PremiumMUMBAI: Shares of Cadila Healthcare Ltd have been rising consistently and are up more than 46% from their March lows following the company's covid drug portfolio. Developments pertaining to the expected vaccine launch and rollout has further boosted sentiment for the stock. The company is also to benefit from the unfolding of its NCE (new chemical entities) pipeline.
It recently received Emergency Use Approval from Drug Controller General of India for the use of Pegylated Interferon alpha-2b, ‘Virafin’ in treating moderate COVID-19 infection in adults. The drug is said to reduce the need for oxygen support and is priced at ₹11,995/dose, with dispatches having started. Analysts at a domestic brokerage say the opportunity is huge and even if the company targets 1 crore patients, the size would be as large as their domestic business.
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Premium Premium In another development, Zydus Cadila entity is to sell its India-focused Animal Health Business to Multiples Alternate Asset Management-led consortium. The sale of the business would fetch about Rs2,920 crore on a slump sale basis. As per analysts at Motilal Oswal Financial Services Ltd, the business had sales of Rs600 crore (up 17% YoY) and an EBITDA margin of 25% ( up 800bps YoY) in FY21. This implies EV/sales of 5times and EV/EBITDA of 19 times.
Analysts feel valuations are decent considering its leadership positions across various therapies covering most livestock and poultry animal species. However, the proceeds are to be used for debt reduction and strategic growth initiatives, hence is considered as earnings neutral by most analysts.
Meanwhile, the company’s growth in the US remains to be monitored. Analysts at Motilal Oswal Financial Services expect US sales to decline 8% YoY to $226 million in 4QFY21. However, Cadila plans to launch 40 plus products, including 8-10 complex ones in FY22. The same will be crucial to to drive growth in the US.
During the January-March quarter, domestic formulation sales are expected to have grown 5% YoY, suggest MOFL estimates. The second wave of covid-19, however, has boosted sales of drugs having a direct or indirect role in treatment. Cadila had seen strong 59% year-on-year growth in domestic sales during April. The company's product range comprises chronic (31%), sub-chronic (15%) and acute portfolio (54%), suggests Axis Capital Limited data.
It has also realigned its domestic business with rationalisation of field force and distribution network, and thereby is set to grow well. The covid treatment portfolio and vaccine is to provide a further leg up.
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