Motilal Oswal says Cadila Healthcare received Restricted Emergency Use approval from the Drug Controller General of India (DCGI) for the use of ‘Virafin’, Pegylated Interferon alpha-2b (PegIFN), in treating moderate COVID-19 infections. Considering the drug’s potential in reducing the need for supplemental oxygen and its better efficacy against other viral infections, Motilal Oswal says it expects sales of Rs 2.5 – 3 bn on an annualized basis.

COMMERCIAL BREAK
SCROLL TO CONTINUE READING

Accordingly, Motilal Oswal raised its earnings estimates by 7%/6% for FY22/FY23, factoring in:

a)      the Virafin opportunity

b)      lower operating cost in the Domestic Formulation (DF) segment on account of the lockdown

Motilal Oswal has valued Cadila Healthcare at 23x 12M forward earnings to arrive at Target Price of Rs 670. The vaccine prospect may be a potential trigger over the medium term. It maintains Buy Rating on the stock. The multi-centric trial conducted at 20–25 centres across India revealed that administering Virafin to the patient reduced their dependency on supplemental oxygen; this indicates the drug’s ability to control respiratory distress/failure.

As per Cadila’s management, it significantly reduced the viral load when administered early, thus providing better disease management. Phase III clinical trial data indicates a higher number of patients in the PegIFN arm showed two-point, statistically significant clinical improvement (WHO’s seven-day ordinal scale) on Day 8 vis-à-vis the Standard of Care (SoC) arm. 

Interestingly, Virafin is to be administered only as a single-dose subcutaneous injection. While emergency use authorization has been granted, the prescription of the medicine would be left to the doctor’s discretion – it may be prescribed either when a patient is hospitalized for moderate COVID symptoms or when they require supplemental oxygen, explains Motilal Oswal.

Cadila Healthcare is expected to supply 50,000 doses initially. By July, however, the company may be able to scale this to 1m doses per month. Channel checks suggest 10–12% of COVID-positive patients require hospitalization, of which 6–8% require supplemental oxygen. The current therapy for hospitalized patients is six doses of Remdesivir. Motilal Oswal says assuming an average price of Rs 2k per dose, a course of Remdesivir treatment for COVID patients costs Rs 12K. Motilal Oswal has assumed a conservative price of Rs 5,000 per dose for Virafin in India, implying potential sales of Rs 2.5–3b from this opportunity.

Motilal Oswal has also raised EPS estimates by 7%/6% for FY22/FY23, factoring in the COVID treatment opportunity as well as the extended benefit of reduced operational cost in the DF segment. Motilal Oswal rolled forward their Target Price to Rs 670 (based on 23x 12M forward PE).

Positive on Cadila Healthcare on the back of :

a)      superior growth in the Specialty segment of DF

b)      a strong ANDA pipeline

c)       it's NCE portfolio

d)      a better outlook in the Consumer Wellness segment.

Motilal Oswal says vaccine prospect may be a potential trigger over the medium term. Maintain Buy.