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Cipla factories need more medicine

Johannesburg - While delivering impressive results, pharmaceutical group Cipla Medpro  is yet to convince investors its turnaround strategy for its manufacturing division will deliver on promises.

Reporting for the year to end-December 2009 on Thursday, Cipla said the manufacturing division posted a R35.6m loss before interest and tax. In 2008, the loss was R15.3m for the year.

The manufacturing facility produces some of Cipla's own brands - Laxette, Pynmed, AlkaFizz, Gastrolyte, Efavirenz and Abflex - as well as for third parties secured by the group during 2009.

Cipla said initial orders were conservative for the manufacturing division, but raised hopes that volumes will increase as its relationships with third parties grows. "Additional contract manufacturing negotiations are ongoing and will deliver results," the group said.

It added that state tenders for 2010/2011 will generate about R80m in additional revenue for the division.

Cipla has been restructuring its manufacturing division, investing R225m in its Durban-based plant and putting up sophisticated equipment.

In line with market expectations

Reuben Beelders, analyst at Gryphon Asset Management, said it was unclear whether problems faced by Cipla's manufacturing division pertained to cost structures or other factors, but it was noticeable that the restructuring exercise was taking longer than expected to yield results.

The group nevertheless produced impressive numbers in the ended year, aided by its relationship with Cipla India. The group lifted diluted headline earnings per share by 25% to 36.5c. Group revenue was 27% higher at R1.262bn.

Beelders said the results were good and in line with what the market expected.

Without giving details, Cipla said it has concluded a significant collaboration agreement with Biomab/Desano of China, which will open up the doors to extensive range of biosimilars, biotechnology and monoclonal antibodies.

The group also reaffirmed its strategic partnership with Cipla India, saying the relationship continued to deliver research and development on newer generics.

The group also said it will add an oncology division to its already comprehensive medicines portfolio in 2010/2011.

Adding to its current export markets - Namibia, Botswana, Lesotho and Swaziland - Cipla said during 2009 the African trade division started regulatory approval processes in various countries including Kenya, Zambia, Uganda, Nigeria and Ireland.

It said dossiers have been submitted, key trading partners appointed in each country and the division was ready to commence trading as soon as dossiers are registered.

- Fin24.com

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