Half Year 2025 Cipla Ltd Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Damayanti Kerai - HSBC Securities & Capital Markets Private Ltd - Analyst : My first question is on Abraxane opportunity. So obviously, I think we are waiting for Goa clearance for this particular product. But can you comment in case we don't earn back favorably from the US FDA regarding classification, et cetera. How far this product can be pushed in terms of launch in the market? If I remember correctly earlier, you said this launch could possibly come in second half of FY25. So what is we can thought on this product?

Question: Damayanti Kerai - HSBC Securities & Capital Markets Private Ltd - Analyst : Okay. In case Goa take slightly longer, then you proceed with the CMO route, then how long, I guess, we have to wait?

Question: Damayanti Kerai - HSBC Securities & Capital Markets Private Ltd - Analyst : Okay. Okay. My second question is on the supply issues, which you mentioned on Lanreotide. Is it purely the capacity constrained or there are some other issues? And are you remain confident about resolving different quarter? And then supply is going back to the normal level? And then a quick question on the 4 approvals, which you've got during the quarter. So I believe one is the peptide product calcitriol. So do you have a manufacturing capability for that particular product? Or it will be again done through CMO?

Question: Damayanti Kerai - HSBC Securities & Capital Markets Private Ltd - Analyst : Okay. And on Lanreotide issue?

Question: Damayanti Kerai - HSBC Securities & Capital Markets Private Ltd - Analyst : Sure. And you mentioned you are investing in the partner side for capacity expansion? Or how is the arrangement there?

Question: Damayanti Kerai - HSBC Securities & Capital Markets Private Ltd - Analyst : Okay. My last question on India business. So again, I guess, we expect to see better seasonality in 3Q. So are you seeing like initial sign of better pickup in the respiratory for third quarter? And that's why you believe you could still outpace market growth in the full year basis because after 3Q, I believe fourth quarter is generally a lean quarter, right?

Question: Surya Patra - PhillipCapital (India) Pvt. Ltd. - Analyst : Yeah, thanks for the opportunity, sir. First question about the sequential decline in the US sales for the quarter, what we have seen -- could you clarify what would have impacted -- because sequentially, we have seen improvement on albuterol, we have seen sequential improvement in Lanreotide. And obviously, the Revlimid would be sequentially remaining flat or slightly improved. So what would have impacted the QoQ performance in the US, whether it is any pricing --

Question: Surya Patra - PhillipCapital (India) Pvt. Ltd. - Analyst : Your press release indicates, sir, our Lanreotide market share has improved quarter on quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, CIPL.NS - Half Year 2025 Cipla Ltd Earnings Call

Question: Surya Patra - PhillipCapital (India) Pvt. Ltd. - Analyst : Yes, sure. Okay, sir. That was my first. Second question was about the removal of the patent of for this Advair as well as albuterol by GSK and Teva on the request of US FDA. So because of that, have you seen any kind of enhanced competition or any pricing implication? Or do you even expect any kind of, if not seen so far going ahead, do you see enhanced competition price or what impact that you do see because of those developments?

Question: Surya Patra - PhillipCapital (India) Pvt. Ltd. - Analyst : Okay. Then just last one point I wanted to clarify a bit about the Africa integration, the one Africa thing. So what is the kind of synergy that we can have -- having seen the success here in one India, while it sounds similarly for Africa, Africa. But what synergetic benefit that can flow out of these initiatives may not be on the revenue side on the profitability side and your strategic initiatives for that because new product launches in licensing for Africa market. Those have been the kind of strategies that you are anyway following for those markets. So now with this one Africa, what one should really think and what changes that one can see?

Question: Surya Patra - PhillipCapital (India) Pvt. Ltd. - Analyst : Thank you, sir. Thank you, wish you all the best.

Question: Ankush Mahajan - Axis Securities Limited - Analyst : So my question is related to we have Revlimid sales and Lanreotide, right? I try to understand that whatever our base business are, how it performed in the last quarter.

Question: Ankush Mahajan - Axis Securities Limited - Analyst : I'm talking also base business.

Question: Neha Manpuria - BofA Securities India Limited - Analyst : Thanks for taking my question. On generic Advair, once the filing timeline from the US facility was towards the end of this calendar year. Is that still on? I mean, are we on track to file Advair? And that would then trigger an inspection for that facility, right? So despite of that, we expect that we will get approval -- we'll be able to launch the product in first half fiscal '26. Is that correct?

Question: Neha Manpuria - BofA Securities India Limited - Analyst : Okay. Got it, got it. And my second question, as is on the gross margin, the quarter-on-quarter improvement, I know it's sort of flattish to slightly better despite US being lower, even though acute wasn't as strong, there is some acute impact in this quarter, tender business is higher. So what exactly happened? Is there anything else? Have you seen a better API pricing environment? What's helping the gross margin trend?

Question: Neha Manpuria - BofA Securities India Limited - Analyst : Okay. So that's the only driver that there's nothing else in terms of the API cost, et cetera, that we're seeing improvement in --

Question: Neha Manpuria - BofA Securities India Limited - Analyst : Understood. And from a gross margin -- from an EBITDA margin guidance perspective, given that we are a little over shade over 26% for first half, I know fourth half -- the fourth quarter tends to be seasonally slow for you. But then are we -- other than the one-off impact that we talked about in US because of Lanreotide, given that India will be significantly stronger, any reason to still keep the guidance at 24.5% to 25.5%. Is there any other cost that we are anticipating, which should keep margins lower in the second half?

Question: Neha Manpuria - BofA Securities India Limited - Analyst : Understood. Okay, thank you so much.

