Company Analysis Note

Purpose of Note: Review Date: 30 May 2019

Company: Cipla Limited
Industry: Pharmaceuticals
Current Market Price (Rs.): 557.95
Market Cap. (USD bn): 45,000.70CR

Background: Cipla Limited is an Indian multinational pharmaceutical and biotechnology

company, headquartered in Mumbai, India. Cipla primarily develops medicines to treat
respiratory, cardiovascular disease, arthritis, diabetes, weight control and depression;
other medical conditions. Cipla is a leading global pharmaceutical company, dedicated to
high-quality, branded and generic medicines. Over 1500+ products across various
therapeutic categories, with 50+ dosage forms. Presence in over 80 countries. Cipla’s
state-of-the-art manufacturing facilities are cGMP compliant in conformity with national
and international standards.

Key drivers of recommendation: What can go wrong:

1. At US$ 163mn, US jumped 38% QoQ. It was
largely aided by a one-time opportunity with
gSensipar(hormone control)
2. Gross margin (GM) improved ~330bp YoY to
65.2%.
3. Absolute EBITDA increased ~73% YoY to INR9.7b
4. Domestic branded pharma business for CIPLA
grew by 11.2% v/s industry growth of 10.5% for
Mar-19.
5. Expect a healthy core EPS CAGR of 18-20% over
FY19-FY21
6. CIPLA’s Goa plant received EIR for the USFDA
inspection carried out in Jan’19. Recent
inspection at Indore (13th May to 17th May) also
ended with zero observations.
7. Cipla has surpassed its US business guidance of
US$ 125mn run rate in 4QFY19.
8. gProventil(inhaler) to drive the stock price.
1. Delays in high-value US launches are a
key risk to estimates.
2. A decline in the Global Access business
due to challenges in the funding
environment poses a risk.
3. Should R&D costs increase beyond
the current 7-8% of sales, the savings
from other cost optimisation measures
would be nullified.
4. Supply constraints, Iran/Yemen
geopolitical uncertainty, and raw
material prices.
5. Higher-than-expected pricing pressure
in Africa business and currency volatility
in Emerging Markets.

Key variables and goalposts Financial & Valuation benchmarking

1. Cipla is going file two products in the US in FY20 Given below.

including Advair.
2. gAlbuterol can be a good late-FY20 opportunity.
3. Total investment in Tramadol and Pulmazole
could be in the US$ 150mn-180mn range over 3-
4 years
4. CIPLA entered into an agreement with Pulmatrix
for worldwide co-development and
commercialization of Pulmazole (Inhaled
Itraconazole).
5. Aims to file 12+ ANDAs.
Financial & Valuation benchmarking