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Cadila Healthcare Ltd’s shares have been under pressure this year, but some recent developments may bring relief. The firm recently reached an agreement to settle litigation relating to generic-Revlimid in the US with the innovator company Celgene Corp. Revlimid is used in treating multiple myeloma. Though the agreement terms are confidential, analysts at Emkay Global Financial Services said that its estimates suggest that generic Revlimid could represent a stock price upside of 20-40, depending on the terms of settlement. Cadila shares currently trade at 421 apiece.

Their base-case upside of 20 per share assumes Cadila achieving low-single-digit volume share in FY23, gradually increasing to mid-single-digit in FY26. The bull-case of 40 per share assumes settlement terms being similar to Alvogen and mid-single-digit volume share in FY23, with it increasing to high-single-digit in FY26.

Muted performance in US
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Muted performance in US

Alvogen Pharmaceuticals had settled for a launch with the innovator company along with Cipla Ltd, Dr Reddy’s Laboratories Ltd and Natco Pharma Ltd. The opportunity is huge since Revlimid’s 2020 sales in the US grew 12% year-on-year (y-o-y) to $8.2 billion. An improvement in US sales holds the key for Cadila. Sentiment for the stock was impacted after it reported weak US sales during the Q3. The US business declined 8% y-o-y and 6% sequentially on account of a weak flu season and order delays leading to inventory correction. India sales of the company, however, remain strong. India formulations saw 21% y-o-y growth helped by speciality business and covid portfolio. Its domestic growth in January and February beat industry growth rates. Notably, Cadila’s consumer wellness business (housed under a separately listed company, Zydus Wellness) is also seeing good traction, led by strong brands like Sugar-Free, Nutralite, Everyuth, Complan, Glucon-D and Nycil.

Prospects in the Indian market can get a further boost if the company’s covid-19 vaccine is successful. Analysts at Motilal Oswal Financial Services see vaccine opportunity as a potential medium-term trigger. They remain positive on Cadila on account of its strong ANDA pipeline (comprising injectables), new chemical entities (NCE) portfolio, and outperformance in India formulations market.

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