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Cipla to raise Shs168bn in IPO

Kampala, Uganda | ISAAC KHISA | Drug manufacturing firm, Cipla Quality Chemical Industries Limited, hopes to raise at least Shs168.56bn through an Initial Public Offer that opened on August 14-24.

The firm that is 62.3% owned by India’s Cipla, is offering 657.17million shares at a cost of Shs 256.5 per share.

Nevin Bradford, the firm’s chief executive officer, said the proceeds from the offer, which represents 18% stake of the entire shareholdings, will be used to expand drug production capacity and portfolio.

“We are looking at increasing the volume of existing drugs and also add on new ones (in our portfolio),” he said.

He said the firm, whose monthly production capacity has increased from merely 25million tablets per month in 2009 to 100million currently, is expected to reach 130 million soon.

Besides the production of World Health Organisation pre-qualified anti-malarials, anti-retrovirals and Hepatitis B drugs, the firm plans to add new drugs including, tuberculosis, hypertension and diabetes to its portfolio through licensing arrangements with the parent company Cipla or third parties.

This comes nearly five years since the firm expressed interest to list on the Uganda Securities Exchange (USE).

The Kampala based USE last had a listing in 2012 with the electricity distributor, Umeme. With the new listing, the bourse now has 17 local and regional companies.

Emmanuel Katongole, the executive director at Cipla QCIL said Cipla will retain the firm’s majority shareholdings of 51% for strategic reasons such as technological transfer, procurement efficiency and operational excellence.

“We are listing at particularly exciting time in the evolution and development of the company,” he said.

“Our mission to provide access to quality affordable medicines has never been more relevant. We see tremendous potential for growth, geographically and in the scope and breath of our product offering.”

USE CEO, Paul Bwiso said the drug firm is highly commended for allowing members of the public to own part of the firm as it starts a new growth journey.

“We know that many companies are not willing to come to the market because of issues of scrutiny from the public, investors and analysts. Cipla’s decision to open up to the public is highly commendable,” he said. He added that more than Shs1.2trillion has been raised through the stock exchange to grow business.

Cipla QCIL bold move comes when Sub-Saharan Africa has the highest incidence of a range of communicable diseases and accounts for 93% of malaria-related and 73% of HIV/AIDs related deaths in the world and approximately 12 and 7% of Hepatitis B and C infections, respectively, according to the firm’s prospectus.

Similarly, the healthcare spending in the region has demonstrated high growth rates from US$20bn in 2000 to US$85bn in 2015 driven by economic development and donor funding.

CIPLA QCIL started operations in 2005 as a joint venture between Quality Chemical Limited (QCL), a Ugandan company dealing in the importation and distribution of pharmaceutical drugs, and Cipla Ltd, a leading Indian pharmaceutical company specialising in manufacturing anti-retroviral drugs (ARVs) and Artemisinin-based Combination Therapies (ACTs) to combat HIV/Aids and malaria respectively.

Since then, the firm has initiated multiple capacity expansion programs and portfolio expansions, including the launch of new therapies.

Cipla QCIL’s plant is currently approved by drug authorities in 13 Sub-Saharan African countries and its products sold in nine countries – Uganda, Kenya, Cameroon, Angola, Tanzania, Zambia, Namibia, Mozambique and South Sudan. It also hopes to sell its products to 19 countries by the end of 2020.

The firm manufactured over 1 billion tablets – the highest volume in its history, with a monthly production in December alone reaching a record of 124 million tablets.

In terms of returns, the firm has consistently recorded growth in revenues over the last five years due to rapid expansions into new markets.

For instance, its revenues have increased from Shs89.7bn as at the end of March 2013 to Shs227.3bn as at the end of March 2018.

Consequently, the firm’s net profit has increased from merely Shs8.28bn to Shs44bn. Its assets have grown from Shs106.7bn to Shs 209.29bn in the period under review.

With this upward trend curve for net profits, assets in addition to its planned expansion strategy, one can easily conclude that the company could be a good buy.

Cipla QCIL drug portfolio

  • Duovir-N (ARV) and Lumartem (ACT)
  • Trioday
  • Efavirenz and Duovir
  • Duomune and Nevimune
  • Texavir and Zentair

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