Cipla likely to start clinical trials of two respiratory products in the US: Kedar Upadhye, Global CFO

Kedar Upadhye, Global Chief Financial Officer, Cipla Limited, talks about Albuterol, the US business, product pipelines, margins and Goa facility among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: US sales were quite robust this time mainly due to Albuterol. What were the other factors that contributed to good US sales?

A: Our portfolio got a fillip with the approval and launch of Albuterol in this quarter has fillip. As far as rest of products are concerned, like the products that are supplied to the US from India and those which are manufactured locally in the US and supplied to the government business, the entire portfolio has been very strong this time. This is a reason that our US business’s performance is looking very good. I believe that it will continue to be good for the balance of the year, i.e. in the next nine months. Albuterol is a good product and what we got in April was something that we got before our expectations. We were not prepared for supply. So, the sales we registered for Albetrol in the quarter is not reflecting full sales. We have worked on manufacturing and supply chain and will try to supply as much as we can across the remaining three quarters of the year. I believe that whether it is about this product or other products or DTM business in which we supply products from India will remain very strong in the balance quarters. 

Q: Update us about the product pipeline of Cipla for the next one year?

A:  The pending pipeline of ANDA is very strong. You would have heard that trail of generic Advair was very positive and have filing for the same in May. We are also working with an agency for phase-3 approval of the product. There are several other products like complex generic products and we are also starting one or two respiratory trials. So, our portfolio and pending ANDC pipeline for the US business is very strong. I am very confident that the US business will continue to grow in the balance three quarters as well as next year. 

Q: Can you provide sales guidance for FY21? Going ahead what kind of competition you may face that will have an impact on the numbers? Also tell us about the other triggers for the US business, particularly?

A: I will not provide guidance but the good thing is that our three businesses in the domestic market, namely, prescription business, generic trade business and consumer healthcare business, are doing well. Prescription business is doing well because our respiratory drugs, chronic category medicines, like cardio drugs, diabetic drugs, neurology, derma, oncology drugs, and other drugs as well as the COVID drugs that we are selling are doing well. The distribution pattern of the trade generic business was remodelled last year and it has worked well. As far as the consumer healthcare business is concerned then we have good products and we have also launched a hand sanitizer. So, all the three businesses are doing good and I believe that the inherent strength of our business, especially during this COVID time, the complete model has been shifted to the virtual model because our medical representatives are not able to reach in person to the doctors and our activities, like webinars, outreach to the customers and conferences among others, have shifted to the virtual model. So I believe that our Indian business will grow well in the next three quarters. In the last four quarters, the performance of our Indian business has been above the market growth. I feel that the growth pattern will continue because year-on-year, we have invested in our capabilities, may it be in our medical representatives or products or technology, of the Indian business. Due to this all capabilities and investment I feel that our growth will be good. 

Q: Margins have gone up to 26% in this quarter. Do you think that it has happened due to lower general expenses and lower R&D? Are these margins sustainable on a medium to long term?

A: It will be our endeavour to ensure that our future margins should stay above the historical margins that we have demonstrated. A lot of field activities has been low in this quarter due to the lockdown. Similar conditions were seen in other areas like we are not going to the offices due to which the administration cost has been low in the quarter. Going forward a situation will evolve where we will have to see the offices that will become operational, the areas in which our field team will work as before. It is difficult to say anything about it. But I feel the kind of cost optimization has been there in this quarter will not stay the same but a large part of this cost control will stay back in the post-pandemic era. So, I believe that our margins will remain good in the next three quarters but it is difficult to speak anything about the levels at which they will stay. But as I have said that it will be better than the historical margins, both gross margin and EBITDA margin. We will also try to retain the efficiency that we have developed and invest a bit on customer activities. 

Q: Update us about the Goa facility. Have you received any further communication from the USFDA?

A: In the context of the Goa facility, we committed some corrective and preventive actions to the USFDA and the progress is happening accordingly. Monthly and frequent updates are provided to the agency and we will work with them to resolve the same. 

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Q: Your raw material prices have gone up in this quarter. How much raw material do you import from China and are you expecting any major challenges due to the current situation?

A: There are certain APIs, intermediaries, and antigens whose cost has gone up tremendously and it has impacted the margins of those products. We are trying to reduce the cost by negotiating with our vendors. Some impact has been felt but we have been able to offset it a bit by saving costs in some areas. We will keep a watch on it because a lot of development is happening in this area, globally. Thus, we will have to keep an eye on this area. Its impact has remained contained in the first quarter but possibly it will have an impact in the rest of the year.