HSBC maintains ‘buy’ rating on Cipla

MUMBAI: HSBC has maintained ‘buy’ rating on Cipla with a target price of Rs 603 after the drug maker’s flagship product Sereflo got final approval from the UK Medicines and Healthcare Products Regulatory Agency.

The product is the generic equivalent of GlaxoSmithKline’s Seretide and is used in the treatment of asthma.

HSBC said approval is key to validating Cipla’s respiratory franchise in the developed markets.

“Assuming 10-15% market share and price discount of 25-30%, gSeretide could be a USD25-35m annual sales opportunity for Cipla,” said HSBC.

In the note, HSBC said Cipla aims to increase inhaler sales from $350 million currently to $700 million-$800 million in the next five years with half of the growth to come from India, South Africa and Rest of the World, and of the remaining half, the US will drive two-thirds and the rest from the EU. “Additionally, US ramp up and benefits from cost control initiatives should drive earnings,” said HSBC.

On Friday, shares of Cipla ended up 4% at Rs 582.75 on the BSE.