After Q1 results, Cipla warns of margin pressure over cost increases

Cipla is focusing on limited competition launches in the US and marketing tie-ups for biosimilars for revenue growth but has cautioned that an increase in raw material prices could impact its profit margin in coming quarters.

The drug maker posted 10 per cent growth in net profit to Rs 4.51 billion in first quarter of FY 2019 on a year-on-year basis. Consolidated revenue rose 12 per cent to Rs 39.39 billion due to growth in India and South Africa markets. US business remained flat on year-on-year basis and declined 5 per cent sequentially as the company discontinued certain low margin products.

“We will continue to launch one limited competition product in the US every quarter. In fact, 30 per cent of our US revenue in the first quarter came from products launched in last twelve months. Scaling up the generic business remains our priority,” said Kedar Upadhye, Cipla's global chief financial officer. US sales in Q1 stood at around $100 million.

Upadhye said biosimilars (which are copies of drugs made from living cells) will be another area of opportunity and the company has signed partnerships with other companies for distribution in South Africa, Colombia, Malaysia,  Australia and New Zealand. The company had earlier announced it will not manufacture biosimilars and shelved plan to set up a biotech plant in South Africa.

The company reported 12 per cent increase in earnings before interest tax depreciation and amortization to Rs 7.26 billion and margin came in line at 18.4 per cent. Upadhye said the Ebidta growth was due to better revenue mix and cost containment.

Increasing prices of China manufactured-active pharmaceutical ingredients and volatility in emerging markets remain a challenge, the company said in a post-result presentation. “We have been able to absorb the cost in this quarter,” Upadhye said.  

The company also announced the appointment of R Ananthanarayan as its global chief operating officer. He will oversee research and development, manufacturing, supply chain and key markets. 

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