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : A question on the US, basically, to understand the concentration risk. Can you share what your top three -- top three products would contribute to the US aid?

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Some broad numbers like 40% plus or less than 40% somewhere?

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Okay.

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Okay. And second, on your plant in China, would you have filed for approval for the China markets for the (inaudible) like the Pulmicort (inaudible)?

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : But would you have filed or you are yet to file for the (inaudible)?

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Yes. Pulmicort (inaudible).

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Okay. Okay. And just one final one on India. Any thoughts on how do you kind of intend to play in the GLP-1 space? Any in-licensing opportunity that you will be seeking or maybe participating in the semaglutide generic opportunity?

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Are opportunities available for out-licensing or innovators open to out-licensing in India. So since I understand Eli Lilly, which normally out licenses their products to India has and done so far.

Question: Shyam Srinivasan - Goldman Sachs (India) Securities Private Limited - Analyst : Just one back on Lanreotide. So the August market share is what you've disclosed. So where did take September market share for Lanreotide 505(b)2+ generic ended?

Question: Shyam Srinivasan - Goldman Sachs (India) Securities Private Limited - Analyst : Yes. Should we think of it like at Q1 levels, 20% or even lower than that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, CIPL.NS - Half Year 2025 Cipla Ltd Earnings Call

Question: Vishal Manchanda - Systematix Shares & Stocks (I) Ltd. - Analyst : Understood. And Umang, to your comments that there'll likely be a Q3 -- sorry, Q4 bounce back. And are we again talking about similar market shares like 35% or you think we can go higher post the expansion?

Question: Shyam Srinivasan - Goldman Sachs (India) Securities Private Limited - Analyst : Understood, yes. So maybe we are guiding for 35% share back in Q4. That's what you're saying.

Question: Shyam Srinivasan - Goldman Sachs (India) Securities Private Limited - Analyst : My bad, 35% was just one month, so maybe for the average for the quarter is lower. So okay, I get it. Sorry, my bad. Yes. And the second question is just on cash. We have now $1 billion of cash on the balance sheet. So I just want to understand how are we thinking about capital allocation, either dividends or buybacks or even M&A. If you could outline some of the key priorities for us, please.

Question: Shyam Srinivasan - Goldman Sachs (India) Securities Private Limited - Analyst : Ashish, last follow-up. So valuations for assets, is it something that you're seeing is frothy? Or is it comfortable? Or are you seeing a lot of assets that are available?

Question: Shyam Srinivasan - Goldman Sachs (India) Securities Private Limited - Analyst : All right. Thank you and all the best.

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Hi, good evening. My first question was regarding the India business. If you can give some color, particularly on trade generics and consumer. So do you think trade generics has recorded growth in this quarter compared to last year given the restructuring we have done? And also on Consumer, I remember last year was muted. We had seen like 21% growth this quarter. Why are we seeing sort of that volatility and what's more of sustainable growth here?

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Thanks, Ashish. And my second question was on the tender business. So in South Africa, the vaccine tender. So has that scaled up the kind of numbers we are seeing this quarter or this cover to sort of go up further? And also if you can share like what percentage of your other business like outside of South Africa international business, ex-US, what is the quantity or what is the percentage of tender sales there approximately?

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : So this is the overall growth in the EMU you're referring to, Ashish?

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Right. But overall, on a consol basis, you're saying the contribution from tender is not very significant.

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay. And if I can just ask one more question, this is on R&D. So that spend is -- the growth is quite muted. So how are we thinking -- what are the new areas you're planning to invest? And over the next two quarters and also going forward in fiscal '26, what's the trajectory on R&D spend that you're expecting?

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : And do you expect any step-up here or because of these things or it will take time before the trials start on a larger scale?

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Right. So that's a few years out, right, Umang, or do you think some time --

Question: Saion Mukherjee - Nomura Financial Advisory and Securities (India) Private Limited - Analyst : Okay, thank you very much.

Question: Tushar Manudhane - Motilal Oswal Securities Ltd - Analyst : Yeah, thanks for the opportunity. Sir, just on Goa respiratory observations, so (technical difficulty) in terms of sort of resolving the -- or sharing the data with (inaudible).

Question: Tushar Manudhane - Motilal Oswal Securities Ltd - Analyst : So subsequently, has there been any communication from (inaudible) in terms of the response appropriate places or anything of that sort?

Question: Tushar Manudhane - Motilal Oswal Securities Ltd - Analyst : Sorry to drag on this, but just that this is like basically the course of actions the company is then to take as far as resolving the issues on Goa site. But what could be the time line to implement those measures and get the issues resolved.

Question: Tushar Manudhane - Motilal Oswal Securities Ltd - Analyst : Got it, sir, got it. And lastly, sorry, a lot of questions been asked already on Lanreotide, but just maybe one from my side. In terms of the partners facility, is that a dedicated facility for Lanreotide or it's a multiproduct facility?

Question: Tushar Manudhane - Motilal Oswal Securities Ltd - Analyst : Got it. Okay. So in the expansion of the facility is not just because of the demand, which maybe like plus product is seen for the partner is looking for the demand for the other products as well. Is that the way to understand?

Question: Tushar Manudhane - Motilal Oswal Securities Ltd - Analyst : Understood. Got it, got it. Thank you.

Question: Alok Dalal - Jefferies LLC - Analyst : Yes, hi, good evening. Just to confirm, did you mention about 10% price erosion for the quarter on a portfolio basis?

Question: Alok Dalal - Jefferies LLC - Analyst : Okay, fine. So not much change with respect to price erosion in the US?