Cipla Management Discussions

In FY 2021-22, economies worldwide manifested signs of recovery, despite repeated spikes in COVID-19 caseloads due to the emergence of new variants. governments globally, embarked on massive vaccination programmes for local populations as fiscal policies and reforms continued to strengthen economic recovery. Central banks across the world also injected additional liquidity into their economies through various monetary measures to support vulnerable populations and businesses. Consequently, global economy recovered from lows of 2020 with trade re-bounding strongly.

However, as we move into FY 2022-23, rising energy prices, supply chain disruptions and adverse currency movements on account of localised COVID-19 restrictions and geopolitical tensions are expected to drive higher and more broad-based inflation across economies. The emergence of new COVID-19 variants could risk prolonging the tenure of the pandemic therefore requiring continued worldwide access to vaccines, tests and treatments. While monetary policy in many countries will continue on a tightening path to contain inflationary pressures, fiscal policies with limited headroom are likely to prioritise healthcare spending.

Over the past two years, Cipla has strengthened its business model with complex launches and expanded footprint to augment its competitive position in key geographies. Throughout the pandemic, the Company has upscaled its capabilities to support stronger execution and ensure widespread availability of quality medicines from organic portfolio and leveraging partnerships with global MNCs.

Cipla is investing in automation and digitalisation to drive sustainable efficiencies across portfolio selection, manufacturing, supply chain and quality operations. The Companys employees are its invaluable assets and Cipla will continue to invest in strengthening its talent pool to nurture an agile, innovation - driven and excellence - focused culture. The Company is offering its employees and associates a safe return to work approach via hybrid work models across the Companys operating geographies.

During the year, Cipla witnessed robust momentum across geographies with revenue growth of 14% over FY 2020-21 and operating profitability convincingly stabilising between 21-22% range. Geopolitical conflicts and associated supply chain challenges have kept procurement and freight costs at elevated levels. The Company is managing some of the external headwinds by passing on cost escalations wherever possible, continued cost optimisation and managing its product/ geography mix to insulate core margins while balancing growth investments in portfolio, markets and channels.

Ciplas focus continues on maintaining strong growth momentum led by unlocking of its complex pipeline, which is a culmination of consistent delivery across the Companys strategic priorities. Cipla will continue to drive measurable outcomes across business and is committed to deliver sustainable growth, attractive return on investment, maximising stakeholder value and have a positive impact on the environment as we progress on our long-term sustainability goals.


Cipla has emerged as a world-class pharmaceutical Company with a formidable branded and unbranded generic market franchise in over 80 countries on the back of deep- rooted research and development (R&D) capabilities, strong manufacturing, commercial and execution capabilities.

The Companys relentless focus of bringing in best-inclass drugs resonates with its purpose of Caring for Life; serving patients through innovative respiratory drug-device combinations, complex formulations and broad-spectrum capabilities in injectables, oral solids and inhalation amongst others. Over the last five years, the businesses have generated strong stakeholder delight through continued rigour on portfolio execution and financial discipline to drive higher profitability, improved cash flow generation and return on investment. Ciplas focus continues on realising commercial opportunities beyond respiratory and complex generics and injectables, particularly in the space of co-developing biosimilars, inhalation devices, diagnostics solutions, new-age technology platforms and digitised business models. The Company aspires to build a strong global wellness franchise. Ciplas global consumer business is leveraging portfolio strengths and capabilities across India and South Africa, coupled with consumer insights and robust media campaigns to drive innovation, translating into winning benefits for consumers.

Global pharmaceutical industry structure and key developments

Global medicine market size and growth 20H-2026E, constant USD billion2

Over the past two years, global spending on medicines underwent a significant re-prioritisation for the development of vaccines and novel therapeutics to contain the pandemic. While the impact from COVID-19 in 2020 and 2021 has been significant, the long-term impact on growth trends is expected to normalise.

As per the IQVIA report, the global medicine market is expected to reach USD 1.8 trillion by 2026, growing at a CAGR of 3-6% over 2022-2026. While development of vaccines continues in line with the demand for effective booster doses, global spending over the next four years continues to be driven by innovation offset by losses of exclusivity and the lower cost of generics and biosimilars. Leading global therapies such as oncology and immunology, are expected to grow by 9-12% and 6-9%, respectively, through 2026.

In developed countries, medicine spending is expected to be in the range of 2-5% over the next five years. The adoption of new treatments, offset by patent lifecycles and competition from generics and biosimilars, are expected to continue as the main factors influencing medicine spending and growth. In pharmerging countries, medicine spending is expected to be in the range of 5-8% over the next five years. Significant increases in healthcare access were the largest drivers of change in the use of medicines historically, but the trend is stabilising and will result in volume moderation across many markets.

In line with global trends, Cipla deepened its complex portfolio for the US market with the launch of Arformoterol respiratory inhalation solution and the Companys first 505b2 lanreotide injection. Cipla also executed a joint venture agreement with Kemwell Biopharma for developing, manufacturing and commercialising biosimilars. With a vision to help physicians and patients with accurate and affordable diagnosis of COPD, Cipla launched Indias first pneumotach - based portable wireless Spirometer.

Cipla will continue to allocate capital strategically for driving the next leg of the Companys growth and return on invested capital. Over the medium term, clinical trials for respiratory products, peptide injectables and biosimilars are likely to gradually inch up absolute R&D spend run rate. The Company continues to focus on moving up the innovation curve by leveraging data science and digital technology in R&D, coupled with best-in-class commercialisation and create value for all stakeholders.

