Upcoming Covid portfolio a shot in the arm for Cadila
PremiumStrong growth in the domestic market offset the impact of weak sales in the US in the March quarter
The Cadila Healthcare Ltd stock has been on investors’ radar screens since the company started research and development for covid-19 vaccine and related products. Analysts are of the view that vaccine sales could provide a significant shot in the arm to the company’s domestic formulation segment. “The vaccine-related upside is the potential trigger in the near term and is yet to be captured in earnings," analysts at Motilal Oswal Financial Services Ltd said in a report.
Analysts estimate that the company has the capacity to manufacture 10 million doses a month, which can be scaled up to 25-30 million. According to analysts at HDFC Securities Ltd, the covid-19 products further improve the outlook of the company’s India business.
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“The contribution of covid-19 was negligible in Q4 but it is likely to be significant in Q1FY22. We factor in 13% CAGR for India business for the next two years," said the HDFC report. CAGR is short for compound annual growth rate.
Meanwhile, the company reported decent earnings in the March quarter. Performance was largely driven by strong growth in the Indian market, which negated the impact of weak sales in the US. In Q4FY21, the India business including consumer health and animal health portfolio, which contributed almost half to its overall sales, grew 18% on a year-on-year (y-o-y) basis.
The speciality portfolio also posted robust sales in the March quarter, which helped improve domestic formulations sales by 14.7% y-o-y.
The covid-19 treatment drugs did not contribute much during the March quarter. Analysts said the company’s pipeline of novel molecules has the ability to further drive its sales growth.
As far as the company’s US business is concerned, it faces intense competition. That, along with weak season for flu and lower-than-expected contributions from its key product Asacol HD, which is used to treat ulcerative colitis, impacted Cadila’s Q4 performance.
It should be noted that the company plans to launch 30-40 products in the US to provide growth a fillip in that market.
Apart from that, the company is also developing a range of products in transdermal and hormonal therapy. That said, the approval and launch of these products depends on the regulatory resolution of issues pertaining to its Moraiya manufacturing facility in Gujarat.
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