Cipla shares: Analysts turn bullish on Cipla post Revlimid patent settlement; see nearly 30% rally

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Updated: December 15, 2020 4:06 PM

With Cipla having achieved a commanding market share in gProventil, US growth is now expected to be driven by market share gains from other Albuterol inhalers

ciplaAccording to the brokerage firm, the gRevlimid settlement is positive for Cipla’s stock given the market was not factoring in potential upside sooner from this opportunity.

Cipla Ltd shares were ended nearly one per cent down today on BSE after the company announced the settlement of its litigation with Celgene Corporation, a wholly-owned subsidiary of Bristol Myers Squibb, relating to patents for Revlimid (lenalidomide). Most of the research and brokerage houses are bullish on Cipla stocks and see an upside of over 26 per cent. According to a BSE filing, in settlement of all outstanding claims in the litigation, Celgene has agreed to provide Cipla with a license to Celgene’s patents required to manufacture and sell certain volume-limited amounts of generic lenalidomide in the United States beginning on a confidential date that is some time after March 2022.

Also read: ‘Neutral’ on Cipla, co well-placed to deliver 24% earnings CAGR

Analysts at Edelweiss Research welcomed the settlement as it imparted visibility to FY23/24E revenues. For Cipla, the brokerage firm has assumed peak market share of 10% in the volume-limited period. It has revised its target price to Rs 945 from Rs 910 apiece, earlier, implying an upside of nearly 20 per cent from the previous close. It has recommended to ‘buy’ Cipla shares.

According to the JM Financial Services, the terms of the settlement offered to Cipla seem similar to that offered to Dr Reddy’s and Alvogen with the agreed-upon volume restrictions remaining confidential.

It has also recommended to ‘buy’ the stock with a target price of Rs 1000 apiece. It will take Cipla to jump 26.7 per cent from the previous close to reach the target price pegged by the brokerage. It added that with Cipla having achieved a commanding market share in gProventil, US growth is now expected to be driven by market share gains from other Albuterol inhalers with the share of Proventil in the overall Albuterol market increasing to 10% and a favourable competitive landscape post Perrigo’s exit likely to be a key near-term tailwind.

BOB Capital Market is also bullish on Cipla stock, with a price target of Rs 900, a 14 per cent upside from previous close. According to the brokerage firm, the gRevlimid settlement is positive for Cipla’s stock given the market was not factoring in potential upside sooner from this opportunity. “This enhances confidence in Cipla’s capability and focus toward maximising the value opportunity in complex generics,” it added.

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