Mumbai: Shares of Cipla plunged 7 per cent on Monday and hit their lowest level in about 7 months as observations issued by the US Food and Drug Administration (US FDA) to the company’s Pithampur manufacturing facility in Madhya Pradesh raised concerns over earnings.
The stock hit a 7-month low of Rs 955.25 on the National Stock Exchange.
The US drug regulator has issued 8 observations to the unit, which is one of the key facilities of the drugmaker. The company has filed applications for some of its major generic drugs from this unit.
“While the company has not commented on the nature of observations at this point, note that this is one of its key manufacturing facilities besides Goa and Invagen plant in the US,” JP Morgan reportedly said in a note to its clients.
According to Macquarie Capital, Pithampur unit is estimated to contribute 15 per cent to the operating profit of Cipla in FY23, and about 5 per cent to the consolidated revenue.
Cipla manufactures some of the key products in this facility. Apart from oral products, it makes respiratory products such as generics of Proventil, Brovana and Pulmicort.
Further, generic of Advair drug, used to treat chronic pulmonary diseases, is one of the complex products filed from the Madhya Pradesh unit.
According to JPMorgan’s estimate, Advair drug generic is slated for launch in the June quarter of FY24, and it could contribute 5-6 per cent to the overall EPS.
Analysts have not done any tinkering to their ratings or earnings estimates as they seek details on the nature of these observations. JPMorgan and Macquarie have retained an “overweight” rating on Cipla with a price target of Rs 1,210, and Rs 1,235, respectively.
If they are minor in nature, then it is unlikely to hurt sales from the unit. However, if the regulator found major deviations from good manufacturing practices norms, then the resolution process could be longer and delay product launches from the facility.
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