Cipla tries to change course, eyes markets beyond US

Shift in strategy due to younger management, say analysts

Drug maker Cipla plans to shift its strategy, on both markets and products, to address issues on competition and revenue.

It has been known for for selling low-priced generic medicines and for challenging the patents of multinational corporations.

Now, it plans to focus more on the US and on emerging markets such as Malaysia; also, the product mix would see more of high-margin products such as those for oncology and inhalers, it is learnt. "It is looking at setting up a manufacturing facility in Malaysia as this is one of the fastest growing and lucrative markets," said a source. Cipla did not reply to Business Standard's questions for this report.

Making its own mark
So far, it garnered most of its revenue through contract manufacturing and operated in developed markets such as America primarily through sales and distribution partners. Now, it plans to launch products in the US on its own. It is believed to be aggressively filing applications with the Food and Drug Administration there, seeking approvals for low-cost generic medicines.

Besides markets, the company is making a gradual shift from low-margin and tenders-based anti-retroviral medicines to high-margin products.

According to an industry analyst, the contribution from anti-retroviral drugs was 20-25 per cent two years earlier; it is now 15 per cent.

"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. Its strategy was more revolutionary, focusing on a very niche segment which was cost-intensive," the analyst said.

Going global
Apart from the US and Malaysia, Cipla is eyeing new markets such as Turkey, Morocco, Brazil and Nigeria.

"Different models are being considered for various markets. In some markets, the company might opt for partnerships. In others, there can be partnerships, joint ventures or even small scale acquisitions," the source said.

Key management changes
Some analysts feel the shift in strategy is a result of change in Cipla's top management, now dominated by young minds.

Currently under the chairmanship of Yusuf Hamied, it has undertaken a major management restructuring in the past two to three years.

Scions on board
It had inducted two Hamied scions a year earlier - Kamil, 31, and Samina, 36, children of Yusuf Hamied's brother, M K Hamied. Also, the Mumbai-headquartered company has appointed many new and young faces, including from abroad.

This includes the new managing director and chief executive officer, Subhanu Saxena, earlier with Novartis AG. He's also worked with Citicorp, The Boston Consulting Group and PepsiCo across markets in Europe, North America, Africa and Asia.

Beside Saxena, Cipla has hired others in the key positions of finance, international business and strategy from competitors such as Lupin and Dr Reddy's in recent years.

In July, it announced the hiring of Frank Peters (ex-Teva and GSK) to head its respiratory business and the European Union region.

STRATEGIC CHANGE

* So far Cipla operated in developed markets such as America primarily through sales and distribution partners

* Now in a strategic move, it plans to launch products in the US on its own

* Apart from the US and Malaysia, Cipla is eyeing new markets such as Turkey, Morocco, Brazil and Nigeria