Professional Documents
Culture Documents
07 May 2010
Cipla
Bloomberg: CIPLA IN EQUITY Reuters: CIPL.BO Recommendation: BUY No Change EVENT UPDATE Recommendation
CMP: Rs Target Price (Period): Rs Previous TP: Rs Upside (%) EPS (FY12E): Rs
% change from previous
Focus on Niche Product Development Long term driver for Future Growth
Cipla ties up with Stempeutics for Stem Cell Therapy based Products
Cipla has tied up with the Stempeutics Research to market stem cell-based products. Cipla becomes the first domestic drug player to diversify into stem cell therapy and will fund Rs500mn in the next two years to conduct clinical trials. With this funding, Cipla would get marketing rights of Stempeutics eight pipeline products. The first of the products, Stempeucel-CLI (Critical Leg Ischemia), is now poised for phase III trials on a wider set of 110 patients and could be launched in 2013. Stem cell therapy market in India is about Rs24bn, and growing at ~ 15%. Stem cell therapies are gaining prominence world over and are considered a major branch of medical treatment in the future with a potential of revolutionizing medicine. Cipla is the first Indian company to enter this market through this tie-up, which augurs well for its future growth.
Exhibit 1: Projected Revenues for a Single Product Stempeucel-CLI FY2014 No of Patients (mn) Insurance Coverage Cost of Therapy (in Rs) Target Market Size (in Rsmn) Cipla's Revenues (in Rsmn) Patients Treated
Source: Ambit Capital research
3M
11.2 4.2
12M
51.7 6.7
YTD
3.1 6.0
Performance (%)
20,000 18,000 16,000 14,000 12,000 10,000 May-09 Sep-09 Sensex 400 350 300 250 200 Feb-10 Cipla
Stock Information
Mkt cap: 52-wk H/L: 3M Avg. daily vol.(mn): Beta(x): BSE Sensex: Nifty:
Source: Company, Ambit Capital research
Currently the no of CLI patients in India are close to one million and increasing every year. We believe that a specialized care product like Stempeucel-CLI which can significantly improve quality of life and reduce the no of amputations caused by CLI could be launched at Rs50,000 per therapy. The target market size for this single product (CLI) is estimated to be Rs5.0bn and we arrive at Ciplas revenues of Rs1.0bn in FY2014 (~ 20% share) which should be 2-3% of Ciplas domestic revenues. Ciplas tie-up with Stempeutics is for eight products and we believe that Stem Cell products could form a significant share of Ciplas revenues (5-6%) in the long term. Valuation and recommendation: Any product launches in the niche product categories including biosimilars has not been included in our projections for the next two years. We reiterate our BUY recommendation on Cipla with a target price of Rs400, which is 20x our FY12 EPS estimates.
Exhibit 2: Key financials Y/E Mar (Rsmn) Net Sales EBITDA EBITDA Margin % Adj. PAT EPS P/E (x) EV/EBITDA(x)
Source: Company, Ambit Capital research
Analyst contact Anshuman Gupta Tel .: + 91-(022) 3043 3286 anshumangupta@ambitcapital.com Vijay Chugh Tel .: + (022) 3043 3054 vijaychugh@ambitcapital.com
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Please refer to disclaimer section on the last page for further important disclaimer.
Cipla
Disclaimer
This report or any portion hereof may not be reprinted, sold or redistributed without the written consent ot Ambit Capital. AMBIT Capital Research is disseminated and available primarily electronically, and, in some cases, in printed form.
2. 3.
4. 5.
6.
7.
8.
9.
10. 11.
12.
13.
17.
18.
Ambit Capital Pvt. Ltd. Ambit House, 3rd Floor 449, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, India. Phone : +91-22-3043 3000 Fax : +91-22-3043 3100
Cipla
07 May 2010