In Summary

Diversify revenue sources. The drug maker is investigating an acquisition, which it believes will diversify its revenue sources following a huge drop in its profits in March.

Drug manufacturer, Cipla Quality Chemical has said it is considering undertaking an acquisition that will see its revenue sources diversified.
Mr Nevin Bradford, the Cipla chief executive officer, yesterday told Daily Monitor they would be acquiring a pharmaceutical company.
However, he declined to go in details because the acquisition is still under investigation.
“We are currently assessing the possibility of a small but significant acquisition in the pharmaceutical field which will be synergistic to its growth and strategic imperatives,” he said, noting that further details will be communicated in due course.
In notes published along the company’s financials last week, Cipla indicated that it was investigating an acquisition opportunity that will further support growth initiatives as well as help the company to diversify its revenue streams.
Cipla floated more than 657m shares in September last year, after a six-year drought at the Uganda securities exchange (USE).
However, the drug maker’s share price has since the start of year been turbulent, closing yesterday closed at Shs170 compared to Shs256 at the initial public offering.
The company could also face a penalty for failure to issue a profit warning to investors prior to the release of its full-year results at the end of March, which showed a big drop in profits.
Mr Bradford yesterday said they had been engaging USE on an ongoing basis, noting: “We are on a journey with USE to ensure compliance across all aspects and continue to build our relationship.”
Cipla’s profit after tax fell by 84.8 per cent to Sh6.79b as at the end of March compared to Shs44.6b in the previous year, according to its first full-year results published last month.
The drop was attributed to a decline in the Global Fund business because of the redirection of funds from cure to prevention medicines.
Increased competition across funded markets also led to a dip in price of anti-malarials and ARVs.
Whereas USE listing rules require companies to issue a profit warning in case their earnings are projected to fall by more than 20 per cent over a 12-month period, Cipla failed to provide any guidance to investors.
Mr Keith Kalyegira, the Capital Markets Authority chief executive officer, said they were yet to receive any notification of Cipla’s intended acquisition, adding it could be in its preliminary stages.
“What I know is what is in the public domain. We have not yet received any formal notification so it might be very preliminary,” he said.

About CIPLA

In 2004, Quality Chemicals partnered with Cipla and the government of Uganda to form a joint venture that would later establish one of the largest pharmaceutical industries in East Africa.
The government of Uganda in 2010 divested from the drug manufacturer, selling its stake to Cipla Quality Chemicals at a transaction that was valued at about $5m (Shs18.7b).
The company now produces high quality World Health Organisation prequalified first line treatments for HIV/AIDS and malaria