• Dangerous games

    Employers' body Neasa is playing a potentially dangerous game, says Terry Bell.

  • Rational thinking

    All players should first consider the net result of their actions, says Leopold Scholtz.

  • Telkom's property poser

    BEE may be hindering Telkom's plans to offload redundant real estate, says Gugu Lourie.

Data provided by iNet BFA
Loading...
See More

More India ties may be Cipla Medpro remedy

May 20 2011 10:39 Andile Makholwa

Related Articles

Cipla Medpro earnings expected to jump

Cipla factories need more medicine

Cipla upbeat about earnings

Adcock's run of bad luck

Netcare's fine the correct remedy

Rand boosts Cipla Medpro

 
WHAT started off as a supply arrangement between Cipla Medpro South Africa [JSE:CMP] and its Indian counterpart Cipla India promises to be an interesting evolution to watch. Of course, it’s still early days.

But a deal between the companies a few years down the line may not be entirely far-fetched. At the very least, Cipla India may take strategic equity in South Africa’s emerging pharmaceutical company.
 
Since graduating from the JSE’s AltX in 2005, CMSA has been a rising star and one of the favourite small caps on the main board. Its price competitiveness – thanks to its Indian connection – has been its strength. However, CMSA is yet to chart a path independent of its strategic partner Cipla India.

CEO Jerome Smith keeps his cards close to his chest. Nevertheless, latest developments between the groups suggest some coordinated planning. For example, Cipla India is to take a 25% stake in CMSA’s loss-making manufacturing facility Cipla Medpro Manufacturing (CMM).

Whether that’s a sign of more things to come remains to be seen. But what’s clear is CMSA’s ambitious plans are only achievable with the backing of Cipla India.

Pursuant to its 25% stake in CMM, CMSA says Cipla India will provide additional volume and assist it in achieving World Health Organisation and Food and Drug Administration manufacturing approvals in the near future, which will result in increased orders and business for its newly refurbished Durban-based factory.

The agreement will ensure continuity and further entrench CMSA’s relationship with its Indian associate.

As part of its plans to diversify its product range, CMSA will this year launch its Oncology range, commencing with 20 molecules targeting a host of cancers.

Writing in the group’s latest annual report, Smith says it will move into Biosimilars or subsequent-entry biologics over the medium to long term. In all these plans CMSA boasts of its strategic relationship with Cipla India to carry them through.

Smith also touts Cipla India’s market leadership of generic drugs, as CMSA aims to extract maximum value in the increasing use of generic medication due to rising healthcare costs.
 
“Given our extremely strong relationship with Cipla India, which affords us access to one of the best generic pipelines in the world, we believe we will benefit significantly from the increased generic usage in the future, especially in the chronic medication segments,” writes Smith in the annual report.
   
Mark Ansley, a portfolio manager at Cadiz Asset Management, says though it’s possible Cipla India may eventually make an offer for CMSA, such a move is unlikely over the near term because both currently enjoy a “healthy supply agreement”. He says an acquisition of CMSA by Cipla India wouldn’t benefit South African investors.
 
Interestingly, Cipla India is believed to have caused the collapse of Adcock Ingram’s bid for CMSA in 2009, apparently because it said it wouldn’t continue supplying CMSA if it was acquired by Adcock. British multinational GlaxoSmithKline, which for a long time had an array of strategic agreements with SA’s Aspen Pharmacare, eventually took equity in CMSA. It’s not inconceivable Cipla India would later follow suit.       

* This article was first published in Finweek.
* To read more Finweek articles, click here.                                       

cipla medpro south africa
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

A cash flow crunch often occurs in small businesses trying to balance cash coming in with cash going out. Watch this video to help you improve.
 
 

Go solar and save

Households may have to examine alternative forms of energy after Eskom has been given permission to raise electricity prices above the 8% previously granted.

 
 

Start saving...

Where can you stash your cash?
Time the key for retirement saving
Dummy's guide to saving
Save money with affordable account

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...