Expected trends for global pharmaceutical markets

Global pharmaceutical companies are adopting emerging technologies for drug discovery and developments with increasing decentralisation.

Digital ecosystems

COVID-19 restrictions have encouraged patients to embrace digital tools for health management and develop new relationships with HCPs and health systems.

Pharmaceutical companies are transitioning from multichannel to integrated omnichannel for creating harmonised customer-centric experience.

Natural language processing, machine learning and computer vision are used to unlock insights into disease progression, clinical characteristics and development of more targeted and effective therapies for patients.

Accelerated drug discovery and approvals

COVID-19 vaccine breakthroughs have opened up new avenues for mRNA technology with advantages of speed, adaptability and specificity over other virus - specific approaches.

Providing global access to disruptive innovation such as curative therapies (cell and gene therapies) and monoclonal antibodies at affordable prices.

Precision dosing and monitoring will specialty drugs with narrow therapeutic index and wide variations in drug response to reduce preventable adverse drug reactions.

Healthcare budgets and pricing actions

Pro-biosimilar and generic policies will remain a powerful cost containment tool to unlock savings, with new countries formalising the substitution process.

Re-calibration of healthcare budgets will boost healthcare infrastructure for creating ICU capacities, testing capabilities and associated infrastructure.


Increasing solidarity for COP26 objectives and delivery on sustainability commitments.

Sustainable packaging, inclusive clinical research and promoting diversity in recruitments.


DCGI granted approval to imported and indigenous COVID-19 vaccines for emergency use in adults and children, resulting in expedited large-scale vaccination drive in the country.

The NPPA is working on updating the National List of Essential Medicines (NLEM) and fixing the prices of drugs.

During the year, several domestic export-oriented companies received approval under the Production Linked Incentive (PLI) scheme introduced in 2020. This is likely to set into motion the implementation phase of the scheme and drive the focus on boosting indigenous manufacturing in India.

The United States of America

The USFDA has been working to facilitate the development, review, approval, supply, and availability of vaccines and therapeutics for the management of COVID-19 in adults, as well as ensuring the safety of marketed products. The agency also released various guidelines for addressing these variants and clarity regarding remote FDA inspection of drug facilities.

Inspections for manufacturing plants exporting to the US have resumed gradually in India by USFDA, which were deferred owing to travel restrictions for on-site inspections during the pandemic.


In 2021, the South African Health Products Regulatory Authority (SAHPRA) prioritised approvals for the emergency use of COVID-19 vaccines in the local adult population. To improve communication between SAHPRA and the applicants and to expedite approvals, the agency implemented digital platforms with an online portal for the submission of critical applications.

Healthcare authorities outside South Africa continued to focus on harmonisation of protocols across African countries, so that patients have access to safe and cost-effective medications and digital technologies.


In March 2021, the European Commission published the roadmap for revising pharma regulation in Europe. While the roadmap is in a draft stage, the aim is to facilitate new technologies that address unmet needs and provide enhanced incentives that promote innovation and support increased affordability and access to medicine.

The UK-MHRA also published a 2021-23 delivery plan.

The plan highlights the opportunity to position UK as an attractive market for the development, manufacture and supply of products post-Brexit. It identifies the passing of New Medicines and Medical Devices Act, 2021 as the vehicle for regulatory evolution.

Emerging markets

In 2021, regulatory authorities across Emerging markets prioritised the COVID-19 approvals for emergency use. Emerging pharma markets have positive long-term fundamentals in light of the ageing world population, incidence of chronic ailments and increasing access to health systems as insurance coverage improves. This will continue to fuel growth in demand for high quality, on-demand insights, diagnosis and treatment options.

Financial Performance

Growth in Key Markets

One-India: In FY 2021-22, the One-India business witnessed significant traction, led by strong core portfolio tailwind in prescription and trade generics businesses, along with continued supply of COVID-19 products during the second and third COVID-19 wave in India.

Overall, the One-India business grew 27% for the year and after adjusting the contribution from COVID-19 products, the revenue growth was 25% over last years base. The focus for FY 2022-23 continues to be on maintaining market-beating growth, increasing the share of chronic therapies, continuing growth-linked investments and enhancing patient experience with digital analytics and data science.

North America: Ciplas North America business delivered revenue at a multi-year high of USD 594 million, growing 8% on a Y-o-Y basis, led by strong traction in respiratory assets as well as contribution from peptide launch during the year. The Companys flagship respiratory products continue to command a strong market share in generic and overall markets; while maintaining strong serviceability levels across respiratory and complex portfolio. In FY 2021-22, the Company received approval for the first 505b2 version of lanreotide injection, which expands its peptide portfolio and is in line with its aspiration to improve the share of complex assets.

South Africa, Sub-Saharan Africa and Cipla Global Access (SAGA): The SAGA region grew by 6% on a Y-o-Y basis in USD terms, driven by strong traction in the SA private market (15% Y-o-Y in ZAR terms) and commercial excellence on new launches. The performance in the SSA and tender businesses in SA and CGA were soft due to weak demand in line with expectations.

International Markets: The international markets comprising of Emerging markets and Europe businesses, navigated strong geopolitical headwinds and managed to maintain overall scale at USD 385 million. The DTM business continued to grow strongly across geographies. During the year, critical respiratory filings were made which are likely to drive revenue over the medium term.

Active Pharmaceutical Ingredients (API):

The API business reported a revenue of USD 102 million and continued to deliver high margins, robust order book and significant visibility of seedings and lock-ins.

