Cipla's Q4FY19 results (Outperformer) - gSensipar enhances a good quarter
Q4FY19 result highlights
- Revs for the quarter stood at Rs 44bn vs est of Rs40bn; Q3 was Rs 40bn. Beat primarily driven by the US business which reported revs of $163mn vs est of $124mn due to at-risk launch of gSensipar. Adj for this launch (~$41mn), overall rev. stood at Rs 41.1bn. India business revs declined by 5.4% qoq to Rs 15bn vs est of Rs 15.3bn; SAGA sales also beat est with rev of Rs 8.23bn vs est of Rs 7.5bn
- Boosted by gSenispar, EBITDA was Rs9.6bn (46% qoq) vs est of Rs6.6bn despite Rs0.5bn non-recurring expenses; EBITDAM- 21.8% (17.7% in Q3) vs 16.5% est. Adj. EBITDA stood at Rs 7.5bn vs est of Rs 6.6bn with adj. EBITDAM at 18.2% vs est of 16.5%
- GMs came higher at 65.2% (62.6% in Q3) vs est of 64%. SG&A cost came at Rs19.6bn (+6% qoq) vs est of Rs19.1bn. R&D spends were lower at Rs3bn vs Rs2.9bn in Q3.
- Rs2.07bn impairment charge in US acquisition impacted PBT. Reported PAT stood higher at Rs3.6bn (10.7% qoq) vs est Rs2.9bn.
- Mgt didn’t provide any guidance for the way forward on gSensipar sales given that it is under litigation. We expect some clarity to emerge on the litigation outcome over next few weeks.
Key positives: Continued traction in US sales
Key negatives: Low EM sales
Impact on financials: We have marginally increased our FY20/21 est
Valuations & view
Cipla’s FY19 performance, though boosted by gSensipar sales in Q4, builds on the turnaround visible from FY18 onwards. Sequential pick-up in adj. US sales (~$122m for Q4FY19 vs $108m in Q2) mitigates concerns on Cipla’s ability to grow the US business. With a steady pace of new ANDA approvals / launches, we expect the run-rate to steadily improve going forward. Likely initiation gAlbuterol MDI / gTruvada supplies will add to the US sales momentum in FY21. The expected pickup in high margin US sales will help to effectively fund the desired R&D investments across generics and speciality and also improve the overall profitability of the business. This will complement the steady growth in the domestic franchise. Likely bottoming of the EM and South African business by FY19 will further aid profitability going forward. Maintain Outperformer.
Cipla is a global pharmaceutical company based in India. Co. manufactures over 1,000 pharmaceutical products for therapeutic areas such as cardiovascular, children's health, dermatology and cosmetology, diabetes, human immunodeficiency virus/acquired immuno deficiency syndrome (HIV/AIDS), infectious diseases and others. Co.'s operations are organized along four business units: Active Pharmaceutical Ingredients (API - 200 generic and complex APIs); Respiratory (inhalation therapy); Cipla Global Access (HIV/AIDS, malaria, multi drug-resistant tuberculosis, and reproductive health); and Veterinary. Co.'s products are sold in India, Africa, Middle East, Europe, Americas, Asia and Australia.
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