Drugmaker Cipla exhibits signs of ill financial health

Saturday August 14 2021
The Cipla Quality Chemical industries drug production line

The Cipla Quality Chemical industries drug production line in Kampala. Cipla is a public listed company. PHOTO | FILE


The announcement by Cipla Quality Chemicals about top management changes and delayed publication of financial results has thrown the drug company into the spotlight again after nearly three years of frequent profit warnings, inability to pay dividends and a shrinking share price at the Uganda Securities Exchange (USE).

Cipla Quality Chemicals is a Ugandan manufacturer of drugs for HIV/Aids treatment, malaria, TB and hepatitis medicines. It supplies drugs to Kenya, Tanzania, Rwanda, Botswana, South Africa, Namibia, Sierra Leone and Zambia.

The firm announced the retirement of chief executive officer Nevin Bradford at the beginning of August in a dramatic move that surprised investors after months of uncertainty about the firm’s commercial direction.

Bradford, a British national, joined the company in 2013 after serving in various pharmaceutical industry positions in Europe and Asia. He has been replaced by Ajay Kumar Pal, the firm’s chief operating officer who joined in February 2020, according to statutory disclosures.

Kumar’s appointment takes effect next month.

Dr John Collins Kamili was also appointed chief company pharmacist following the departure of Dr Samuel Opio in April this year. Whereas the company’s full year results for March were scheduled for publication before end of July, the firm issued a notice last week alerting investors about delayed release of its financial results but did not give reasons for the unexpected development.


Current trading rules applied by the Uganda Securities Exchange (USE) require listed companies to publish periodic financial results within four months after a gazetted reporting date.

The company is yet to pay any dividends since 2018, a worrying development that has led to frustration among retail investors keen to recoup their investment in the short term.

Faced with poor earnings and investor pessimism, the share price has fallen by more than 50 percent since 2018 coupled with low trading volumes.

While the Initial Public Offer price stood at Ush256.5 ($0.07) per share, its trading price closed at Ush100 ($0.03) at the end of last month.

The share price further dropped to Ush95 ($0.026) at the start of last week following announcement of new top management changes.


Emmanuel Katongole, the executive board chairman declined to comment on the matter by The EastAfrican about the outgoing CEO. E-mail queries to the company CEO had not been addressed by the time we went to press.

The firm’s total turnover increased from Ush76.7 billion ($21.6 million) in September 2019 to Ush122.5 billion ($34.5 million) in September 2020, according to company records.

Operating loss rose from Ush13.6 billion ($3.8 million) to Ush19.5 billion ($5.5 million) during the period under review.

Total loss grew from Ush14.4 billion ($4.05 million) in September 2019 to Ush16.3 billion ($4.5 million) in September 2020. Basic loss per share also rose from a negative position of Ush3.97 ($0.001) to Ush4 ($0.0011) over the period under review.

Despite gloomy signals surrounding the company’s performance, stockmarket watchers sound guarded about its commercial blues- a sign of insufficient clarity related to its business turnaround plans. Questions have also emerged about the company’s readiness to profit from coronavirus pandemic.

Whereas some public universities have invested in medical innovations such as ventilators and herbal drugs suitable for treating Covid-19 symptoms, the company is yet to roll out any Covid-19 treatment-related product.

“Top management keeps emphasising market expansion. They also hyped the acquisition of the veterinary drug business earlier this year. Failure to clarify strategic issues usually leads to significant institutional investor exits similar to what is happening to Umeme Ltd.

Retail investors are more concerned about profits and dividends. That explains why they keep asking us when Cipla will generate profits and begin paying dividends to its current shareholders. They have also asked why the company is not making money during the pandemic.

The company trades between Ush10 million ($2,816) and 20 million ($5,632) per month at the USE,” said an equity analyst at Crested Capital.