Cipla cuts lower band of US quarterly sales guidance as launches delayed
This story was originally published at 18:41 IST on 29 October 2024
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--Cipla MD: New launches post regulatory resolution to boost US sales base
--Cipla MD: Regulatory issues at certain facilities delaying new launches
--Cipla MD: US market most responsive to new launches
--Cipla MD: Likely to see some improvement in acute therapy drugs Oct-Dec
--Cipla MD: See R&D spends at 5-6% of sales
--Cipla MD: EBITDA margin guidance remains 24.5-25.5% for FY25
--Cipla MD: EBITDA margin may be muted in Jan-Mar
--Cipla MD: Lanreotide supply issues to abate Dec-end, see no impact Jan-Mar
--Cipla MD: US quarterly sales run rate to normalise at $230 mln-$240 mln
--Cipla MD: To start Peptide launches over next 6 months
--Cipla MD: Oct-Mar to be better than Apr-Sept for India business
--Cipla MD: Expect some impact of Lanreotide supply issues in Oct-Dec too
--Cipla MD: Supply-linked issue in Lanreotide capped Jul-Sept US sales rise
--CONTEXT: Cipla MD, Global CEO Vohra's comments at virtual press conference
--Cipla MD: India business witnessed slower demand for antibiotics Jul-Sept
MUMBAI – Cipla Ltd. has cut the lower band of its guidance for US sales and now expects its quarterly sales run rate to normalise at $230 mln-$240 mln Jan-Mar onwards. After detailing Apr-Jun earnings in July, Cipla had raised its guidance for US sales to $235 mln-$240 mln in the coming quarters from $220 mln-$225 mln earlier.
The reason the company has reduced the lower band of its guidance for quarterly US sales run rate is the slowdown in sales growth in the region because of delays in new launches due to regulatory issues at some facilities, Managing Director and Global Chief Executive Officer Umang Vohra told reporters in a virtual press conference.
For Jul-Sept, the US sales of Cipla rose 5% on year to INR 19.86 billion. In dollar terms, the revenue was $237 mln, led by market share gains in niche products and traction in generic cancer drug Revlimid.
Vohra believes there is room for the US sales base to inch up once new launches happen, as the region is the most responsive to new products. Severe regulatory issues at the company's Goa and Pithampur units have delayed launches of key complex generic drugs such as Advair and Abraxane. The company has worked on resolving the regulatory problems and is now awaiting the next action by the regulator.
Launch of new peptide products over the next six months is also seen aiding US sales. Moreover, supply chain issues in Lanreotide, which hurt Jul-Sept growth, are likely to abate only by December-end. Hence, Cipla's earnings for Oct-Dec will be hit by supply issues in Lanreotide, but Vohra expects the situation to not impact the performance from Jan-Mar.
Despite reporting higher-than-guided operating margin for Jul-Sept, Cipla has retained its earnings before interest, taxes, depreciation and amortisation margin for the current financial year at 24.5-25.5%. This is to account for the seasonal weakness in the company's business during the March quarter and the delays in new launches in the US. Cipla's EBITDA margin for Jul-Sept expanded 70 basis points on year to 26.7%, marking the best-ever profitability of the drugmaker.
The company will keep research and development spending in the range of 5-6% of sales for now, Vohra said. The company remains open to new deals and acquisitions, but will not pay the highest valuation just to close a deal, Vohra added.
Cipla's India business, which accounts for 40% of sales, is expected to fare better in Oct-Mar, compared to Apr-Sept, according to Vohra. The business will get a lift from recovery in demand for antibiotics, which was muted in Jul-Sept, he said.
Overall, acute therapies are seen doing well in Oct-Mar, especially respiratory products, while the company expects its chronic portfolio to keep growing ahead of the industry average. "We've added almost 800 to 900 people in this year in our field force and we expect those additions to start resulting in some amount of sales," he said. The company expects some benefit of recent changes in the Ayushman Bharat scheme of the Indian government, as it will aid the consumption and dispensing of medicines.
Earlier on Tuesday, the drugmaker reported a 15% year-on-year rise in its consolidated net profit to INR 13.03 billion for the September quarter, its lowest growth in the last six quarters. The numbers were hit by slow growth in India and a lower-than-targeted growth in North America.
The Mumbai-based drug company's revenue for the quarter increased 5.6% on year to INR 70.51 billion, which was also its lowest growth in sales in the last six quarters. The company's shares closed 1.7% lower at INR 1,477.55 on the National Stock Exchange. End
US$1 = INR 84.07
Reported by Apoorva Choubey and Jahanvi Kothari
Edited by Ashish Shirke
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