Strong US, India growth prospects – Cadila Healthcare


Cadila Healthcare continues working on drug innovations. It announced the launch of its first biosimilar of Adalimumab. The drug is used for treatment of rheumatoid arthritis and other autoimmune disorders and will now be made available for patients in India by Cadila under the Exemptia brand.

While it’s a significant achievement, Cadila will have to promote and develop the brand for it to become a significant contributor to sales.

For world markets, it will take some time to get the drug approved and launched. Analysts feel the company might look at an international partner.

The company also drew the Street’s attention with the news of recall of 15,144 bottles of hypertensive drug amlodipine in the US. The stock that lost 1.7 per cent recovered and closed at Rs 1,576 levels (0.6 per cent down) on Tuesday. Drug recalls are a routine phenomenon in the US but any such news raises concerns of investors who have seen the ire of the US FDA on Ranbaxy, Wockhardt, etc.

Cadila remains on a strong wicket as its growth is being led by the US as well as the domestic segment. During the quarter ending September, US market sales (which contributed 36 per cent to top line) grew 68 per cent, driving overall revenues 22 per cent year-on-year. Adjusted for sales of products Dulcolax and Buscopan on the back of the discontinued tie-up with innovator, domestic revenues grew 14 per cent.

In the US, product approvals have picked up and should drive growth. The firm launched generics of anti-depressant Wellbutrin XL and urinary tract drug Potassium Citrate ER and gained good market share in the generics of epilepsy drug Depakote ER and cholesterol drug Niaspan. For the three months ending October, Cadila’s sales at $176 million grew 21 per cent year-on-year according to Nomura and IMS data. Sriram Rathi at Anand Rathi expects Cadila to report 15.3 per cent revenue and 25.5 per cent adjusted PAT CAGR over FY15-17. Growth would be chiefly driven by US generics, where the management expects new product approvals to rise to 15-20 each in FY15 and FY16.

Anand Rathi analysts expect domestic formulations to continue growing in the mid-teens or even higher, given the price hikes in the pipeline and new product launches. Hitesh Mahida at Antique Stock Broking believes margins will continue to improve, with consistent scale-up in its US business with ANDA launches.

He has raised FY16 earnings estimates by 10.3 per cent and the stock’s target to Rs 1,742 (without factoring in Prevacid ODT and Lialda launches that can add $71 million to its FY16 estimated Ebitda). Consensus one-year target price for the stock stands at Rs 1,537.


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