Anand Rathi 's research report on Cipla
Formed by Dr KA Hamied in 1935, Cipla is one of the oldest ventures set up by an Indian in the pre-independence era. With 34 manufacturing facilities spread over seven different locations, Cipla has a complete range of therapeutic offerings ranging from simple anti-infectives to complex oncology products. The facilities of the company have been approved by various agencies such as the USFDA. On the product filing front, Cipla has filed 259 ANDAs (Abbreviated New Drug Application) with the USFDA cumulatively (FY20) with 175 of them already approved and 22 tentative approvals. The company currently spends 7-8% of revenues on R&D. In the domestic market, Cipla remains among the top five players, due to a complete range of product offerings, which covers almost all therapies, and is built on a network of ~7500 medical representatives (MRs) covering a doctor base of ~5,00,000. As per MAT (Moving Annual Total) March 2020 AIOCD ranking, Cipla ranked third with a market share of 4.66%. Breaking it down further, its ranking in chronic therapies was at second and is a market leader in respiratory therapies with a market share of 21.2%. Exports constitute around ~61% of total sales. The company exports both APIs and formulations to more than 170 countries including advanced regions such as the US and Europe. Cipla derives 23% of its export revenues from US followed by 18% from South Africa, 5% from Europe and 15% from RoW markets. Cipla has recently signed a non-exclusive licensing agreement with Gilead Sciences, Inc. for the manufacturing and distribution of the investigational medicine Remdesivir, which has been issued an Emergency Use Authorization (EUA) by the U.S. Food and Drug Administration (FDA) to treat COVID-19 patients. As part of the agreement, Cipla will be permitted to manufacture the API and Finished product, and market it in 127 countries including India and South Africa under Cipla’s own brand name. Cipla will receive the manufacturing know-how from Gilead Sciences, Inc. to manufacture the API and Finished product at a commercial scale. Cipla’s extensive geographical and commercial footprint will help make this therapy accessible to more patients and markets.
We believe with healthy earnings growth and core ROCE expansion over FY20-22e, valuations are likely to witness re-rating. We initiate our coverage on Cipla Limited (CIPLA) with a BUY rating and a target price of Rs.738 per share.
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