Homegrown pharma giant Cipla became the fourth company to settle patent litigation in the United States on blockbuster cancer drug Revlimid. Cipla settled with Celgene Corporation, an arm of American pharma company Bristol Myers Squibb.
Revlimid, which is used to treat conditions such as multiple myeloma, is an approximately $8 billion brand in the US.
Natco Pharma, Dr Reddy’s Laboratories and Alvogen have already settled on the drug. Cipla’s settlement terms are like Dr Reddy’s and Alvogen while Natco has a headstart.
Natco Pharma, along with partner Teva can launch their generic version of the drug in March 2022. Cipla, along with the others, will launch sometime after March 2022, the date kept confidential.
Like others, Cipla will sell a limited amount of volume of the drug until January 2026 after which there will be no volume caps.
Cipla shares rally 4% after it settles litigation with Celgene Corp for cancer drug Revlimid
Analysts, as of now, are assuming a September to October 2022 launch. In terms of market share, edelweiss assumes 10 percent and Nomura at 8 percent in the volume restricted period. Credit Suisse factors in a peak market share of 5 percent.
Cipla’s settlement according to analysts has come earlier than expectations. It also gives certainty over cash flow for Cipla.
Credit Suisse has raised its target price on Cipla to Rs 885 per share versus Rs 835 earlier. It is estimating a cash flow of over $300 million over FY23 to FY26. Nomura which has a ‘Buy’ rating on the stock with a target price of Rs 861 says there is a potential value of Rs 42 per share for Cipla from this opportunity. They are not factoring Revlimid in their current target price.
Edelweiss is assuming an EPS contribution of Rs 6 in FY23, Rs 17 in FY24 and Rs 11 in FY25 for Cipla.
Analysts also believe this is a strong boost to Cipla’s US sales run rate as well. Credit Suisse believes it can be an annual addition of $100 million-plus while analysts say this points an overall improvement in the quality of US launches.
Edelweiss expects the US business to be more resilient with better margins. The launch, according to brokerage, will also complement Cipla’s current inhaler portfolio which includes generic versions of drugs Proventil, Advair and Dulera.