Cipla shares advanced 3% today; here's target price for pharma stock

Shares of Cipla Ltd advanced 3 per cent in Monday's trade after the drugmaker announced a VAI status for its Goa unit, which had been battling a compliance challenge since 2019. The VAI status is a positive surprise at a time Cipla is seeing a temporary supply challenge in Lanreotide, softness in India and competitive challenge in Albuterol, Nuvama Institutional Equities said.

"The Goa VAI status paves the way for Cipla to launch pending ANDAsfrom this facility, mainly gAbraxane, which could be a $120 million opportunity at peak as per our understanding. Currently, we are building in $21 million/$64 million/$85 million in gAbraxane revenue for FY25/26/27. The stock fell per cent  in October  owing to several challenges—refer to Q2FY25 earning analysis. We retain ‘HOLD’ with a target price of Rs 1,601 (earlier Rs 1,593)," the brokerage said.

Following the development, the Cipla stock rose 2.78 per cent to hit a high of Rs 1,602.70. The pharma stock is up 26 per cent year-to-date.

Cipla’s ANDA filings and approvals had slowed after FY18. Cipla filed 32 ANDAs in FY17, which fell to 12 ANDAs in FY24. Cipla has been filling 12 ANDAs between FY20–24, which can now improve. 

"We reckon manufacturing units under OAI/WL tend to have lower margins due to price erosion, missing out on new launches, cost overruns and remediation efforts. Additionally, management bandwidth is occupied in improving facility compliance. With the Goa unit back in shape, we expect it to offer operating leverage due to slowdown of the some cost items and new product launches," Nuvama said. 

The company management may now seek new growth opportunities and potential deployment of Cipla’s $1 billion strong coffers, it added.