2010

Cipla : Caring for life

International
Academy Ujwal Sharma
of PGPM/0911/024
Management 2009-2011
&
Entrepreneurship
 Cipla : Caring for life
Cipla–A Global Leader in Generics

•Leading pharmaceutical company in India in terms of retail sales

and one of the largest exporters of pharmaceutical products from
India.
•Legacy of innovation and an entrepreneurial spirit ingrained by the
founder, Dr. K.A Hamied, and propounded by the present Chairman
and Managing Director, Dr. Y.K. Hamied.
•Wide range of products across all major therapeutic categories and
in most dosage forms.
•Business model based on international strategic alliances and focus
on pursuing organic growth while reducing capital commitment and
regulatory/litigation risks.
•Result driven R&D ensuring efficient utilization of resources and
generating substantial technical know-how fee income.
Company turnover is $1billion.

Significant Milestones in the History of Cipla

 1935- Founded by Dr. Khwaja Abdul Hamied as The Chemical,

Industrial and Pharmaceutical Laboratories Limited –subsequently
changed to Cipla Limited on July 20, 1984.
 1936- Commenced manufacturing operations at the first plant at
Bombay Central, Mumbai.
 1952-Established the first research and development division for
development of pharmaceutical products.
 1960-Commenced operations at the second plant at Vikhroli,
Mumbai.
 1974-Commenced manufacturing medicinal aerosols.
 1977-Commenced manufacturing operations at the third plant at
Bengaluru.
 1983-Commenced manufacturing operations at the fourth plant at
Patalganga.
 1985-Received approval from the U.S. FDA for the bulk drug facilities.
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 1994-Commenced manufacturing operations at the fifth plant at
Kurkumbh.
 2002-Set up four technologically advanced manufacturing facilities in
Goa.
 2003-Second phase of the manufacturing facilities at Goa, involving
five more independent manufacturing units, commenced commercial
production
 2005-New formulation plant at Baddi, Himachal Pradesh commenced
commercial production.
 2008-Commenced commercial production for formulations at the
Sikkim facility.

Business Model

 Cipla has a business model based on STRATEGIC

PARTNERSHIP.
 API and formulations exported to approximately 175 countries
through strategic alliances, including partnerships and agency
arrangements.
 Export sales contributed 51.5% and 49.5% to FY09 and Q1 FY10
revenues, respectively.
 Total of approximately 7,000 product registrations in place across
various export markets.
 International partnerships with governments and social service
organizations to supply products and/or technology, which helps
strengthen relationships abroad.
 Partnership model helps in:
-Leveraging in-depth local expertise of partners.
–Limiting the need to set up own facilities or sales and
distribution networks.
–Lowering fixed costs and capital commitment
–Reducing potential risks from litigation, regulatory or
employee related matters.

 Strategic partnership model structured as per:

-Developed markets which are highly regulated and
exposed to litigation risks.
-Emerging markets which offer higher growth
opportunities, due to lower entry barriers, limited
competition and higher profitability.

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Financial Analysis

Financial performance
(Rs m) 4QFY08 4QFY09 Change FY08 FY09 Change

Net sales 11,221 13,667 21.8% 42,185 52,705 24.9%

Expenditure 9,190 10,076 9.6% 33,571 39,873 18.8%
Operating Profit
2,031 3,592 76.9% 8,614 12,832 49.0%
(EBITDA)
Operating Profit
18.1% 26.3% 20.4% 24.3%
Margin (%)
Other income 153 155 1.0% 527 678 28.8%
Interest 46 133 191.0% 117 335 186.9%
Depreciation 367 557 51.8% 1,307 1,757 34.4%
Profit before tax 1,771 3,057 72.6% 7,717 11,419 48.0%
Forex loss/(gain) (250) 100 (667) 2,318
Tax 227 428 88.5% 1,369 1,423 3.9%
Profit after tax/(loss) 1,795 2,529 40.9% 7,014 7,678 9.5%
Net profit margin (%) 16.0% 18.5% 16.6% 14.6%
No. of shares (m) 777 777
Diluted earnings per
6.9
share (Rs.)
P/E ratio (x) 27.3

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PEER COMPARISON

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VALUE CHAIN

Experienced Management Team

•Led by a qualified and experienced management team that has the
expertise and vision to manage and grow the business.