Key Financial Highlights

Total income from operations: In FY 2021-22, the Companys revenue grew by 14% to Rs 21,763 crores. The performance for FY 2021-22 was driven by strong momentum in One-India, US and SAGA region as well as support from COVID-19 products. The core portfolio growth (excluding COVID-19) stood at 12% over FY 2020-21. The Company continued to maintain strategic inventory of critical raw materials, robust supply of essential medicines and prioritising critical launches in the pharmaceutical and consumer businesses.

FY 2021-22: Break-up of revenue by geography*

Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA):

In FY 2021-22, the Company reported an EBITDA of Rs 4,578 crores (FY 2020-21: Rs 4,303 crores) with EBITDA margin of 21%

(FY 2020-21: 22.5%).

During the year, the rigour on cost and operating efficiency, coupled with initiation of clinical trials and growth-linked investments, continued. The reported numbers also include one-time COVID-19 - related inventory provisions, business restructuring and other charges driving the moderation in comparison to last years profit figures. The core operating profitability is strong and reflects the strength of the underlying business fundamentals.

Employee expenses: Ciplas employee expenses for the year stood at Rs 3,530 crores, an increase of 8.6% over FY 2020-21. The increase was largely due to annual increments and performance-linked components.

Other expenses: In FY 2021-22, the other expenses, which includes R&D, quality, sales and marketing, regulatory and manufacturing, among others, stood at Rs 5,185 crores, increasing by 20.5% over FY 2020-21. While the Company has retained the efficiencies from re-imagination and operational initiatives taken in FY 2020-21, the initiation of clinical trials as well as growth-linked investments during the current year are driving the Y-o-Y increase in other expenses for FY 2021-22. The other expenses accounted for 23.8% of the revenue (FY 2020-21: 22.5%).

R&D Investments4:

The total R&D investments (opex including depreciation) during the year stood at Rs 1,122 crores or 5.2% of overall revenues.

R&D spend increased by 21% vis-a-vis FY 2020-21, driven by initiation of clinical trials on a respiratory asset as well as other portfolio development efforts, which continue to remain on course. As on 31st March, 2022, Cipla has 169 approved ANDAs and NDAs, 19 tentatively approved ANDAs; and 69 under approval ANDAs and NDAs for the US markets.

Depreciation and Amortisation:

During FY 2021-22, the depreciation and amortisation expenses (including the impact of change in lease accounting) stood at Rs 1,052 crores (FY 2020-21: Rs 1,068 crores).

Finance cost:

During FY 2021-22, finance expenses stood at Rs 106 crores (FY 2020-21: Rs 161 crores). The Y-o-Y decline was primarily on account of prepayment of USD 137 million term debt raised for InvaGen Pharmaceuticals Inc. acquisition.

Tax expenses: The effective tax rate stood at 26.7% for FY 2020-21.

Profit after tax: The profit after tax (PAT) for the year was Rs 2,517 crores or 11.6% of revenue (FY 2020-21: Rs 2,405, 12.6%). Growth in operating profitability, lower depreciation and lower interest expenses on reducing debt drove 5% growth in PAT in FY 2021-22. The reported PAT numbers include the impact of impairments in assets, largely on account of investment in Ciplas associate company Avenue Therapeutics Inc. as well as forex loss on receivables due to sharp depreciation of LKR Vs USD.

Debt to Equity: Robust operating profitability and strong free cash-flow generation enabled the Company to maintain a healthy debt-to-equity ratio, improving it to 0.05 (FY 2020-21: 0.11). The Company prepaid USD 137 million long-term debt taken for InvaGen Pharmaceuticals Inc. acquisition during the year. As on 31st March, 2022, the long-term debt stands at ZAR 720 million in South Africa and USD 7 million in Uganda. The Company also has working capital loans of USD 49 million, EUR 2 million and others, which act as natural hedges towards receivables. Driven by the relentless focus on cash generation and rigour on cost discipline, Cipla continues to be a net cash positive Company at 31st March, 2022.

Interest Coverage Ratio: Growth in operating profitability and reduction in interest expenses on account of debt repayments improved the interest coverage ratio to 43 in FY 2021-22 (FY 2020-21: 26.8).

Debtors Turnover Ratio: Strong control on collections across geographies improved the debtors turnover ratio to 6.3 in FY 2021-22 (FY 2020-21: 5.2).

Return on Net-Worth (RoNW)5: In FY 2021-22, the Company continued to maintain healthy RoNW of 12.8% (FY 2020-21: 13.8%). The Y-o-Y moderation is attributed to lower financial leverage (FY 2021-22: 1.25; FY 2020-21: 1.33) as the Company repaid outstanding long-term debt for InvaGen Pharmaceuticals Inc. acquisition during the year.

The Company is committed to drive sustainable expansion over the near-to-medium term.

Inventory Turnover Ratio: In FY 2021-22, Cipla maintained stable inventory turnover ratio of 1.7 (FY 2020-21: 1.6) driven by prudent inventory planning of medicines including COVID-19 products.

Current Ratio: In FY 2021-22, Cipla maintained a strong liquidity ratio, reflected in current ratio of 2.99 (FY 2020-21: 2.87).

Debt Service Coverage Ratio (DSCR)6: In FY 202122, the Company repaid the outstanding debt raised for InvaGen Pharmaceuticals Inc. acquisition. The DSCR for the year FY 2021-22 stood at 2.97 (FY 2020-21: 2.92).

