again another inhaler in 4QFY20 and have a partnered asset which is another very large category where nobody else is working. That product is at the clinical trials stage with their partner.
• If we combine the above four and the rest of the products that Cipla is likely to do, a big opportunity is beginning to unlock for Cipla in the US and carries a fairly significant value for the company in the long term.
• His views on COVID-19, India and other emerging market business and the process for other prescription drugs: In the first two, three weeks of the lockdown, there was a serious dip because everyone was dealing with the lockdown initially. In week three and four, activity was resumed by doctors, who started interacting virtually with their patients. In the last week, the green and orange zones are opening up and activity is resuming in these areas. Of course, there are sections where the doctors are not meeting as much. For example, dentists and dermatologists because of the risk of this infection being real, are perhaps not meeting as much as interventionists, chest physicians etc. So, it is gradually opening up. As the red zones begin to open up, resumption in activity can be seen depending on the zone.

Consensus Estimate: (Source: market screener website)

• The closing price of Cipla Ltd. was ₹ 594/- as of 19-May-20. It traded at 25.4x/ 21.2x the consensus EPS estimate of ₹ 23.7/28.4 for FY21E/ FY22E respectively.
• The consensus target price of ₹ 623/- implies a PE multiple of 22x on FY22E EPS of ₹ 28.4/-.

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