Synopsis: Cipla is in focus after the US FDA raised issues regarding a significant overseas production facility for the company linked with its US operations. This has raised questions about the expected earnings in the near future.
The shares of one of the largest pharma companies in India are in focus after the US FDA flagged key issues in one of its key manufacturing facilities, through which it markets one of the largest products in the US. In this article, we will dive more into the details of it.
With a market capitalisation of Rs 1,19,304 crore, the shares of Cipla Ltd reached a day’s low of Rs 1,473.60 per share, down nearly 4 percent from its previous day’s closing price of Rs 1,530.35 per share. Over the past five years, the stock has delivered a return of 76 percent, underperforming NIFTY 50’s return of 82 percent.
About the news
Cipla fell sharply after investor sentiment became cautious after the US Food and Drug Administration (FDA) provided notice (Form 483) of major quality issues with a key overseas manufacturing facility owned by the company’s largest product in the US. In a published report, the US FDA detailed its findings from a recent inspection of Pharmathen, which is a Greece- based contract manufacturing organisation (CMO) and is Cipla’s sole manufacturing partner of Lanreotide for the US.
Lanreotide is a long-acting formulation that is prescribed to help prevent the excessive production of hormones in the body, including abnormal amounts of growth hormone, which can lead to abnormal body growth (acromegaly). It may also be indicated to treat patients with specific types of hormone- secreting cancers. The U.S. approved the original formulation in 2007, while Cipla’s version received FDA approval in 2021.
According to the US FDA, the facility (Rodopi Unit) has many manufacturing and quality control deficiencies, including contamination risks, sterile manufacturing deficiencies, rejected batches, inadequate quality failure responses, and data reliability issues. Additionally, the US FDA cited failures in laboratory procedures as well as facility conditions that raised serious compliance concerns related to its manufacturing operations.
How is this significant for the company?
The problem is significant since Lanreotide is Cipla’s largest product in the U.S. market. An extended manufacturing halt at one plant might result in reduced availability of the medication and lost sales revenue for Cipla, unless the company finds a way to transfer production to another facility.
According to calculations, nearly 10 percent of Cipla’s EBITDA might be at risk if Cipla cannot resolve its manufacturing difficulties promptly. Because the timelines associated with the regulatory follow-ups and remedial actions are uncertain, there is an earnings overhang in the near term for Cipla. This has caused investors to reevaluate the stock price.
Financial and other highlights
The revenue from operations for Cipla stands at Rs 7,589 crores in Q2 FY26 compared to Q2 FY25 revenue of Rs 7,051 crores, up by about 8 per cent YoY. Additionally, on a QoQ basis, it reported a growth of 9 percent from Rs 6,957 crore.
Coming down to its profitability, the company’s net profit stood at Rs 1,353 crore in Q2 FY26, up from Rs 1,305 crore in Q2 FY25, which is a minor growth of 4 percent YoY. Additionally, on a QoQ basis, it reported a net profit of Rs 1,292 crore, which is a growth of 5 percent.
Regarding its revenue splits, in Q2 FY26, 41 percent of its revenue came from One India (domestic formulation), followed by 27 percent from North America, 16 percent from One Africa, 13 percent from Emerging Markets & Europe, 2 percent from API and 1 percent from Others.
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