26 Jan , 2022 By : Kanchan Joshi
Cipla Ltd’s better-than-expected performance for the quarter ended December was driven by strong performance in India and the US markets. Expectations around the India business growth were muted due to a high base of last year driven by covid-19 drug sales.
The company's Ebitda margin contracted 130 basis points year-on-year (YoY) to 22.5% due to higher other expenses and spending on R&D which were partially offset by lower staff cost. The company said that other expenses in 3QFY22 can be considered to have normalized as Covid-19 situation eases. Higher tax expenses also took a toll on net profit which declined 2.6% YoY.
However, both Ebitda and net profit of Rs1243 crore and Rs729 crore, respectively, were ahead of analyst estimates. Analysts at Motilal Oswal Financial Services had estimated Ebitda and net profit of Rs1114.6 crore and Rs656 crore, respectively. Those at ICICI Securities Ltd expected Ebitda and net profit of 1145.6 crore and Rs640.3 crore, respectively.
Domestic sales that contributed 46% to overall revenues remained a key growth driver for Cipla’s performance. Strong growth in the Indian market should lend confidence to investors on the future prospects of the company.
Analysts at Motilal Oswal Financial Services expected domestic formulation sales to decline 4% YoY with lower demand for covid-19 drugs. However, the overall India business grew by 13% YoY led by sustained momentum across core therapies and traction in flagship brands despite modest contribution from covid-19 drug portfolio.
In another key geography, the US, Cipla continued its strong performance. US sales were up 9% YoY and 6% sequentially, contributing slightly more than fifth to the overall number.
The company’s respiratory portfolio continues to contribute to this traction, marking a growth of 36% YoY in dollar terms, according to the company. Albuterol and Arformoterol inhaler generics are regularly gaining market share, strengthening the company's US sales. The drugmaker said its share of Albuterol and Arformoterol stood at strong 15.9% and 26.8% of the overall market respectively.
US business for Cipla now sees a new base of $150 million quarterly run-rate, said the firm in a post-results conference call.
The company is in the process to share more data with the USFDA on Abraxane generics and is confident for the second half FY23 launch. This chemotherapy drug launch is awaited eagerly and remains a meaningful asset on a long term basis. Besides, the company is also in the process to launch its product Lanreotide for the US market, the approval for which it already had received in December. Another key launch awaited during FY23 is that of Advair inhaler generics.
With two key markets firing at all cylinders, the company managed to post a strong 6% revenue growth in Q3. However, some disappointments were seen in South Africa, Sub-Saharan and Cipla Global Access business that saw sales decline 2% YoY.