Debt to EBITDA: Growth in operating profitability, healthy free cash flow generation and lower debt enabled the Company to maintain robust Debt to EBITDA ratio, improving to 0.23 (FY 2020-21: 0.47).

No material changes and commitments have occurred after the close of the year till the date of this report, which may affect the Companys financial position. Additionally, there have been no significant changes in other key financial ratios requiring disclosure and explanation as per the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Business Performance and Outlook One-India

Ciplas One-India business comprises branded prescription business, trade generics and consumer health business (incorporated under Cipla Health Limited). In FY 2021-22, the One-India business experienced significant traction, led by strong core portfolio tailwinds in branded prescription and trade generics businesses, along with support from the COVID-19 portfolio during the second and third COVID-19 waves in India. Our flagship consumer brands including the transitioned brands have grown bigger and bolder in FY 2021-22.

Overall, the One-India business reported Rs 9,828 crores in revenue and grew 27% during the year and after adjusting for contribution from COVID-19 products; the revenue growth was 25%. In-line with our One-India strategy, we have seen strong execution across portfolio and distribution synergies helping us drive strong growth across the three businesses which is tracking close to the Rs 10,000 crores mark with strong volume traction across therapies and business segments.

Branded Prescription Business

In FY 2021-22, Ciplas branded prescription business crossed a strategic milestone of USD 1 billion in revenue, building a formidable branded franchise in the home market with a high-quality mix of acute and chronic therapies. The core prescription business in India excluding COVID-19 grew strongly by 25% on a Y-o-Y basis.

The branded prescription business continued the marketbeating growth driven by sustained traction across therapies in core portfolio annually. As per IQVIA MAT March, 2022, Cipla continues to maintain healthy ranks and market shares in key therapy areas across Respiratory, Urology, Anti-infective and Cardiac. The focus continues on creating depth in antidiabetics and oncology therapies, building on existing and new partnerships with Global MNCs.

Therapy Market Rank 1 Market Share Cipla Growth
Overall 3 5.2% 16.1%
Chronic 2 7.9% 12.3%
Acute 7 3.7% 21.3%
Respiratory 1 22.2% 30.4%
Urology 1 14.2% 7.7%
Anti-infective 4 6.9% 24.9%
Cardiac 5 5.3% 6.8%
Gastro-Intestinal 9 2.9% 17.7%
Anti-diabetics 27 0.8% 293%

Source: IQVIA MAT March, 2022

Over the last four years, Cipla has fostered strong partnerships with global MNCs for strategic widening of therapy base with specialty offerings across Anti-diabetic with Eli Lillys and Boehringer Ingelheim and Oncology with Roche. Ciplas in-licensing franchise has grown at 77% CAGR over FY 2018-22. With an ambition to increase access to innovative medicines and enhance the chronic portfolio, Cipla entered into a partnership with Eli Lillys for the flagship diabetes products Humalog? and Trulicity? in India. The in-licensing franchise is well poised to achieve over Rs 500 crores in annualised revenue in FY 2022-23.

Branded Prescription Outlook for FY 2022-23

Cipla will continue focusing on maintaining market-beating growth across therapies, increase in the share of chronic therapies, industry-leading MR productivity and enhancing patient experience with digital analytics and data science.

Trade generics business

Ciplas trade generic business continues to drive patient access to high quality medication beyond metro cities of India. Cipla operates the largest trade generics franchise in India offering robust coverage to Tier 2 and below towns with 5,500 stockist network and services 15,000 pin codes.

In FY 2021-22, the business continued its focus on further strengthening its leadership position in the domestic markets, expanding portfolio breadth with targeted launches and deepening connect with channel.

The trade generics business maintained strong momentum in FY 2021-22. The performance was attributed to traction in flagship brands, enhanced customer engagement and utilisation of digital mediums for business such as chatbot for retailers and integration of stockists through Cipla Connect. The business forayed into newer therapies such as thyroid management, entered into injectables segment and launched products across 19 brands, thereby strengthening chronic offerings.

High customer engagement levels in Ciplas trade generics business have driven healthy orders from Tier 2 towns and below in India. Some of Ciplas flagship generics brands have scaled up significantly, which reflects their well- entrenched positioning and consumer appeal, built via targeted channel communications in these markets.

Trade Generics Outlook for (FY 2022-23)

Ciplas trade generics business continues to maintain leadership position in generics space that delivers value through strong retail connect, leveraging phygital medium and customer-centric communication.

* Driving strong brand building across illness and wellness segments.

* Investing in digital initiatives to get closer to customers.

* Widening portfolio offerings and segments.

Consumer business

In FY 2021-22, the consumer business continued to drive the illness to wellness theme led by brand-building initiatives, deepening distribution and category innovations.

Note 1: Including pharmacies

The business reported robust double-digit growth adjusted for brands transferred from trade generics business. The performance was led by robust traction in anchor and transitioned brands during the year driven by high consumer recall benefiting from robust media campaigns and meaningful consumer insights throughout the year.

Anchor Brands

In line with the One-India strategy, the Company has also announced the transfer of the consumer business undertaking to Cipla Health Limited (CHL). The consumer business undertaking includes brands with high consumerisation potential across five categories from branded prescription and trade generics businesses. The transaction is in the execution phase and is expected to be completed during FY 2022-23.

Consumer Business Outlook for FY 2022-23

* CHL will continue the growth momentum by making big brands bigger, strengthening current portfolio position in the market and build a formidable franchise to improve consumers lives every day.

