Investors in Cipla Ltd’s stock have been seeing its value erode to a 52-week low from its 52-week high levels, with the stock tumbling 36 per cent in the past one year. News that the US Food and Drug Administration has made some further observations on Cipla’s Goa plant has further compounded the company’s woes. So far today, the stock has shed 4.1 per cent in trade.
Much of the details of these observations are yet not known. But it must be noted that the US FDA has made 12 observations for the Goa unit. Details will emerge in due course after the receipt of Form 483. Analysts note that the severity of the issue will only be known when this filed, which will also show whether these issues are minor or major in nature.
Cipla’s Goa plant accounts for over 20% of its total US sales, and hence any serious observation could impact sales to the US. Overall, the US business accounts for about 21 per cent of its sales. Further, US sales have risen steadily from about $100 mln in Q1FY19 to about Q1FY20 due to new launches in the US. Hence, if the recent observations by the US Fed are serious in nature, new drug launches in the US could get impacted or delayed.
Read EquityPandit’s Nifty Outlook for the Week