SWOT Analysis
Cipla
SWOT
Analysis Report Cipla
COMPANY
OVERVIEW
Cipla
(or 'the company') is an India-based manufacturer of prescription drugs, animal
products, OTC (over-the-counter) products, bulk drugs, flavors and fragrances,
and agrochemicals. It is headquartered in Mumbai, India, and employed 27,562 people
as of March 31, 2013. The company recorded net revenues of INR82,793.3 million
(approximately $1,515.1 million) during
the
financial year ended March 2013 (FY2013), an increase of 17.9% over FY2012. The
operating profit* of the company was
INR20,886.5 million (approximately $382.2 million) during FY2013, an increase
of 40.5% over FY2012. The net profit was INR15,448.5 million (approximately
$282.7 million) in FY2013, an increase of 35% over FY2012.
SWOT
ANALYSIS
Cipla
(or 'the company') is one of the largest pharmaceutical companies in India. The
company’s
strong
R&D and manufacturing capabilities enable it to build a diverse and robust
portfolio of products. However, new drug pricing control method in India could
affect the company's operating margin expansion.
Strengths
Strong R&D and manufacturing
capabilities
Cipla
is one of the oldest companies and the second largest drug firm in India. The
company has
strong
research and development (R&D) capabilities. In pharmaceuticals, Cipla's
R&D focuses on the development of new innovative technology for the
manufacture of existing active pharmaceutical ingredients (APIs) and their
intermediates; development of products related to the indigenous system of
medicines; and development of new drug formulations for existing and newer
active drug substances. In agriculture, the company is focused on the
development of agro technology, and genetics and biotechnology for cultivation
of medicinal plants and isolation of active ingredients from plant materials.
The company is also engaged in the development of medical devices and new drug delivery
systems for existing and newer active drug substances. Focus in diverse areas
has helped Cipla build a diverse product portfolio that addresses various needs
of different industries including pharmaceuticals, biotechnology, veterinary,
food and agriculture. The company's R&D is well supported by more than 34
manufacturing facilities spread across India that more than 2,000 products in
over 65 therapeutic categories.
Sustained operating performance boosting
the company's profitability
Cipla
has delivered a sustained operating performance during FY2009-13.The company's
net sales has increased at a compounded annual growth rate (CAGR) of 14% during
the period in analysis, from INR49,606 million (approximately $907.8 million)
to reach INR82,793.3 million (approximately $1,515.1 million). The operating
profit of the company has increased at a five-year CAGR of 24%, from INR8,955
million (approximately $163.9 million) in FY2009 to INR20,886.5 million
(approximately $382.2 million) in FY2013. As a result, the net profit of the
company has grown at a CAGR of 19% from INR7,768.1 million (approximately
$142.2 million) to reach INR15,448.5 million (approximately $282.7 million)
during the historical period.
Weaknesses
Lack of significant presence in
developed markets
Cipla
derives a majority of its revenues from its domestic market, India. Although it
exports its products to about 170 countries across the globe, it does not have
significant presence in the major and most lucrative pharmaceutical markets,
such as Japan and the EU. In contrast, its rivals such as Ranbaxy, Dr. Reddy's,
Sun Pharma and Lupin have aggressively expanded their presence in those markets
through mergers and acquisitions. Hence, lack of significant presence in
developed markets may affect Cipla's ability to compete effectively with its
major peers.
Alleged quality issues in the company’s
manufacturing practices
The
company’s products have been under the scanner of the Drug Controller General
of India (DCGI), India’s drug regulator. For instance, in July 2013, drugs
manufactured by Cipla came under DCGI for failing safety and efficacy tests. It
was reported that the samples of Cipla’s Ibugesic 200 and 400 picked up by drug
inspectors from the company’s plant in Sikkim (India) were found to be of substandard
quality. Also in 2011, the company came under the scanner of DCGI for selling
drugs banned by the Indian government. Quality issues and violations of
regulatory compliance could trigger more regulatory inspections and actions
against the company.