* CHL will focus on brand-building on the already transitioned brands, while also exploring inorganic opportunities and foray into D2C.

North America

Ciplas North America business reported revenue at a multi-year high of USD 594 million led by a strong traction in flagship respiratory assets as well as contribution from peptide launch during the year. Ciplas core formulation business in North America contributes 20% of Ciplas topline in FY 2021-22.

The Companys flagship respiratory products continue to command a strong market share in generic and overall markets. Ciplas Direct-to-Market (DTM) respiratory portfolio reported 28% Y-o-Y growth in FY 2021-22. Ciplas unmatched service levels of all products including respiratory portfolio is a testimony to the Companys ability to deliver complex product portfolio in the US market.

Market Segment TRx Overall Market Share
Albuterol 172%
Arformoterol 29.8%

Source: IQVIA weekly TRx ended 31st March, 2022

During the year, the business portfolio in North America witnessed a steady momentum in select products, which along with the respiratory and complex portfolio positioned the portfolio to better respond to price erosion seen in the rest of the portfolio.

With a well-designed manufacturing footprint and capabilities, balanced capital allocation across organic and inorganic initiatives, Ciplas DTM portfolio has delivered a strong 20% Y-o-Y growth in FY 2021-22. The DTM portfolio maintained its position among the top ten TRx generic players in the US.

In FY 2021-22, the Company received an approval for the first 505b2 version of lanreotide injection. This approval expands its peptide portfolio and is in line with the aspiration to improve the share of complex assets. Cipla expects a sustainable ramp-up on this product over the medium term. During FY 2021-22, the Company continued its R&D investments for the US market, which has resulted in pipeline expansion to include multiple differentiated assets. During the year, Cipla filed 11 ANDAs and received 9 final approvals (including conversion from tentative approval to final approval). These include ANDAs owned by Cipla and InvaGen Pharmaceuticals Inc. only.

North America Outlook for (FY 2022-23)

The near-to-medium term focus for the North America business is targeted on maintaining high serviceability of existing products and upcoming launches in the respiratory portfolio, expanding the peptide portfolio through internal development and partnerships, strengthening the high value complex generic pipeline.

Respiratory franchise in the US

Cipla has been leveraging its existing respiratory capabilities and investing significant resources with a vision to expand its respiratory franchise in the US. Currently, the Company is working towards respiratory products under various categories such as ICS, ICS+LABA, LABA, LAMA. As on date, the Companys commercial respiratory portfolio includes Budesonide repsules, Albuterol MDI, Arformoterol inhalation solution and Ipratropium + Salbutamol inhalation solution.

Under our Nasal spray category, Cipla got approval from the USFDA for two generic products: Sumatriptan nasal spray and Dihydroergotamine mesylate. These approvals proved Ciplas capability in handling different dosage forms and complex drug device combination products, thus meeting the requirement of the patients in need. The Company has filed the generic fluticasone propionate and salmeterol inhalation powder (100/50 mcg) (gAdvair) in early FY 2020-21 and continue to work with the US FDA for approval.

Respiratory and peptide injectable franchise in the US:

Unlocking of respiratory franchise in the North America with launch of generic MDI, Nasal sprays and repsules, filing of generic Advair and complex respiratory assets.

South Africa, Sub-Saharan Africa and Cipla Global Access

The overall SAGA region grew by 6% on a Y-o-Y basis in USD terms and contributed 17% to the Companys overall revenue. The performance was driven by the South Africa private business (15% Y-o-Y in ZAR terms) which offset the subdued demand in tender business in the rest of Africa businesses in line with expectations.

South Africa

Ciplas South Africa business reported a strong performance during fy 2021-22.

Overall, the South Africa business grew by 4% to ZAR 5.2 billion, led by 15% growth in the private market, which was partly offset by subdued order flow in the tender business. Cipla demonstrated strong resilience during the unrest in South Africa in July 2021, which impacted its facility in Durban.

Driven by proactive initiatives, the facility resumed operations within a record time of one month. Cipla also supported the fight against COVID-19 pandemic by supplying Remdesivir to select geographies under the in-licensing agreement.

As per IQVIA MAT March, 2022, Cipla maintains the 3rd rank in the prescription segment, OTC segment and the overall private market. Both prescription and OTC segments outperformed the market and increased its market share in comparison to previous year. At therapy level, the prescription business significantly outperformed the market and increased market shares across key therapies including Cardiovascular, Dermatological, Systemic Anti-Infectives, Anti-Neoplast and Immunomodulators, Respiratory, GU System and Sex Hormones among others.

Nervous System category continued to be the largest therapy area for our South Africa private business followed by Respiratory category in the prescription segment. Ciplas prescription business contributed 62%, while the OTC business contributed 38%, to overall South Africa private business in FY 2021-22.

