Cadila Healthcare Limited is one of the largest Indian companies in the domestic pharmaceutical market. The company is the flagship of the Zydus Cadila group. Its operations include pharmaceuticals, diagnostics, herbal products, skin care products and other over-the-counter products. Company came into being after the group restructuring in 1995 under which the operations of the group were consolidated. The company also has co-marketing agreement with number of Indian drug companies like E. Merck, Kopran, Nicholas Piramal and Ranbaxy. Further, the company plans to ramp up export of its brands and establish overseas operations in the high margin export markets like the Hong Kong, China, Malaysia, South America and West Africa.

Products & services—

Cadila has more than 80 brands across segments of anti-infective, gastrointestinal, cardiovascular, pain management, biologicals, vaccines and OTC of which eight belong to the top 300 India pharma brands as per ORG figures of October 1999. Bulk drugs manufactured by company include Loratidine, Famotidine, Omeprazole, Losartan and Amlodipine. At present, company has about 31 per cent of its formulations under DPCO. The company exports both bulk drugs and formulations.

Cadila has overseas operations at Sri Lanka, Kenya, Czechoslovakia, Romania, Mauritius, Myanmar, Cambodia and the Russian markets. The company covers over 1,10,000 retail outlets and has a work force of field over 1500. Company has a technical collaboration under license agreement with Swiss Serum Vaccine Institute (SSVI), Switzerland for the manufacture of human rabies vaccine and SSVI would buyback 50 per cent of the annual production. It also has a 50:50 research-cum-manufacturing joint venture with the DM 1.76 billion Byk Gulden in India. The German multinational is the global patent holder for pantoprazole, a proton pump inhibitor used to treat various gastrointestinal disorders. The company has six subsidiaries Indon Healthcare Limited, Zydus Pharmaceuticals Limited, Zydus Agrovet Limited, Zoom Properties Private Limited, Zydus International Private Limited, Ireland and Zydus Healthcare S.A (Pty) Ltd., South Africa.

Cadila plans to increasingly focus on fast growing molecules and new product launches. It plans to focus its R&D to develop new molecules and drug delivery systems. The NCEs will be concentrated in the cardiovascular, pain management and biotech research, while the NDDS will be mainly in on pulmonary drug delivery systems, having acquired technology platforms for transdermal delivery systems.

Recent developments—

Cadila Healthcare has received three product approvals from the USFDA in quick succession. The group has received approvals to market Lamotrigine chewable tablets in strengths of 2 mg, 5 mg and 25 mg, Lamotrigine tablets in strengths of 25 mg, 50 mg, 100 mg, 150 mg, 200 mg and 250 mg and Divalproex sprinkle capsules, 125 mg. The branded sales in the US market of Lamotrigine chewable tablets was estimated at USD 101 million and that of Lamotrigine tablets was estimated at USD 2.4 billion in 2008 as per NDC. The sales of Divalproex sprinkle capsules were estimated at USD 63 million in 2008 as per NDC. All three products fall under the anti- epileptic segment. The company will market all the three drugs through its US subsidiary Zydus Pharmaceuticals (USA). The group now has 44 approvals since the commencement of filing process in FY 2003-04. So far, the group has filed 80 ANDAs and 71 DMFs.

Novavax has formed a joint venture (JV) with Cadila Pharmaceuticals for developing and commercializing virus-like particle-based (VLP-based) vaccines. The joint venture will develop and commercialize Novavax’s VLP-based vaccine and Cadila’s therapeutic vaccine candidates against cancer as well as its adjuvants, biogeneric and biological diagnostic products for the Indian Territory, Navavax said in filing to Security Exchange Commission (SEC). Novavax would provide the technology and Cadila would invest USD 8 million over three years to support the joint venture operations. In the proposed joint venture, Cadila would have 80% stake while remaining 20% will held by Novavax.

Valuation—

At current market price, stock is trading at 13.45 P/E multiple of its FY2010 estimated earnings. We recommend investors to buy “Cadila Healthcare Limited” with medium to long term investment prospective.