Cipla Ltd Long Term Buy Call: Abhishek Jain, StocksIdea.com

Cipla On August 17, 1935, Cipla was registered as a public limited company with an authorized capital of Rs 6 lakhs. Cipla was officially opened on September 22, 1937 when the first products were ready for the market. Exports contribute approximately 35% of net sales. A major portion of Cipla's exports is to the developed countries of Europe and US. Other major markets are Africa, Middle East, Asia and Australia.

The company exports raw materials, intermediates, prescription drugs and OTC products. It also earns fees for supplying know-how to overseas firms for the manufacture of pharmaceutical products. In year 1999-00, it entered into an alliance with Neolab of UK and Chanelle Pharmaceuticals of Ireland for marketing its products in Europe. Cipla has also entered into JVs with firms in China and Australia for manufacturing formulations. It has an agreement with Zenith Goldline, an affiliate of the US-based Ivax Corporation, for the supply of Flutamide, used in the treatment of prostrate cancer.

There is also a tie-up with Ranbaxy for marketing a select basket of drugs in the cardiovascular and anti-infective segment in the domestic market. In the year 1996-97, the company started the Cipla Palliative Cancer Care Institute. It launched Lamivudine in the year 1998-99, a drug used for retroviral combination therapy. In 1997, company launched transparent Rotahaler, the world's first such dry powder inhaler device now patented by Cipla in India and abroad. The palliative cancer care centre was set up by the Cipla Foundation, offers free services at Warje, near Pune. Cipla is one of the few companies in the world to offer all three component drugs of retroviral combination therapy. In 2000, Cipla became the first company, outside the USA and Europe to launch CFC-free inhalers
- ten years before the deadline to phase out use of CFC in medicinal products.

Products & services:

Company is a leading domestic pharmaceutical major has a wide range of product including antibiotics, anti-bacterials, anti-asthmatics, anthelmintics, anti-ulcerants, oncology, corticosteroids, nutritional supplements and cardiovascular drugs. Company is a leader in the anti-bacterial and anti-asthmatic segments and is the first player in Asia to launch non-CFC metered dose inhaler. Formulations business mainly in the domestic market has over 70% market share and bulk drugs has around 15% market share. Bulk drugs mainly account for export into international market. Cipla's prominent brands are Ciplox, Norflox, Novamox and Asthalin-Inh. Company has a technical collaboration with California-based Cymbiotics for the treatment for arthritis. The company markets "Mobix Capsules" and "Mobix Topical Cream" for treatment of osteoarthritis and rheumatoid arthritis.

Company effectively leverages its process research skills and is known to be amongst the fastest in introducing new products. Cipla has made substantial progress in the field of novel drug delivery systems (NDDS) and chiral synthesis. Initiatives in chiral chemistry have been successful in case of Salbutamol (asthma) and Lamuvidine (AIDS) wherein the company has launched the single isomer chiral version of both these drugs. The focus areas continue to remain asthma, corticosteroids, anti-ulcerants and oncology. It has introduced a breakthrough combination product of fluticasone and salmeterol for asthma. Apart from this, it has also introduced two new anti-asthmatic drugs, formoterol and bambuterol.

Recent developments:

Cipla announced that Oseltamivir 75 mg capsules marketed as "Antiflu" by the company has been included in the World Health Organization (WHO) list of prequalified medicinal products
(PMP). Oseltamivir is indicated for use in the treatment of influenza A (H1N1) infection commonly known as swine flu. The company has a product range comprising antibiotics, anti-bacterials, anti-asthmatics, anthelmintics, anti-ulcerants, oncology, corticosteroids, nutritional supplements and cardiovascular drugs.

Cipla has received final approval from the US Food & Drug Administration (USFDA) to manufacture and market for Efavirenz Capsules in strength of 200 mg. Efavirenz (brand names Sustiva and Stocrin) is a non-nucleoside reverse transcriptase inhibitor (NNRTI) and is used as part of highly active antiretroviral therapy (HAART) for the treatment of a human immunodeficiency virus.

Cipla will foray into the production of biotechnology medicines soon. The company is planning to set up a 50:50 joint venture partnership with a Chinese firm. The JV will be based in India and will manufacture and market bio-similar products (off patent biotechnology medicines) for domestic and overseas markets.

Cipla has signed a long-term collaboration agreement with Swiss specialty pharmaceutical major Meda, to develop and market an anti-allergic rhinitis drug for various global markets. Cipla will manufacture the drug, which will treat an ailment that causes a runny nose, and Meda will market the product in Europe, Japan, Brazil, South Korea and Australia.

Valuation:

Recently, Cipla has approved issuance of 2,56,30,000 equity shares of Rs 2 each of the company at a price of Rs 263.75 a equity share (including a premium of Rs 261.75 a equity share) under the QIP issue, aggregating to Rs 6,759,912,500. At current market price, stock is trading at 21.27 P/E multiple of its FY2010 estimated EPS. We recommend investors to "BUY" Cipla" with medium to long-term investment horizon.