Market Segment Market Rank Market Share Cipla Growth Market Growth
OTC 3 7.1% 12.8% 8.1%
Prescription 3 7.7% 12.0% 7.9%
Total 3 7.5% 12.3% 8.0%

Source - IQVIA MAT March, 2022

Market Segment Market Rank Market Share Cipla Growth Market Growth
Respiratory system 2 13.4% 28.3% 21.7%
Nervous system 3 10.8% 8.0% 10.7%
Systemic Anti-infectives 3 8.4% 15.6% 5.8%
Cardiovascular system 4 7.9% 6.9% 2.5%
Alimentary and Metabolism 6 4.8% 1.1% 3.9%

Source - IQVIA MAT March, 2022

Top OTC brands in South Africa private market business

Brand Therapeutic Group FY 2021-22 Y-o-Y Growth%
ACTIN? Pain, Cold, Flu and Other 7.8%
CORYX? Pain, Cold, Flu and Other 51.1%
ASTHAVENT? Respiratory 7.4%
ACURATE? Pain, Cold, Flu and Other 11.7%
FLOMIST? Respiratory 20.9%
BRONCOL? Pain, Cold, Flu and Other 54.6%
FEXO? Respiratory 10.1%

New launches and other strategic developments

In FY 2021-22, our South Africa private business launched 32 products across multiple therapies. As per IQVIA MAT March, 2022, Cipla has the highest number of new launches in the market. The new launches cater to a total market size of over ZAR 3.0 billion, setting Cipla up for growth in the coming years. In FY 2021-22, Cipla launched Cipla Select to promote products with high potential but low historical growth. The Cipla Select portfolio reported a 23% growth in FY 2021-22 via-a-vis a decline in the same period last year.

Key launches in South Africa in FY 2021-22

Brand Name Molecule Therapy Areas
CARIXAN Anidulafungin Anti-fungal
IBUGESIC PLUS Ibuprofen; Paracetamol Pain, Cold, Flu and Other
IBUGESIC FORTE Ibuprofen; Paracetamol; Codeine Pain, Cold, Flu and Other
SEREFLO DPI Fluticasone; Salmeterol Respiratory
ETIFLAM Etoricoxcib Cardio and Diabetes
DAMICAVA Abacavir; Lamivudine; Dolutegravir Infectious Diseases
ACERTA Methylphenidate CNS
UROMAX CO Dutasteride; Tamsulosin Mens Health
EZETIMIBE Ezetimibe Cardio and Diabetes
ENTIRO Lactobacillus CAMS, Foodstuff
Rhamnosus and Other
NUVIGIL Armodafinil CNS

Cipla Global Access (CGA)

Ciplas pioneering efforts and long-standing partnerships with global funding organisations have been at the forefront of expanding access to affordable care for HIV/ AIDS patients over the last two decades. In FY 2021-22, the CGA business reported revenue of USD 67 million supported by strong traction in TLD product sales; the TLD portfolio grew by 80% over FY 2020-21.

There was a significant increase in volumes for the primary 1st line ARV treatment product, Tenofovir/Lamivudine/Dolutegravir 300/300/50 with capacity expansion, efficient operations, and addition of new customers.

Sub-Saharan Africa (SSA)

Ciplas remains committed to expanding its portfolio in strategic DTM markets of Kenya, Tanzania, Uganda, Madagascar, Mauritius and Zambia by developing synergies with the South African business to drive profitable growth. The Company acquired stake in Cipla Quality Chemical Industries Limited (CQCIL), Uganda in FY 2013-14 for supporting Ciplas aspiration of In Africa, for Africa.

The CQCIL plant is a state-of-the-art manufacturing facility in Uganda with focus on antiretroviral (ARV), antimalarial (artemisinin-based combination therapy; ACT) and Hepatitis B medicines, and supplies to the Ugandan markets as well as exports to other African countries.

In FY 2021-22, our SSA business reported revenue of USD 73 million and maintained scale over previous years base. During the year, the SSA business focused on generating savings through market expansion, building strong brands and improving collections across operating geographies. The business caters to 10 markets in the SSA region. It experienced strong momentum in Kenya, where Cipla is the second largest company, with a significant share in respiratory products as per IQVIA MAT March 2022.

CQCIL received WHO prequalification within three weeks for Tenofovir-Lamivudine-Dolutegravir (TLD) demonstrating strong collaboration with regulatory authorities for faster access to new first line ARVs fixed combinations. It registered TLE400 in 17 countries and TLD in 3 additional countries.

SAGA Outlook for (FY 2022-23)

In FY 2022-23, Ciplas South Africa private business will continue to focus on maintaining a strong market position in private and OTC markets, enhance private market presence via organic launches and deepen footprint through partnerships.

The products and categories launched in FY 2021-22 will play a major role in driving the Companys future growth.

The SSA business is progressing well on its strategy launched in FY 2021-22, targeting strong market share across five key primary care therapeutic areas over the next five years. Additionally, CQCIL plans to venture into new therapeutic areas beyond ACTs and ARVs for the next phase of the Companys growth over the medium to long term.

International markets

In FY 2021-22, the international markets business comprising emerging markets and European operations maintained scale at USD 385 million, despite forex volatility, geopolitical challenges and increasing competition in some product categories. The business made key product filings and launches during the year, along with strategic digital and technology initiatives in product development and furthering patient awareness to deepen connect with healthcare professionals and patients across geographies.

In FY 2021-22, the emerging markets business grew by 3% including the contribution from the COVID-19 portfolio. The DTM business contributes 41% of emerging market operations and grew by 20% over FY 2020-21. Ciplas presence in key DTM continues to deepen, reflected in the double-digit marketbeating growth trajectory in Morocco and Nepal of 35% and 12%, respectively in USD terms, driven by respiratory portfolio. Our DTM portfolio in the Australia market grew by 40%, driven predominantly by respiratory as well as partnership with Ferring Pharmaceuticals for oncology and urology therapies. Ciplas strong business focus, reach and execution ensured that Cipla continues to maintain top 3 position in Sri Lanka as per IQVIA MAT March, 2022 and retain top generic player position in various middle eastern markets.

