Share

More India ties may be Cipla Medpro remedy

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.                                       

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.97
-0.1%
Rand - Pound
24.14
-0.1%
Rand - Euro
20.63
-0.2%
Rand - Aus dollar
12.40
+0.2%
Rand - Yen
0.13
+0.3%
Platinum
910.97
-1.4%
Palladium
1,022.57
-4.1%
Gold
2,161.41
+0.1%
Silver
25.14
+0.4%
Brent Crude
86.89
+1.8%
Top 40
66,252
0.0%
All Share
72,430
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders