Q3FY24 Review: Cipla: Advair/Abraxane delay partly offset by Peptides

29 Jan 2024 , 12:37 PM

Cipla’s Q3 Ebitda was 10% ahead of analysts of IIFL Securities estimates, driven by a 3yr high GM performance, on the back of higher chronic revenue share in the India business, price hikes in India portfolio, and base business growth in the US. While Q3 performance was strong, analysts of IIFL Securities expect the usual Q4 seasonality in the India and US businesses will probably lead to Ebitda margins declining from ~25% in M9FY24 to ~21% in Q4FY24. Although Abraxane and Advair launches in the US will likely get delayed to FY26 now, Cipla intends to partly offset this impact through launches of 4 peptide assets in FY25, out of which 2 peptide launches are contingent on settlement of litigation. Symbicort launch will likely be in FY27 only, as the product will take two years to receive USFDA approval. With the stock trading at ~26x FY26 core EPS (ex-Revlimid), analysts of IIFL Securities believe most of the positives (double-digit growth in India, robust US pipeline for FY26/27) are already priced-in. They upgrade FY25/26 EPS by 2- 4%, to account for higher margins and lower D&A. Maintain ADD. 

Advair and Abraxane launches in the US will likely get delayed to FY26 now: 

Advair alternate-site filing is expected in mid-FY25, post which USFDA will take 6-9 months to approve the product. Also, Cipla will look to launch Abraxane through the Goa plant only as alternate-site filing would have needed additional clinical trials to be done. However, Abraxane approval will be contingent on Goa re-inspection (earliest by Q1FY25) and clearance. Analysts of IIFL Securities now assume Advair/Abraxane launch only in Q1FY26 (vs Q3FY25 earlier), with sales contribution of USD50/35m resp. in FY26. 

Analysts of IIFL Securities analysis of Cipla’s peptide pipeline shows that it has generic versions of Vasostrict, Forteo and Saxenda, with Orbicular being the partner for some of the peptides. However, Vasostrict has already gone generic, while Teva is the FTF for both Forteo and Saxenda. Cipla is targeting 4 peptide launches in FY25, out of which 2 are just dependent on USFDA approval and the other 2 will be contingent on litigation. Each peptide product can potentially contribute USD10-40m revenue to Cipla. 

Analysts of IIFL Securities expect Cipla’s US sales to increase from USD910mn in FY24 to USD980mn in FY25, as peptide launches will be the only key triggers in FY25. Advair, Abraxane and Symbicort launches will likely lead to US sales increasing to USD1.15bn in FY26/27. Led by robust US launches and 10% growth in the India portfolio, analysts of IIFL Securities forecast Cipla’s core EPS (ex-Revlimid) to clock 14% Cagr over FY24-27.