•Dr. Y.K. Hamied, Chairman and Managing Director, has been

awarded the PadmaBhushan, one of the highest civilian awards in
India in 2005, for his distinguished service and contributions to the
pharmaceutical industry.

•Senior management team is highly experienced in the Indian

pharmaceutical industry, with an average of around 25 years
experience with Cipla.

•Stable and experienced mid-level management team with an

average experience of approximately 17 years experience with Cipla.

•Healthcare domain knowledge and experience of the senior and middle-

management provide a significant competitive advantage.

INITIATIVE

-Cipla launches anti-malaria global initiative.

-The company has entered into a development and supply agreement
with Drugs for Neglected Diseases Initiative (DNDi), a global non-profit
organisation, for a new anti-malarial combination drug. The drug, a new
fixed dose combination of artesunate and mefloquine, will be
manufactured by Cipla using the technology developed by DNDi.

-The agreement is for development and commercialisation of a new fixed

dose combination of artesunate and mefloquine (AS+MQ) indicated for
the treatment of uncomplicated Falciparum malaria.

-The product technology is coming from DNDi. Cipla will manufacture

and make the product available in southeast Asia and other parts of the
world at affordable pre-agreed prices,” Amar Lulla, joint managing
director, Cipla, said.

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MARKETING ANALYSIS

•With approximately 150 APIs and more than 1,600 formulation

products in its portfolio, Cipla offers a wide range of products across
several major therapeutic categories.

•Not dependent on any particular product with no single product

accounting for more than 2% of the total income in FY09.

•Therapeutic categories served include anti-asthma, anti-

inflammatory, cardiac, anti-retroviral, anti-cancer, eye/ear
preparations, dermatology, anti-ulcerant, anti-malaria and critical
care.

•Product range covers most dosage forms including solids, liquids,

injectables, ophthalmic preparations, topical preparations, nasal
preparations, inhalers and devices, rectal preparations and buccal
preparations.

Leader in the Respiratory Care Category

•One of the leading players globally in respiratory care, with over

three decades of experience in developing complex technologies in
inhalation therapy.
•One of the largest producers of inhalers in the world –respiratory
care products sold in approximately 90 countries.
•Leader in the Indian respiratory care category with market share of
52.0% in anti-asthmatic products in FY09.

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•Wide range of drugs, delivery systems and add-on devices for
patients, supported by an aerosol research and development team
and manufacturing facilities.
•Wide range of respiratory care products, including preventer and
reliever drugs and their combinations.
•Developed several proprietary and patented
delivery systems and devices.
Autohaler
Multihaler
ForacortForte.

Leading Domestic presence

•Largest market share of 5.3% (FY09) in terms of retail

pharmaceutical sales in India.

•20 product brands ranked within Top 300 pharmaceutical brands

in India (as on June 30, 2009).

•Market leader in certain categories, including respiratory care

(52.0%), anti-viral (50.1%) and urological (18.2%) in FY09.

•Extensive distribution network consisting of 42 exclusive and

dedicated sales depots that service doctors, as well as 2,300 stockists
and 160,000 chemist’s pan-India.

•Field force of over 4,300 personnel in 14 divisions, actively

promoting Cipla’s specialty products.

•Long-standing relationships with hospitals and

institutions, continues to be an important channel
of distribution.

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SWOT ANALYSIS

STRENGTHS
- Ranks #2 in the retail prescription market in India;
- 18 brands that feature among the top-300 brands;
- Large basket of 1,500 formulations; and
- Partnered 8 leading generics companies in the US for nearly 125
projects.
-
WEAKNESSES
- Impact of IPR regime.

OPPORTUNITIES
- Biotherapeutics – A new and promising area;
- Agreement with Avesthagen; and
- Venturing towards areas of cardiology and anti-cancer.

THREATS
- Partnership related; and
- Potential de-rating.

FUTURE OUTLOOK

-Cipla reported better-than-expected earnings for the quarter ended

December 2009 on account of a drop in other expenses and marginally
lower input costs

-At 29%, the year-on-year growth in net profit was higher than the
market estimates of 22%.

-The company’s domestic business, which contributes half of the

revenue, grew by 14%, higher than the industry growth of 12%.

-Reducing its over-dependence on the domestic business by generating

strong consistent growth in export markets is a critical factor that would
aid Cipla’s future growth.

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