Moneycontrol Bureau
Shares of Cipla touched record high at Rs 575.20 per share, up 8.5 percent intraday on Tuesday as it launched generic drug used for treatment of asthma and chronic obstructive pulmonary disease in Germany and Sweden. The drug major’s portfolio includes 2,000 products in 65 therapeutic categories.
Though analysts are impressed by its earlier- than-expected launch, most of them have not yet upgraded Cipla yet. Credit Suisse maintains a neutral rating on it stating base case is already priced in. According to the brokerage, Germany and Sweden are small markets but the launch signifies approval in the UK could be expected by FY15-end.
Credit Suisse estimates that the drug (Advair MDI generic) may generate USD 70 mn sales for Cipla (25 percent market share and 50 percent price erosion). "Competition in the MDI space includes Sandoz, Orion, Chiesi and Mylan. We expect GSK to retain 30 percent of the market share," it says in a report. The drug is a copy of generic version of GlaxoSmithKline's Advair in these countries.
Bank of America Merill Lynch also is expecting launches in more lucrative markets such as UK, France and Spain to follow over the next 12 months. "We believe Advair pMDI will remain a limited-competition opportunity for a prolonged period as Mylan is the only other generic company working on pMDI. Assuming 30 percent price erosion and 30 percent share for Cipla, we believe the firm will generate USD150mn sales at peak level (NPV of Rs 70/share)," it elaborates.
Morgan Stanley is hopeful that the UK would be key to the commercial upside and it being GSK's home market may invite aggressive response from it.
The DPI form of gAdvair in the EU and US holds the key to making large upside in this product. However, it appears to be three to four years away as the company is finalizing its device presently). Hence the brokerage is underweight on Cipla because of limited presence in US, which had led to sub-industry growth for the company, and full valuations.
At 09:39 hrs Cipla was quoting at Rs 566.65, up Rs 36.95, or 6.98 percent on the BSE.
Posted by Nasrin Sultana
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