The Cipla stock is in focus and gaining in trade after news of the US FDA approving Pulmicort Respules - an asthma drug.
Umang Vohra, MD & Global CEO, Cipla said the approval is limited in nature. He said there is an IP situation around Pulmicort, which will get resolved sometime in 2018 and so, there could be further competition coming in as well.
However, he specified that it is a product candidate which is of Form Fill Seal (FFS) solution – actually a suspension product and is difficult to make. There are not many facilities in the world that make it and so we think the competition is limited.
He said the competition could be doing close to USD 15-20 million in terms of revenues and so they would also roughly be in that range.
The company would continue supplying it to Sandos, as contract manufacturer for the drug, he said.
Post the Q2 numbers, the company had guided for a steady stream of limited competition drugs in the US.
Vohra said not all of them would be limited competition but till the end of FY18 they expect to get another 3 or 4 more approvals, and possibly more after that.
On the business outlook, he said the trajectory is to grow 10 percent quarter on quarter. We have now bottomed out and are beginning to see growth in US, he added.
When asked how the pricing pressure in the US was impacting their portfolio, he said the percentage impact is similar to all the others players, which is around 10-15 percent price erosion. However, the only difference is that since their base is smaller, they do not see the same dollar absolute hits, he added.
For past 3-5 quarters they have been trying to balance the erosion with whatever approvals they are getting, said Vohra, adding that the trajectory will move up once the limited drugs start.
The US remains the largest market in the world and they look at it as an attractive opportunity, said Vohra.
Below is the verbatim transcript of the interview.
Q: It is a limited competition drug I understand up to around three to four odd players, are you expecting further competition to come in and if so by when?
A: I think there is an IP situation around Pulmicort as well which resolves sometime in 2018, so yes, there could be others coming in as well. However, this is a product candidate which is of FFS solution, it is actually a suspension product. It is difficult to make, there are not many facilities in the world that make. That is the reason we think it is limited in terms of competition, so we don’t know how many players would enter eventually but it will probably stay limited for some point of time.
Q: Is it fair to assume that at least for the next one year the upside limit would probably be around USD 25 million in terms of sale?
A: I think we have seen competition is roughly upwards of about USD 15-20 million as I said so we will be roughly in that range but it could be higher, it could be lower. We don’t want to give a number guidance.
Q: You are going to continue supplying to Sandos as the contract manufacturer for the drug?
A: Yes, I think that relationship doesn’t change because of our approval.
Q: You actually guided the market post Q2 that you are going to see a steady stream of limited competition drugs in the US. You have got Renvela, Pulmicort now what can we expect probably in the second half?
A: I think some of the analyst have figured out our pipeline, but I would like to believe that we could see about – not all of them are going to be limited competition but we could see about three to five odd approvals coming in. So, I don’t think there would be as many, but it will start building up beyond the March-April time period. So, I think realistically in the next 3.5-4 months till the end of the year we are hoping we get another three or four more.
This market changes every time because you suddenly realise that you have five competitors and now you have two and then you have three because the FDA is also going around facilities and it was volatile for us and it is volatile for everyone. So, maybe another three odd products not all limited right by the end of the year and possibly a little bit more after that.
Q: Currently, you are doing around USD 95-100 million in terms of sales that is what you did in the previous quarter and it is averaged around those levels say in the past couple of quarters. What are we going to inch up to in probably the next two quarters?
A: We are hoping to see, we have just been managing price erosion with our new approvals that were coming. Now we are hoping to see growth, so again if I give you that number then you will be able to back calculate how much is Pulmicort and how much is everything else. I think we are looking at roughly about, our trajectory to begin to at least show a 10 percent growth quarter-on-quarter, so that is the rough number we are looking at. I won’t hold myself and say that okay next quarter I did 105 why didn’t I do 110. But what we see from here is growth. I think we have bottomed out and we are beginning to see growth in the US now.
Q: You are talking about the growth in the US where everybody else is so concerned about pricing pressure. How much is pricing pressure affecting your portfolio at this point?
A: For us it would be probably the same as everybody else, I don’t think the pressure really changes because of how we operate or somebody else operates. I think people are seeing 10 to 15 percent erosion. We are probably seeing the same level. We won’t be very different we could be seeing 8, we could be seeing 12 but what is more important is that because a base is smaller we don’t see the same dollar absolute hits that come. So, for example 12 on 100 is 12 million; 12 on 500 is 60 million, so I don’t think we are seeing the same absolute but in terms of percentage we see the same. And which is why over the past three or four quarters we have been trying to balance the erosion with whatever little approvals we are getting.
Until the limited one starts you really don’t see the trajectory moving, so we are hoping now that we can seeing a trajectory going up quarter-on-quarter.
Q: 10-12 percent pricing pressure that wouldn’t really impact your portfolio over all or growth that is what the indication?
A: I think we are resuming, the US market actually has almost always done about 5 to 10 percent price erosion.
Q: We have a new US FDA chief who is very gung-ho about increasing the amount of competition that we are seeing as well. Overall do you think that the US market is the place to be at this point?
A: It depends on which side of the table you are sitting. If you are a large player and if the FDA commissioners points out lot of approvals coming in then you ought to be worried about erosion in your product family. If you are relatively smaller player like Cipla you would want to more of your approvals to come through quicker. But then we also know that competition is going to enter in faster as well. US is the largest market in the world. I don’t think anyone can chose to say we are not going to play in the US anymore. So we still look at it as a very attractive opportunity.
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