Cipla joins the race to build specialty branded business in US

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Viswanath PillaMoneycontrol BureauCipla, India’s sixth-largest drug maker by sales doesn’t want to miss out on building a specialty branded business in the US market. “Today Cipla is catching up on generics (in US market), two years later we don’t want to be catching up on specialty,” said Umang Vohra, Managing Director and Global Chief Executive officer of Cipla in recent call to analysts. Vohra said the company has identified products and has started work on development, but declined to provide any specific details of the products. Cipla will be falling back on its core strengths in respiratory and central nervous system (CNS) for build-up of the specialty pipeline in US. The company has also indicated that it is not going to shy away if there are any in-licensing opportunities on offer.Cipla said a portion of the Rs 4,000 crore capital, which it proposes to raise via a combination of debt and equity, will be deployed on developing products, building a front end sales and distribution network and brand promotion for its specialty business.Cipla, which is late to US generics party, has been trying to expand in the US market through acquisitions. The company bought InvaGen and Exelan for USD 550 million in September 2015 and plans to get in to specialty play to catch up with other Indian rivals who generate half their sales from US at much higher margins. The US market contributed around 15 percent of Cipla's overall revenues of Rs 13,678 crore.Cipla is following the footsteps of Sun Pharma and Dr Reddy’s in US — who have managed to build a pipeline of differentiated high-value and high-margin products in the specialty branded generics space by increasing investments in research and development and through acquisitions — as the growth rate in the plain vanilla generic drugs business is slowing due to pricing pressure in the US.Sun Pharma is focusing on dermatology, oncology and ophthalmology for its US branded specialty play, while Dr Reddy’s has set its eyes on dermatology and CNS segment. The spending on specialty drugs in US reached USD 150.8 billion in 2015, up more than 21.5 percent from 2014 on an invoice price basis, according to IMS Research.Many specialty medications provide targeted therapy for severe, chronic and rare diseases. Also a specialty product needs to demonstrate differentiation in terms of formulation, drug-device combination or a new indication, requiring clinical trials.For specialty medicines – the company’s will have to provide patient and physician services, reimbursement support and therapy management assistance, in addition to retail and branding investment.Analyst say it will be time-consuming for Cipla to build a specialty pipeline from scratch, and expect the company to take inorganic route to build its specialty portfolio.“Unlike generics specialty drugs are driven by innovation, so it takes 4-5 years to develop specialty drug, M&A route will cut down that time,” said Ameyi Chalke, research analyst at HDFC Securities.