Cipla Ltd. has experienced a significant boost in its share price, adding around 11% in three sessions, after the US Food & Drug Administration (FDA) designated the company's Goa manufacturing facility as 'voluntary action indicated' (VAI). This development is particularly important due to its implications for the potential approval of Cipla's generic version of Abraxane, a critical drug in pancreatic cancer treatment.
The FDA's clearance is a pivotal step, as Citi Research had previously indicated that the approval of Cipla's generic Abraxane was contingent upon a favorable inspection outcome for the Goa unit. The VAI status suggests that while some issues were identified during the inspection, they do not warrant immediate regulatory action, paving the way for potential approval of the drug.
Nomura upgraded Cipla's stock to 'buy' following the announcement, raising the target price to Rs 1,800 from Rs 1,580.90 per share. This upgrade reflects a 16% upside potential, driven by the anticipated approval of the limited-competition generic Abraxane (gAbraxane). The brokerage firm highlighted that the Goa facility's clearance significantly enhances the likelihood of gAbraxane's approval, which is a key growth driver for Cipla.
While Cipla's stock has risen 29% over the past year, it has lagged behind the Nifty Pharma index, which has gained 54% during the same period. However, Nomura suggests that the risk-reward profile now favors Cipla, with expected returns of 6-21% within one year. Potential risks to this outlook include lower-than-expected growth in the Indian market, weaker US revenue, and increased pricing pressure.
