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Cipla Ltd’s good revenue and margin performance in the September quarter was masked by the 18 per cent decline in its operating profit.
But this was largely on account of a one-off income it received from Teva Pharmaceutical Industries Ltd for the supply of a generic anti-depressant in the corresponding quarter last year.
Operating margin remained strong at 23.6 per cent for the quarter, despite lower contribution from the domestic market and consolidation of its recent acquisition of Cipla Medpro South Africa, whose margins are lower.
Though the domestic market saw challenges from price cuts under the new pricing policy and a strike by drug distributors demanding higher margins, Cipla saw revenue grow in the home market by 11 per cent.
Initiatives such as product portfolio rationalisation, better tracking and monitoring of the field force have helped the drug-maker improve its field force productivity.
The full benefit of these initiatives may accrue in the coming quarters.
The company is changing its business strategy after Subhanu Saxena took over as MD and Global CEO in July. Cipla plans to expand its own marketing network in export markets, a big shift from its current partnership model.
This implies higher R&D and promotional spend over the next few quarters.
With Cipla now focussed on strengthening and building its own product pipeline, the R&D spend is anticipated to increase from 3.5-4 per cent of revenue to over 5 per cent.
Though these investments may temper profit in the short term, it will help Cipla in the medium term scale up export revenue.
The company spent nearly Rs 100 crore during the quarter for the ongoing expansion of its API (active pharmaceutical ingredient) plant at Patalganga and R&D plant at Vikhroli (both in Maharashtra) and targets a capital spend of Rs 400 crore in the current fiscal.
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