Cipla employs a partnership model where it undertakes product development and manufacturing for international partners, without investing in building frontend presence. This will limit profit expansion over the long run. Nine out of the top 15 global players in 2001 have been acquired by now and ongoing consolidation appears inevitable. Cipla faces the risk of its partners getting acquired and the acquirer not being willing to source products. Also, given the fierce competition, its partners have substantial bargaining power.
Cipla’s Margins are Sensitive to HIV (more…)