Cipla shines in gloomy pharma pack, biggest beneficiary of faster approvals

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In a matter of few days, Cipla has announced the approval for the launch of three key generic drugs in the US market, which has boosted its share price. Recent news apart, even in the past few months, Cipla has been among the top performing pharmaceutical stocks. While Cipla getting approval for the launch of respiratory inhalation product in the US was the reason for Friday's cheer, the gains this week follow the announcement of approval of generic version of cancer drug, Dacogen. Given the company's low base of US business, plans to ramp up its product pipeline for launch in the world’s largest healthcare market (US) and business prospects in other key markets, investors have been bullish on the company’s long-term prospects, and this interest is likely to remain high.

Among the recent approvals is Pulmicort Respules, which marks the success of Cipla in the respiratory category, and where the street has high expectations. Thanks to a large portfolio and prowess in the domestic market, Cipla has been building the pipeline for respiratory product launches in the US and Europe. The timeline for approval of these specialty products, however, remains long. Post September quarter results, the company had said that respiratory trials will likely start in the second half of FY18. So, as approvals are received, like the one on Friday where the opportunity is huge, it should keep investor sentiment elevated. 

Pulmicort Respules (a steroidal inhalation treatment product for asthma), which clocked sales of $825 million for 12 months ending September 2017, offers huge opportunity for Cipla. Sarabjit Kour Nangra at Angel Broking says that looking at the competitive landscape, the product can easily clock is annual sales of $20 million for Cipla. The estimated generic sales may sound small compared to the brand’s current sales, but being a limited competition product the sales can sustain for longer and margins should be higher.

The approval on Monday of generic version of cancer drug Dacogen in the US, follows approvals of Renvela and Pulmicort Respules. Analysts expect Dacogen generics to generate sales of $12 million in FY19.