In FY 2021-22, our European business witnessed strong DTM growth, which offset demand challenges on certain products in the B2B businesses. The DTM business contributes 28% of European operations and grew by 25% over FY 2020-21, attributed to the respiratory portfolio in the UK and contribution from new DTM operations in Spain.

In FY 2021-22, the international markets business filed 95 dossiers across key emerging markets and European countries primarily in the Respiratory and Oncology categories.

The business also launched biosimilar Bevacizumab under partnership in Spain in FY 2021-22. The Company has a strong pipeline of in-licensed biosimilars to augment portfolio breadth and meet unmet demand in select emerging markets.

EM DTM % share in overall EM business EM DTM Y-o-Y Growth in USD terms EU DTM % share in overall EU business EU DTM Y-o-Y Growth in USD terms

Key launches in FY 2021-22 across international markets

Product Therapy Geography
Tenofovir +Emtricitabine ARV Australia
Deferasirox Haematology Australia
FPSM DPI Respiratory Australia
Bevacizumab Oncology Spain
FPSM MDI Respiratory Spain
Posaconazole Anti-fungal Spain
Fexofenadine OTC Anti-allergy United Kingdom

Note: FPSM: Fluticasone propionate; Salmeterol xinafoate : DPI: Dry powder inhaler : MDI: Metered dose inhaler : OTC: Over the counter

Coming to Ciplas operations in China, the manufacturing plant set-up in the country was completed during the year and the plant secured all requisite licenses. The business is in the process of filing products and launches are expected over the medium term.

International Markets Outlook for (FY 2022-23)

The international business growth engines are poised to deliver high trajectory in deep markets. The Company continues to proactively monitor external headwinds attributed to geopolitical and currency factors. Ciplas commercial strategy is focused on increased revenue salience from stable economies and deep front-end markets, thus gradually de-risking the global volatility.

Over the near to medium term, the Company is launching commercial operations in big markets such as China and Brazil, coupled with strategic product launches in new markets (Spain and Mexico), which will further accelerate the Companys organic growth journey. The focus continues on profitable and sustainable growth, especially in key markets, backed by investment in differentiated portfolio, continued launch momentum and expanding footprint through meaningful partnerships and strategic acquisitions.

Active Pharmaceutical Ingredients (API)

Backed by its experience of over half-a-century in manufacturing APIs, Cipla has produced 200+ generics and complex APIs. Cipla has a strong dedicated team of 300+ scientists with differentiated product development capabilities across a wide range of chemistries and complex molecules. Ciplas APIs are supplied to 62 countries worldwide and the Company continues to be a preferred partner to many large generic pharmaceutical companies. Cipla covers a wide array of therapies with over 1,246 DMFs available globally.

The API Business demonstrated healthy performance in FY 2021-22. The API business ensured regular supplies to support customers with their critical launches. The API business has also made efforts in de-risking the supply chain for Ciplas focus APIs, by shifting to indigenous suppliers for key starting materials (KSM) and intermediates.

In FY 2021-22, the API Business reported revenue of USD 102 million of which 53% was contributed by Europe and Global Key Accounts (EU&GA), followed by 33% from Emerging Markets (EM) and 9% from North America (NA). The key therapy segments that contributed to these were Anti-retroviral (23%), Gastrointestinal (18%), Respiratory (14%), and Central Nervous System (CNS) (10%). Successful deliveries of differentiated product mix, improved traction in seeding and lock-ins and products launched with key accounts are the key drivers for API business. The API business successfully supplied 100+ distinct molecules to 250+ customers in FY 2021-22.

The business made 25 DMF filings in various countries. The Company has a robust pipeline of over 75+ APIs across regulated markets in various stages of development.

Cipla is keen to partnering with leading generic companies for their new products to further expand in markets such as Japan, Korea, Brazil, and the Commonwealth of Independent States (CIS) countries. The Company plans to enhance its API R&D and manufacturing capacities in therapeutic areas such as respiratory, gastrointestinal and oncology and pursue backward integration for manufacturing KSMs and critical API intermediates to have more control on the supply chain. The Company is focused on productivity and achieved cost optimisation through continuous process/yield improvements. Additionally, Cipla aims to support a higher number of seeding and lock-ins that help in achieving sustainable growth.

API Outlook for (FY 2022-23)

The API business continues to work with Ciplas reimagined strategy to focus on critical and high-demand APIs and to ensure uninterrupted supplies to key customers. Cipla expects to continue growing in FY 2022-23, with a steady inflow of orders from across the globe and by delivering high-quality products to the customers.

Potential developments and risks to the outlook

The Company continues to operate in a challenging and dynamic environment that is still navigating through the uncertainties of the geopolitical conflicts and transitional phases of the COVID-19 pandemic. The nature of the pharmaceutical business also exposes the Company to various competitive and regulatory risks (also refer Enterprise Risk Management section on page no. 42 of this report) in the near term:

Increasing pricing control in India due to expansion of the NLEM and evolving channel landscape in light of growing share of e-pharmacies and associated disruptive business models can potentially impact the branded, trade generics and consumer business in India.

Dependency on China for raw material and key starting material could impact the ability to maintain continuous supply in the event of disruptions. Consolidated customer base, high competition and regulatory requirements could impact product approvals, while continuing pricing pressure in the US.

Increasing regulatory scrutiny could lead to delays in product approvals for the US markets, besides the potential delay in resolution of observations received for the Goa plant.

Geopolitical uncertainties leading to adverse raw material, freight and currency movements in certain markets could impact business growth opportunities in the Emerging markets region.

