Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cipla Ltd (BOM:500087, Financial) reported a 10% year-on-year growth in its branded prescription business.
- North America achieved an all-time high quarterly revenue of $250 million, growing 13% over the previous year.
- South Africa's prescription business continued to outpace market growth, consolidating its number one position.
- The company successfully transitioned its India trade generic business to a new distribution model, enhancing operational efficiencies.
- Cipla Ltd (BOM:500087) reported an impressive EBITDA margin of 25.6% for the quarter, increasing by 154 basis points year-on-year.
Negative Points
- The Goa facility received 6483 observations from the US FDA, with the official classification still awaited.
- The Consumer Health franchise posted a modest growth of 3% year-on-year, impacted by a high base and an exceptionally strong summer last year.
- R&D expenses increased to INR353 crore, representing 5.3% of revenue, which is higher by 1% compared to the previous year.
- The India trade generic business experienced a temporary slowdown during the transition to the new distribution model.
- There are ongoing concerns about potential price erosion in the US market, which could impact future revenue growth.
Q & A Highlights
Q: Sir, just on the gross margin front, is it to do with relatively lower RM cost or largely to do with the product, if you could explain that?
A: Sure. And on gross margin, it's mainly the product mix. Quarter One of last year, we had some tender products in there from CGA and other markets, which were at a lower margin so far higher sales here, we have a better mix due to which the material cost is lower, just mainly the factor of product mix.
Q: Just a clarification here. So let's Revlimid share as a percentage on absolute basis, that was larger stable quarter-over-quarter or whether it has increased?
A: So Revlimid has increased so quarter-on-quarter, by some small margin, yes.
Q: And any thoughts on Abraxane post US restriction on Goa site?
A: We don't -- the inspection. We have answered the queries, and I think we hope to put remedial action, and we hope to hear so.
Q: The timeline as we have guided that didn't change as we stand?
A: No, as of now, it's the same what we had talked about last time. So it's dependent on a Goa. So when we hear back, we have responded to all the queries. So when we go back up, we'll have better clarity on the timeline.
Q: First one on the R&D expense. The R&D expense in this quarter seems to be quite subdued as compared to the last quarter. So do we expect the activity to pick up in the rest of the year and it is expected to be higher?
A: Yes. I think R&D activity will be higher. We will see a ramp-up in projects, I think because some projects that finished end of last year and early this year, that's the reason you're not seeing the uptick but also remember that most of our clinical trials that happened last year are now over and the current ones that are ongoing are not as extensive as the ones that we did earlier. So we will see an uptick in the coming quarters.
Q: Can you suggest any range for this full year for the R&D expense?
A: We have always given a guidance of up to close -- max level for us would be about 6%, 6.5% of sales a quarter-on-quarter, but you could take 5% to 6% as a good range for.
Q: On Goa plant, (inaudible) that we'll share at the appropriate time. But what is the internal assessment? Are you confident that we'll get clearance without any inspection? Or do you think that there's the inspection requirement once we complete our remediation measure? And are we currently employing and consultants our third-party consultants for the plant?
A: Yes. So on Goa, we have given various corrective and preventive actions. We have external consultants who are working with us who are experts in their field. In Goa, we've been working with those experts for two years and an indoor for over a year. And they continue to be assisting us in our response and remedial measures. I think the FDA will come to its conclusion by end September. And that's the time that we hope to hear from them further.
Q: And then just from the US product pipeline are in terms of the two peptides that we have and what is the updated here? Have we got the approval? Or are we waiting for the approval and the launch will be imminent post approval? And secondly, on generic Advair, what is the update in terms of filing from the Invagen plant?
A: So the Invagen filing, I think the batches are in progress. We should be shortly filing from our Invagen site. And the update on the peptide products, yes, the moment we receive approval, we should be launching these peptides, but I believe that the real launches will start only starting quarter three, quarter four of this year, not before that.
Q: On US business. So this [$25 million] delta, which you have seen quarter on quarter, was it all driven by the existing product pickup or Lanreotide generic played a big role there?
A: Two big products, made the difference. Lanreotide the ANDA launch, for generic ANDA launch as well as the gain in albuterol market share. Those were the two big contributors here. And then there was, as Ashish mentioned, a marginal increase in Lenalidomide.
Q: On a very strong gross margins, which you have explained earlier. So is this the sustainable rate? And on back of a strong performance in Q1? Do you have any plan to revise your EBITDA margin guidance for the full fiscal?
A: I don't think we are doing anything on the EBITDA margin guidance, but I'll let Ashish clarify on the gross margin. See. On the gross margin side, I think it's also dependent on the product mix. So as the sales from some of the markets, the tender markets kick in, you'll see some margin dilution of that. So it depends on the product mix. And then of course, when the respiratory quarter picks up at that time, margin is will likely be similar levels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
