Cipla's topline growth has been an impressive 23% as against the overall growth of 9.2% for the overall formulation industry. This year the company has been aggressive in the unbranded generic market which to some extent has contributed to the turnover growth. These are mainly in the anti–infective segment and the anti–inflammatory segment where the company does not have well established brands. Here the company supplies to hospitals and nursing homes at discounted prices. This accounts for the reduced margins.
Operating Profit (EBDIT)
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* Cipla issued a 2:1 bonus in the current year
In the branded formulations the company launched non–CFC based inhalers for asthma under the brand name Asthalin HFA. These are expected to continue to lead growth in the future too since CFC based inhalers have to be compulsorily phased out by 2010. Another breakthrough for the company during the year was the manufacture and the marketing of an anti–AIDS pill, branded Nivimune. The company priced its tablet at Rs 135 per tablet as against Rs 344 for an imported tablet.
Cipla’s strategy has been to develop products by reverse engineering and the introduction of the anti–AIDS medicine is an example of that. The patent on this medicine expires in 2010. However, since India does not have a patent law that recognises product patents Cipla can get away with the introduction of this drug.
The stock currently quotes at Rs 1,004 at an earnings multiple of around 44 times, the highest earnings multiples the company has enjoyed over the last three years. One reason for this could be the expectation that compulsory licensing for the anti–AIDS drug (where companies other than the original patent holder can also sell the patented drug) could open up a big market for the company.
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