Shifts in drug usage and healthcare delivery in developed and developing markets on account of COVID-19 and associated supply chain disruptions could have a negative impact.

Human Resource Management and Industrial Relations

At Cipla, we are committed to provide a safe, secure and healthy work environment to all our employees. We strive to exceed the industry and internal benchmarks in workforce productivity and performance. The professional objectives for employees and teams across levels are directly linked with the organisations objectives and philosophy. This conveys and provides a sense of purpose and direction to employees. The key areas for driving HR initiatives at Cipla include emphasis on building a culture of inclusion and respect, ensuring a safe work environment, focus on Capability Building and Careers, and protection of human rights and strong policy framework.

Our vision for #EqualCipla, has been anchored around our purpose of Caring for Life. As we endeavour to build an even more inclusive and diverse organisation, we have been consistently taking steps to ingrain this ethos into our culture. We launched our first Employee Resource Group, Women@Cipla, enabling women to connect, share and learn from each other. Our Winning at Work series, highlighted stories of successful women associates across functions and levels at Cipla. Bringing focus on the enabling ecosystem that has helped them grow meaningfully in their careers. We also launched the #EqualCiplaEqualVoices platform and hosted conversations around support systems at work, challenging perceptions, empathetic leadership, and parenting.

We follow a structured Integrated Talent Management and Capability Building framework consisting of Talent Review Boards and Talent Assessment, leading to cohesive talent actions across all levels. Future-fit leadership capabilities are built through institutionalised processes such as mentoring, coaching and 360-degree feedback. Cipla University is our multi-purpose learning vehicle, a synonym to global learning and development, which aims to drive the capability development agenda through its functional and leadership academies. Each learning intervention is carefully designed and built on principles of instruction design, keeping in mind the alignment of organisational goals and learners experience. The tenets of our digital learning strategy are simplification, standardisation and automation.

The Occupational Health and Safety (OHS) system across manufacturing facilities has enabled Ciplas workers and employees to operate in safe, audited, and certified working environments. The technology-enabled incident tracking system, MySetu, is at the disposal of employees and workers in manufacturing facilities and has helped to improve the awareness for workplace mishaps in time. This has helped in identification of associated risks for their necessary and timely mitigation. For more details on Ciplas approach towards Human Resources, refer page no. 70 of Human Capital.

Adherence to accounting standards

The Company continues to adhere to standard accounting policies under the Indian Accounting Standards (Ind AS), applicable since 1st April, 2016. IND AS 116 pertaining to Leases was the sole addition under Section 133 of the Companies Act, 2013. These policies are to be read along with the relevant applicable rules and accounting principles. Changes in policies, if any, are approved by the Audit Committee.

Threats, risks and concerns

The Cipla Enterprise Risk Management programme covers its key risks across all its business areas. The Investment Risk Management Committee of the Board reviews and discusses the risk updates on a quarterly basis.

During the reporting period, the Company faced heightened risks due to intensifying COVID-19 wave, increased input costs and geopolitical complexities, which mandated rapid risk responses from business teams. Please refer page no. 42 for risk management framework and key risks including the mitigation measures.

The Company laid down risk response measures to:

address business continuity challenges, overcome growth hurdles, tackle geopolitical developments, secure enterprise-wide cybersecurity, adhere with applicable laws and regulations, and further our agenda of achieving excellence in relation to Environment, Sustainability and Governance (ESG) norms.

During the reporting period, the Company worked towards its purpose of Caring for Life by expanding COVID-19 therapy and diagnostics portfolio and striving to maintain seamless supply of critical life-saving medicines. Additionally, the Company continued its efforts to maintain a sound financial discipline through robust working capital management.

Internal control and its adequacy

Cipla has an adequate system of internal controls commensurate with the nature of its business and the size and complexity of its operations. The Company has adopted policies and procedures covering all financial, operating and compliance functions. These controls have been designed to provide a reasonable assurance over:

Effectiveness and efficiency of operations,

Prevention and detection of frauds and errors, Safeguarding of assets from unauthorised use or losses, Compliance with applicable laws and regulations,

Accuracy and completeness of the accounting records, and Timely preparation of reliable financial information.

The current system of Internal Financial Controls (IFC) is aligned with the requirement of the Companies Act, 2013, and is in line with globally accepted risk-based framework as issued by the Committee of Sponsoring Organisations (COSO) of the Treadway Commission.

The Company has an internal audit (IA) function which functionally reports to the Chairperson of the Audit Committee, thereby maintaining its objectivity. The IA function is supported by a dedicated internal audit team and resources from external audit firms.

The annual internal audit plan is carved out from a comprehensively defined audit universe which encompasses all businesses, functions, risks, compliance requirements and controls maturity. The IA plan is approved by the Audit Committee at the beginning of every year. Every quarter, the Audit Committee is presented with key control issues and the actions taken on issues highlighted in the previous reports.

Additionally, a separate Audit Committee meeting is held with the internal auditors and business finance representatives. The focus of the discussions is on measures adopted to strengthen controls, build efficiencies, and digitise and automate processes and controls. The IA function was independently benchmarked with best practices as laid down by the Institute of Internal Auditors (IIA).

The Audit Committee deliberates with the Management, to consider the systems laid down and meets the internal auditors and statutory auditors to ascertain their views on the internal control framework. The Company recognises the fact that any internal control framework would have some inherent limitations and hence has inculcated a process of periodic audits and reviews to ensure that such systems and controls are updated at regular intervals.