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This month, the Cadila Healthcare stock hit a 52-week high, following the company addressing investor concerns on US Food and Drug Administration’s observations, as well as on growth prospects in the US and Indian markets. The recent withdrawal of the order on price control by the National Pharma Pricing Authority (NPPA) is also likely to benefit the company. After the order was passed, Cadila was the worst hit among Indian generic majors, with a 3.6 per cent hit to its FY15 profit.
Through the past couple of months, the company has seen a series of approvals for key drugs, including anti-viral acyclovir, telmisartan (for the treatment of hypertension) and a tentative go-ahead for diabetes control formulation Glipizide. So far, the company has filed 225 drugs with the US drugs regulator and has received approvals to launch 80 products. Among its launches, the generics of anti-depressant Welbutrin XL are shaping well. According to a Nomura report, the company had gained 17.7 per cent market share for the drug (up 300 basis points compared to the past month) for the week ended September 12. This drug is expected to account for annual revenues of $15 million.
The NPPA reprieve is a positive. The company is expected to post double-digit growth in the Indian market, its largest geography by sales. This is primarily due to a recovery in the monsoon, new product launches and a low base. At 6.3 per cent, the company’s growth during April-July was below average (growth for the entire segment was 8.9 per cent) due to under-performance in the anti-infectives and gastrointestinal segments. Sales of the company’s pantoprazole brand in the gastro-intestinal segment were lower, as the drug came under price control.
While growth in the US and a recovery in India bode well for the company, the stock, after a strong run-up on bourses, seems to be trading near its fair values. Investors with a long-term horizon can accumulate the stock on dips.
