In the past month, Cipla and Lupin have outperformed the market by gaining 12 per cent each, against 8 per cent rise in Nifty Pharma index. At 11:50 am, Nifty Pharma index was up 0.5 per cent at 12,216 points, as compared to 0.3 per cent rise in the Nifty50 index. The pharma index hit a 52-week high of 12,529 in intra-day trade on September 18, 2020.
Perrigo announced recently that it would recall its gProAir (Albuterol) MDI inhaler from the US market due to a potential defect in the inhalers. Perrigo’s gProAir sales were USD 73 million in April-June quarter (Q2CY20).
HDFC Securities has ‘buy’ rating on Cipla and Lupin, with 12-month target price of Rs 855 and Rs 1,185, respectively.
“Our Buy rating on Cipla is premised on US is likely to see improved traction on account of a ramp-up in gProventil (Perrigo’s exit to aid) and limited competition launches. “Respiratory pipeline and specialty assets adds longer term growth visibility; India business should outperform the market driven by continued traction in trade generics, Covid drugs portfolio and benefits of implementation of One-India strategy (double digit growth for three quarters, pre-COVID); ROCE is set to expand by around 400bps to 13 per cent over the next three years driven by operating leverage (tight control on cost),” the brokerage firm said in sector update.
Meanwhile, Lupin launched gTykerb after its core patent expiry on September 29, 2020. The company would be the only generic player over the next 18 months as there are no pending ANDA’s for Tykerb.
Analysts at Prabhudas Lilladher believe Lupin would have an advantage with the first gTykerb launch which could lead them to sustain 60 per cent market share. The brokerage firm remains upbeat on the company on regulatory revival theme and new launches in the US market.
The resolution of key plants, litigation outcome on gSpiriva (FTF), and ramp up of bEnbrel in EU are the key catalysts in the near term for Lupin, according to analysts at HDFC Securities. With monetization of key assets, resolution of key facilities and margin levers in place, the business is set to post strong earnings (PBT) growth of 39 per cent CAGR over FY20-23e, it said.
The recovery in US business led by ramp up in gProAir (Perrigo’s exit to aid) and market share gains in Levothyroxine; India business to bounce back and grow ahead of the market (solid franchise, chronic skewed portfolio); operating leverage to aid margin expansion of ~600bps over FY20-23e, the brokerage firm said.