Cipla shares echo investors’ bets on continued core growth

In fact, the company expects a strong revival in the portfolio which was hit by the boom in COVID related drugs till now.

Even as a boost from COVID-19 drugs, Cipla’s rapid segment is expected to emerge and support growth. The company’s in-house portfolio includes both chronic and acute products. The contribution of the old segment has been strong during the last quarters.

Thus, the growth momentum of the pharma market bodes well for companies like Cipla, which see a strong domestic market contribution. The domestic market share for Cipla in total revenue is around 40%.

Yet another factor supporting the growth is improving sales of respiratory therapy. Cipla is known for its strong domestic respiratory franchise. In addition, other treatments such as analgesics, anti-infectives, gynecology have also shown a quick revival, making the outlook attractive for home development. The data shows that Cipla’s 12-month home sales growth till August stood at 19.8%.

In fact, growth prospects for the respiratory portfolio remain strong in the US market as well. The company’s launch of generic albuterol inhaler in the US has helped in sales there despite the price pressure. On the other hand, several competitors like Lupine and Cadila have seen significant pressure on their US sales performance in the past quarters.

Cipla is seeing an uptick in market share in albuterol generics. A mid-September report on prescription trends in the US market by analysts at Nirmal Bang Institutional Equities suggested that Cipla has been able to gain 300 basis points market share on a sequential basis. The Street is also optimistic about more product launches as the respiratory portfolio unfolds.

Cipla is expecting approval for generic adware in the US market, which is seen as a huge and significant opportunity. In addition to respiratory products, Cipla continues to work on peptide-based products to build and enhance its specialized pipeline for the US market. Whatever the case, most of the positives seem to be baked into its evaluation. With the recent gains, the stock is trading at around 27 times FY12 earnings estimates, leaving little room for further upside.