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Cadila Healthcare’s vaccine bet keeps sentiment upbeat

A doctor prepares a syringe to administer a dose of the Pfizer-BioNtech Covid-19 vaccine to a fellow doctor on January 5, 2021, at the University Hospital Centre (CHU) of Lille, northern France. - France promised on January 5, 2021, to speed up Covid-19 vaccinations, but failed to silence critics who accused the government of Premium
A doctor prepares a syringe to administer a dose of the Pfizer-BioNtech Covid-19 vaccine to a fellow doctor on January 5, 2021, at the University Hospital Centre (CHU) of Lille, northern France. - France promised on January 5, 2021, to speed up Covid-19 vaccinations, but failed to silence critics who accused the government of "amateurism" over the slow start to its inoculation campaign. (Photo by DENIS CHARLET / AFP) (AFP)

Timely approvals of complex opportunities will be key to offsetting the erosion in the base business, say analysts

The news flow around covid-19 vaccines has kept Cadila Healthcare Ltd’s shares under the investors’ radar. The company has completed phase 2 clinical trials for ZyCoV-D, the indigenously developed vaccine, and has also received approvals to conduct phase 3 trials.

Of course, for the Street, the launch timeline is crucial for assessing the gains that Cadila can derive from it, as many other vaccines are already lined up for launch. If other vaccines are launched earlier, it can mean higher competitive intensity for Cadila at the time of launch.

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Also, as Jefferies India analysts said in their research report: “As AZ (AstraZeneca) vaccine becomes commercially available, potential trial subjects will become increasingly tough to find."

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Meanwhile, the company has said that it will be initiating phase 3 clinical trials with around 30,000 volunteers. ZyCoV-D was found to be safe, well-tolerated and immunogenic in the phase 1 and 2 clinical trials.

The successful launch can add to the company’s forward prospects and earnings estimates in spite of the launch of other vaccine brands, added analysts.

Surya Patra, an analyst at Phillip Capital, said: “We estimate this vaccine, if successful, could upgrade our FY22 earnings by about 50% and could be a big earnings as well as a valuation catalyst."

The company continues to benefit from its existing covid treatment drug portfolio in India.

With a restructured India business (distribution and field force restructuring, etc.) it is eyeing higher India growth trajectory. The company’s India business grew 11% year-on-year during Q2.

The US business, which had faced pricing pressure earlier, is also stabilizing now, supported by new product launches. US sales grew 18% year-on-year during Q2.

Timely approvals of complex opportunities, though, will be key to offset the erosion in the base business, said analysts.

Overall, the company sees much improved India and US business outlook.

At 486 apiece, the stock is trading at close to 21 times one-year forward earnings estimates, which is in line with the three-year average of 20x that it traded at. For a significant re-rating from the current levels, the launch of the vaccine will be crucial.

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