 "Cipla to tap high revenue markets, products")
Drug maker Cipla, known for its revolutionary image not only for selling low-priced generic medicines but also for challenging patents of multinational, may change its business strategy. On one hand, the company is planning to focus more on the US and emerging markets such as Malaysia, on the other its product mix is witnessing a shift to include more high-margin products such as oncology and inhalers, it is learnt.
The idea behind the change is to increase revenues and survive competition, according to a source. “For instance, the company is looking at setting up a manufacturing facility in Malaysia as it is one of the fastest growing and lucrative market,” he pointed out. Cipla did not reply to Business Standard’s questions on the matter.
So far, Cipla garnered most of its revenues through contract manufacturing and operated in developed markets like the US primarily through sales and distribution partners. However, the company is now planning to launch products in the US on its own. It is believed to be aggressively filing applications with the US Food and Drugs Administration (US FDA) seeking approvals for its low-cost generic medicines.
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Besides markets, the company is also making a gradual shift from low-margin tender based anti-retroviral medicines to high-margin products, such as oncology drugs and inhalers. According to an industry analyst, the contribution from anti-retroviral drugs was 20-25% two years ago, while it has come down to 15% now.
“It is essential for the company to change its strategy as its peers have already exploited the opportunity and experienced growth. Cipla, as compared to other companies like Lupin and Sun Pharma, has not used its potential so far. Its strategy was more revolutionary, focusing on a very niche segment which was cost-intensive,” the analyst said.
Apart from the US and Malaysia, Cipla is eyeing new markets like Turkey, Morocco, Brazil and Nigeria. “Different models are being considered for various markets. In some markets, the company may opt for partnership, while in others, there can be partnerships, joint ventures or even small scale acquisitions,” the source said.
Some analysts opine that the shift in business strategy is a result of change in Cipla’s top management, which is now dominated by young minds. The company, currently under the chairmanship of Yusuf Hamied, has undertaken a major management restructuring in past two to three years. After inducting two Hamied scions a year ago — Kamil (31) and Samina (36), who are children of Yusuf Hamied’s brother M K Hamied, the
Mumbai-headquartered company appointed many new, young as well as international faces in the company. This includes the company’s new Managing Director and CEO Subhanu Saxena, who worked in Novartis AG before joining Cipla. Saxena has also worked with companies such as Citicorp, The Boston Consulting Group and PepsiCo Inc across markets in Europe, North America, Africa and Asia.
Besides Saxena, Cipla has also hired other people in the key positions of finance, international business and strategy from competitors such as Lupin and Dr Reddy’s in past few years. In July, Cipla announced the hiring of Frank Peters (ex-Teva and GSK) to head its respiratory business and the European Union region.