IPM is struggling for growth above 10% even after MoM abating COVID concerns and with MRs, physician activities almost reaching pre-COVID level. We believe key reasons for growth below par are (i) subdued new prescription (Rx) leading to volume de-growth (ii) digital marketing yield going south and (iii) sustained lower demand of acute products. Cardiac and anti-diabetic growth takes a breather in Jan-21 at 8.8% and 5.3% after reporting double digit growth in most months during lockdown. While amongst top therapies Gastro and VMN reported double digit growth of 14%...

We upgrade CDH to Accumulate (earlier Sell) and increase our earnings estimate by 20%/32% for FY22/23E as we include 1) benefits from new vaccine facility that could add revenue of Rs10bn in FY23E, 2) reduction in interest...

Cadila Healthcare (Cadila) reported 3QFY21 revenue of Rs37,537mn, which was lower than our/consensus estimate by 2.6%/3.7%. Revenue was up 4.3% YoY and flat QoQ. Revenue growth was attributed to strong growth in India (prescription brand and consumer wellness), which was offset by weakness in US sales. India growth was aided by the Covid portfolio, which is now tapering off as fresh Covid cases are reducing. EBITDA at Rs8,069mn was in line with expectation. EBITDA margin declined by 130bps QoQ as other expenses increased by 5% QoQ, partially offset by lower cost of sales. Increase in other expenses was led by higher R&D; spend during the quarter. Net profit at Rs5,272mn benefited from a sharp decline in interest expenses and a lower effective...

Cadila Healthcare (CDH) posted in-line 3QFY21 results, led by a superior performance in India/EM, partly offset by a dip in US sales. CDH is progressing well on NCE programs and developing complex injectables. It is not only working on developing a vaccine for COVID but is also building...

Q3 operational performance was mostly in line with I-direct estimates (albeit skewed) led by strong domestic formulations growth, whereas profitability was higher due to lower interest cost and tax rate. On the US front, the company plans to venture into complex injectables (71 filed ANDAs), which is likely to provide meaningful traction from FY23-24 onwards. Similarly, addition of biosimilars (like Trastuzumab, Adalimumab, Pegfilgrastim, Bevacizumab, etc) for Emerging markets (like LatAm, MENA markets, South East Asia) are expected to provide growth impetus, going ahead. The...

Recently Cadila Healthcare (Cadila) received a USFDA fast track designation for its Phase 2 NCE drug - Saroglitazar for treatment of Primary Biliary cholangiits (PBC). The fast track designation was based on Phase II trial data in PBC patients who are refractory or have inadequate response to 1st line treatment - Ursodeoxycholic acid (UDCA). Apart from Saroglitazar, a couple of other pipeline drugs for PBC have been granted by the USFDA a fast track / breakthrough designation. We try to assess the market opportunity for Saroglitazar considering the expected competition and Saroglitazar relative clinical profile. The key takeaways from our assessment being...

Our target price of Rs445/sh is based on 20x Sep 22 EPS We initiate coverage on Cadila with an ADD rating premised on: 1) Recovery in India business post the restructuring measures; we forecast 8% CAGR over FY20-23e; 2) While product concentration risk remains high in the US, timely approval of complex opportunities will be key to offset erosion and drive growth; and 3) R&D; investments in vaccines, biosimilars, NCE/NBEs, Covid portfolio adds potential upside opportunities which is currently not factored in our estimates. Moraiya resolution and further debt reduction will be the key catalysts to monitor in the near to medium term.

Solid presence in the chronic and sub-chronic segments (which are the key growth drivers for Indian pharmaceutical markets) and an improving outlook for the acute segment provide ample growth visibility for India business Easing pricing pressures, sturdy new product pipeline, and ramp up in the recent product launches would be key growth drivers going ahead for the US business. Strong growth prospects, sturdy balance sheet, and healthy return ratios would...

Cadila Healthcare (Cadila) reported 2QFY21 revenue of Rs37,623mn, which was above our estimate by 4% and consensus estimate by 2.4%. Revenue was up 6% QoQ and 16% YoY. Revenue growth was attributed to strong QoQ growth in USA, strong YoY growth in India (formulations and animal health) and API. Gross margin continues to be in the higher range (65-66%), driven by a better product mix and US business. EBITDA for the quarter stood at Rs8,634mn, up 38% YoY and 6% QoQ. EBITDA margin expanded by 20bps QoQ and was led by lower staff costs. The contraction in other expenses continued with marginal QoQ growth. Net profit stood at Rs4,734mn, up 4.3% QoQ. Net profit was adversely impacted by an exceptional charge of Rs1,320mn pertaining to the...