Opportunities
Launch of new drugs and formulations
likely to help Cipla in generating incremental revenues
Cipla
introduced many new drugs and formulations during FY2013. Some significant
formulations were Amlopres VL (amlodipine and valsartan tablets), a combination
therapy for effective hypertension management; Cinmove OD (cinitapride
sustained-release tablets) for gastrointestinal motility problems and acid
reflux; and Cresar Plus (telmisartan, amlodipine and hydrochlorothiazide
tablets), a triple combination for managing severe hypertension uncontrolled by
therapy. During the year, among other products, the company launched Doricrit
(doripenem injection), an effective antibacterial for Pseudomonas infections;
Levepsy (levetiracetam injection) for the treatment of seizures when oral
anti-epileptics cannot be administered; and Tiganex (tigecycline injection), a novel
antibacterial for difficult-to-treat, hospital-acquired infections.
Launch of new drugs and formulations is
likely to help the company in generating incremental revenues.
Entry
into the Indian biosimilar market through the launch of product for rheumatic
disorder Bioequivalent or biosimilar product market provides an attractive
opportunity for generic manufacturers across the globe. Cipla launched its
first biosimilar of etanercept in India under the brand name 'Etacept' for the
treatment of rheumatic disorders in April 2013. Formed through a partnership alliance,
Etacept is manufactured by Shanghai CP Guojian Pharmaceutical Co., and marketed
in India by Cipla. The introduction of Etacept marks Cipla’s entry into the
biologic segment offering an option to the patients suffering from rheumatic
disorders at a lower cost (about $113).
According
to Cipla, currently there are DMARDs (disease modifying anti-rheumatic drugs)
which are considered to be the first line of treatment for rheumatic disorders.
However, approximately 40% of the patients are not controlled on these drugs.
In such cases, biologics like etanercept would play a significant role for
Cipla in controlling the disease activity in India.
Medpro acquisition likely to strengthen
Cipla’s presence in Africa
In
July 2013, Cipla acquired 100% of the issued shares of Cipla Medpro South
Africa (Medpro), a South Africa-based pharmaceutical firm, for about $495.4
million. Medpro is a distributor of Cipla’s products in South Africa and
certain neighboring countries. Medpro is the third largest pharma company in
South Africa, and has a significant market share in South Africa. This
acquisition will enable Cipla to strengthen its position not only in South
Africa, but also to expand its activities in other parts of Africa, thus giving
Cipla a footprint in one of the major continents of the world. Cipla’s
humanitarian work in the HIV/AIDS therapeutic area has provided it with
reputation throughout Africa. Hence, The acquisition of Medpro will further
enhance Cipla’s potential.
Threats
Intense competition in Indian generics
industry could affect Cipla's market share
Cipla
faces intense competition in its domestic market. The generics industry in
India is highly
fragmented
with many generic companies manufacturing equivalent products.The company's
major competitors include Dr. Reddy's Laboratories, Lupin, and Ranbaxy
Laboratories.The Indian generics producers (such as Cipla) are feeling the
competitive pressure not just from domestic generics producers but also from
international generics players as well as from branded multinational pharma companies
through the availability of own/authorized generics. Such companies are tapping
into the growth potential of the Indian market, and also the country's low cost
manufacturing facilities both for domestic distribution as well as for export.
Hence, intense competition in the Indian generics industry could affect Cipla's
market share.
New drug pricing control method in India
could affect the company's operating margin expansion
The
prices of pharmaceutical products are controlled by law. Governments may also
influence prices through their control of national healthcare organizations,
which can bear a large part of the cost of supplying medicines to consumers. In
2012, the Department of Pharmaceuticals in India shifted from the past practice
of cost-plus based pricing to market-based pricing so as to ensure availability
of essential medicines at reasonable prices to the end-consumers. In May 2013,
the Department of Pharmaceuticals brought 348 essential medicines under the price
control mechanism, thus replacing the earlier order of 1995 that regulated
prices of 74 drugs. In India, the prices of branded generic drugs are already
among the lowest in the world. There are a few provisions in the new DPCO that are
impractical to implement especially the one pertaining to retrospective price
implementation. The transition from the old pricing regime to the new one is
causing disagreement among the Indian government, companies and the trade. This
is leading to the trade curtailing purchases and is bound to have a negative
impact on the immediate product sales of all pharmaceutical companies,
including Cipla.
