 "Cadila Healthcare: More triggers awaited")
Given the series of adverse events witnessed by domestic pharma companies in the past year, the positive news flow in the recent past is encouraging. The US Food & Drug Administration (FDA)'s scrutiny in the past one year had led many companies such as Dr Reddy’s, Cadila, Lupin, Sun Pharma, etc grappling with observations, thereby raising concerns on their US growth. FDA issues observations if manufacturing process is not in sync with regulatory norms.
However, Lupin and Cadila have received partial relief from the US FDA towards their plants, which is crucial for the resolution of regulatory issues and growth in the world’s largest market. Cadila’s Moraiya plant was under FDA scrutiny since September 2014, following which it also received a warning letter in December 2015. Thus, the closure of inspection points that Cadila received through Form 483 from FDA during August-September 2014 is encouraging.
Not surprisingly, Cadila’s stock has gained eight per cent in the past two trading sessions to Rs 370.80. Analysts, however, are unlikely to revise their earnings estimates until complete resolution of FDA issues.
Another development pertaining to the launch of generic of ulcerative colitis treatment drug Ascorol HD on exclusivity basis this month is also positive for Cadila. If Cadila does not get approval, it has the option of going for authorised generic launch, which though will lead to lower margins as the company will have to share profits with the drug’s innovator, say analysts.
Currently, analysts are factoring in only authorised generic launch in their estimates. But, if EIR can enable the company to launch generics on exclusivity, it will lead to earnings upgrades. Notably, these generics are likely to see limited competition for a longer time frame.
For now, Cadila is estimated to report a soft June quarter. If approvals for new launches in the US don’t come soon, the next few might also see some softness. Analysts at Credit Suisse, however, say that Cadila has one of the strongest US pipelines in their coverage with advantage of lower base versus large cap peers and hence a preferred play on faster approvals.
However, Lupin and Cadila have received partial relief from the US FDA towards their plants, which is crucial for the resolution of regulatory issues and growth in the world’s largest market. Cadila’s Moraiya plant was under FDA scrutiny since September 2014, following which it also received a warning letter in December 2015. Thus, the closure of inspection points that Cadila received through Form 483 from FDA during August-September 2014 is encouraging.
Not surprisingly, Cadila’s stock has gained eight per cent in the past two trading sessions to Rs 370.80. Analysts, however, are unlikely to revise their earnings estimates until complete resolution of FDA issues.
Another development pertaining to the launch of generic of ulcerative colitis treatment drug Ascorol HD on exclusivity basis this month is also positive for Cadila. If Cadila does not get approval, it has the option of going for authorised generic launch, which though will lead to lower margins as the company will have to share profits with the drug’s innovator, say analysts.
Currently, analysts are factoring in only authorised generic launch in their estimates. But, if EIR can enable the company to launch generics on exclusivity, it will lead to earnings upgrades. Notably, these generics are likely to see limited competition for a longer time frame.
For now, Cadila is estimated to report a soft June quarter. If approvals for new launches in the US don’t come soon, the next few might also see some softness. Analysts at Credit Suisse, however, say that Cadila has one of the strongest US pipelines in their coverage with advantage of lower base versus large cap peers and hence a preferred play on faster approvals.