The pink of health: Trade generics now key growth driver for Cipla

Vertical witnesses 25% CAGR in 5 yrs

Mumbai-headquartered Cipla’s trade generics business clocked a compound annual growth rate (CAGR) of 25 per cent over FY18-FY22. Its branded prescription business, on the other hand, clocked a 10 per cent CAGR during the same period.

Trade generics are drugs that are pushed directly to trade and not promoted via doctors.

Cipla’s India business posted a 13 per cent CAGR over the FY18-22 period; the branded generics business accounted for 80 per cent of its  total business in the country.  In FY22, the India business of Cipla clocked 27 per cent year-on-year growth to Rs 980 crore.

According to analysts at Motilal Oswal, Cipla’s trade generics business largely focuses on patients beyond tier-2 cities, driven by the 5,500-stockist network; it services around 15,000 pin codes. “The business continued with its momentum and grew 59 per cent YoY in FY22, exhibiting 25 per cent CAGR over FY18-22. This growth was supported by Omnigel, Nicip, Pantosec, Paracip, and Azicip,” Motilal Oswal said.

Cipla's trade generics business is likely to maintain the leadership position in the generics space that delivers value through strong retail connections, the analysts said.

In an earlier conversation with Business Standard, Umang Vohra, MD and global CEO of the pharma major, had said: “Trade generics go where pharma representatives cannot go. Our trade generics sales are from tier-2 cities and towns, and not from metros. Metros and tier-1 cities are covered by medical representatives.” He felt that the Ayushman Bharat scheme and focus on primary health centres shall drive pharmaceutical consumption in the hinterland.

“We now have hospitals beyond tier-2 and 3 cities, too; there is paying power because of Ayushman Bharat. Lots of 20-30-bed small hospitals are coming up, and these will eventually drive pharma sales volumes,” Vohra said.

The need is to have a digitised way to reach these areas, he said.

Cipla has the biggest trade generic business in India, mentions the company’s FY22 annual report, adding that strong traction in flagship brands and order flow across regions attributed to expanding portfolio breadth and deepening connection with the channel.

“High customer engagement levels in Cipla’s trade generics business have driven healthy orders from tier-2 cities and below in India. Some of Cipla’s flagship generics brands have scaled up significantly, which reflects their well-entrenched positioning and consumer appeal, built via targeted channel communications in these markets,” the company said in its FY22 annual report. While Paracip (paracetamol) clocked a 22 per cent CAGR over FY17-22, Azicip (antibiotic) clocked a 43 per cent CAGR.

Cipla started to re-configure its trade generics business in 2019 and rationalised its channel incentives, and also channel partners. The company revamped its domestic distribution business in the first quarter of FY20.

Besides trade generics, Cipla witnessed strong traction in its consumer health business. Between FY18 and Fy22, this segment clocked a 49 per cent CAGR. The performance was led by robust traction in Cofsils, Prolyte, Cipladine, Clocip Naselin, Mamaxpert, and Maxirich.

Focus on consumer health or over-the-counter (OTC) products has been a work in progress at Cipla. It has been re-aligning its India business to leverage the potential of brands across its different businesses in the OTC space