CIPLA - Cipla Ltd. Share Price

In the Q2 FY26 earnings call, Cipla's management, led by Global Managing Director Umang Vohra, highlighted a strong performance with all-time high quarterly revenues of INR 7,589 crores, an 8% year-on-year growth, and an EBITDA margin of 25%. Key forward-looking points include:

1. Guidance Revision: The full-year EBITDA margin guidance has been revised to 22.75% - 24%, down from the previous 23.5% - 24.5%. This revision is attributed to anticipated higher R&D expenses and the expected decline in contributions from generic Revlimid.

2. Market Performance: The One-India business saw a 7% year-on-year increase, with key therapy segments showing robust growth "” anti-diabetes (10%), cardiac (13%), urology (17%), and dermatology (18%). Cipla aims to regain growth momentum and outperform market averages in India.

3. North America Strategy: North America recorded revenues of $233 million, with a market share of 22% in the albuterol MDI segment. The management emphasized enhancing commercial execution and expediting new product launches, including four major respiratory assets expected by the end of 2026.

4. Product Pipeline: Cipla introduced six new products during the quarter, focusing on chronic care and expanding its portfolio in obesity care with the launch of Yurpeak (tirzepatide). They also have plans for upcoming launches in gastroenterology and dermatology.

5. Expectations for Future Growth: The company anticipates that Q3 will typically be strong for respiratory treatments due to seasonal trends, which they expect to bolster revenue.

Management remains optimistic about long-term growth across markets, highlighting their diversified portfolio and strategic partnerships as key drivers.

1. Question: For your GLP-1, do you only plan for fill and finish or do you also manufacture API substances?

Answer: We don't manufacture API ourselves; we procure it, and it's readily available. Currently, fill and finish is managed through contract manufacturing organizations (CMOs), although we're evaluating internalizing some of this in the future. Most of our non-Lilly products will be supplied to various global markets, including the U.S., Europe, and India.

2. Question: Can you talk about the India business? Is there a slowdown in the branded business?

Answer: Yes, we did experience a slowdown due to a lack of an acute season and some team transitions. However, in Q2, there was recovery, and we anticipate aligning with or exceeding market growth in Q3. Our partnership with Eli Lilly for tirzepatide presents a substantial opportunity as we recognize great potential in Tier 2 and Tier 3 towns.

3. Question: Can you provide an update on expected revenues from the U.S. market in the next quarter?

Answer: For Q3, you should not expect significant contributions from generic Revlimid; in fact, it will be marginal. Although it's challenging to provide an exact figure, the overall base business, excluding Revlimid, should still show growth. We carefully monitor consensus estimates and will validate our guidance as we approach Q3.

4. Question: Can you discuss the revenue arrangement with Eli Lilly regarding tirzepatide?

Answer: We will launch Yurpeak with exclusive distribution rights in India, supplied by Lilly, which we will market. The financial arrangement is structured like a typical licensing agreement, where we buy the product at a set price, affecting our gross margin, along with our marketing costs.

5. Question: What are your reasons for revising EBITDA margin guidance to 22.75% to 24%?

Answer: This revision reflects not only the absence of Revlimid's contribution but also increased R&D investments and expected seasonality impacts in Q4. While we anticipate strong growth from core businesses, the logarithmic nature of our investments and lack of Revlimid will impact our margins this year.

6. Question: What strategic changes might we see with the new leadership?

Answer: Achin will drive continuity along with operational effectiveness. We aim to expand our scale in generics and enhance competitiveness, remaining focused on respiratory therapy. Achin will also assess innovative avenues for growth as market dynamics evolve.

7. Question: Can you clarify on R&D spend being higher by 0.5% of revenue?

Answer: Yes, we are adjusting R&D spending upwards, which now stands to exceed planned allocation. This increase results from our strategic decision to expedite certain promising product filings, particularly within generics and respiratory segments.

8. Question: What is your expectation regarding the domestic market growth trajectory?

Answer: We remain optimistic about our future growth prospects, driven by our expanding portfolio, notably in chronic care segments like diabetes and obesity. While the market generally grows at 8-9%, we aim for better alignment, leveraging our product launches and expansions.

9. Question: Is Cipla looking to expand its offering in biosimilars?

Answer: Yes, we aim to enhance our portfolio with both proprietary biosimilars and partnerships. The recent FDA guidelines present favorable conditions for creating a fuller biosimilars portfolio, and we're evaluating opportunities accordingly.

10. Question: What's your estimated market share for lanreotide moving forward?

Answer: We expect lanreotide to continue climbing as we see the impact of expanded capacity. While I can't provide specific percentages, we are consistently aiming to increase our market presence as we cater to increasing demand over time.