Cipla rallies 5% after settling litigation with Bristol Myers in US

Bristol Myers (Celgene) will provide Cipla with a license to sell generic volume-limited amounts of gRevlimid capsules in the US sometime after March 2022, subject to regulatory approval

Shares of Cipla rallied 5 per cent to Rs 793 on the BSE on Monday after the pharma company announced the settlement of Revlimid (Lenalidomide) patent litigation with Celgene [Bristol Myers Squibb (BMS)] in the United States.

Under the terms of the settlement, Celgene will provide Cipla with a license to sell generic volume-limited amounts of gRevlimid capsules in the US sometime after March 2022 subject to regulatory approval. This limited volume constraint will be applicable till January 2026. The oncology drug, indicated for treatment of multiple myeloma, had annual US sales of $9 billion in CY19 as per a BMS report.

Arunesh Verma, CEO, Cipla North America said, “This is an important step forward for us and is in line with our pursuit of improving access to high quality life-saving treatments.”

This makes Cipla the fourth player after Natco, Alvogen and Dr Reddy’s (DRL) to sign a settlement agreement with the innovator for gRevlimid.

“Considering other settlements, limited build-up of sales over FY23-26E, and unlimited quantities of g-Revlimid by Cipla post Jan-26E, there could be a potential net present valuation (NPV) addition of Rs 40 per share from this opportunity. We await clarity on further details of the agreement,” Motilal Oswal Securities said in a note.

The extended benefit of operational cost savings in domestic formulation, ramp-up in albuterol sulfate sales, and increased business for Covid-19 products, Cipla is well-placed to deliver 24 per cent earnings CAGR over FY20-23E. We maintain our Neutral rating as the valuation factors potential upside in earnings over the medium term, the brokerage firm said company update.

At 10:19 am, Cipla was trading 3 per cent higher at Rs 779 on the BSE, as compared to 0.15 per cent rise in the S&P BSE Sensex. The trading volumes on the counter jumped over three-fold with a combined 9.3 million equity shares changing hands on the NSE and BSE, so far.