Q2 revenues were above I-direct estimates on all fronts due to better than expected operational performance and lower interest expense. On the US front, the company plans to venture into complex injectables (69 filed ANDAs), which is likely to provide meaningful traction from FY23-24 onwards. Similarly, addition of biosimilars (like Trastuzumab, Adalimumab, Pegfilgrastim, Bevacizumab, etc) for Emerging markets (like LatAm, MENA markets and South East Asia) are expected to provide growth impetus, going ahead. The wellness segment performance hinges upon Cadila's...

Cadila reported an in-line 2Q driven by strong growth across India, US and the API segment offsetting the muted growth in consumer segment. Revenue grew 16% YoY, an improved product mix (double digit growth in India formulations and US sales at $230mn, up $13mn QoQ) led to healthy gross margins at 64.9%. Impact of MEIS offset lower marketing spends, thereby, restricting EBITDA margins at 22.6%. Adjusting for the one-time charge of Rs1.3bn, for NCD purchase and forex loss, PAT grew 63% YoY at Rs6.2bn. Cadila strengthened its balance sheet by reducing debt of Rs27bn...

Cadila continues to bear heavy debt and high intangible assets from FY19 (acquisition of Heinz by its subsidiary Zydus Wellness). Hence, total intangibles remain high at Rs68bn, 65% of net worth, mainly due to the surge in goodwill from Rs14bn to Rs53bn in FY19 and Rs54bn in FY20. Other findings: i) Currency translation loss (FCTR) shot up by Rs4.3bn, out of which Rs2.8bn impacted cash flow. iii) Other operating income and other income together flared up to Rs10bn, 67% of PBT (FY19: 45% of PBT). iv) The cash tax rate lowered from 28% to 16% in FY20, whereas the...

Cost savings more than offset the pain of COVID lockdown on India sales Cadila Healthcare (Cadila) reported 1QFY21 revenue of Rs35,493mn, which was above our estimates by 10% and below consensus estimates by 4.4%. Revenue was down 2.1% QoQ and was up 4.2% YoY. QoQ decline was on account of COVID lockdown impacting India domestic formulation sales (down 7%) and US sales declining (down 8%). The decline was partly offset by the uptake in Asia, Africa, and LATAM and Consumer wellness business growing QoQ. The gross margin continues to be in the higher range (65-66%) driven by better product mix and US business. EBITDA for the quarter stood at Rs8,154mn, up 29% YoY and 1% QoQ. EBITDA margin expanded...

Outlook & Valuation: We reduce our Revenues for FY21E/FY22E by 1.4%/1.5% in FY21E/FY22E due to downgrade in domestic formulations and Consumer Wellness.

US (44% of FY20 revenues) grew at ~12% CAGR in FY16-20 backed by aggressive filings, product launches. Launch of authorised generics also contributed to overall growth. US pipeline (cumulative) consists of 390+ filed ANDAs, 95 pending final approvals. However, resurfacing of cGMP issues at Moraiya, imminent slowdown in base are main near term...

COVID related products to share more focus in FY21E. 1QFY21 revenue was in-line with our estimate but EBITDA and EBITDAM were beat due to decline of SG&A; 17% YoY. We believe its foray into COVID related products has diverted its focus from core business when its top revenue contributors (India, US Gx) have been lacking consistency. With HCQ already...

6 August 2020 CDH delivered in-line performance for 1QFY21. The decline in domestic formulation (DF) and consumer healthcare was more than offset by lower operating cost. CDH is progressing well to build Injectable/vaccine/biosimilars as additional levers of growth for the next 2-3 years. We have raised our earnings estimates for FY21/FY22E by 10%/9% to reflect better operating leverage/growth outlook for DF. We continue to value CDH at 21x 12M forward earnings to arrive at TP of INR460. We remain positive on CDH due to robust ANDA pipeline (including injectables/transdermals), renewed strategy in DF and completion of remediation measures at Moraiya. Maintain 1QFY21 sales at INRINR36.4b (v/s est. Sales growth was largely led by (a) US sales (45% of sales), up 19% YoY to INR16.2b, (b) LATAM/EM revenues (7% of sales), up 8% YoY to INR2.4b, and (c) API revenues (4% of sales), up 89% YoY. India revenue (41% of sales) comprising of DF, consumer and animal health was down 11% YoY to INR14.

Cadila Healthcare has emerged at the forefront of India's battle to fight against COVID-19. Company is one of the world's largest producer of anti-malarial drug hydroxychloroquine which is widely used as a prophylactic drug to prevent COVID-19 infections. Apart from that, to offer treatment options for COVID 19, company is now exploring multiple options from its portfolio of biological products and based on the available evidence, has selected the long-acting biological therapy, Pegylated Interferon alpha-2b as a potential treatment. It may be noted that Zydus Cadila has been commercially manufacturing Pegylated Interferon Alpha-2b under the...