Cipla through its China JV has acquired stake in two biotech companies (in India and Hong Kong) with total equity investment of USD 65 mn over three years. Cipla has acquire 40% stake in Indian biotech company and 25% stake in Hong Kong company, which will likely be used to fund biosimilars manufacturing facilities of these companies. Cipla, through this investment will have access to the biotech portfolio of these companies and rights to market these products in India and other international markets.
We view this venture as a step forward in company’s strategy to launch bio-similar products in India and other international markets especially post its recent setbacks in this regard. Earlier the company, as a part of its bio-similar strategy, entered into a 50:50 JV with Avasthagen for launching 11 biosimilar products in BRICS markets. However, JV was terminated as agreed milestones were not achieved.
Kotak in a report on Cipla said,
There is no change to FY2011-12E est. Inhaler opportunities in Europe and a potential manufacturing deal have countered negative impact of poor FY2011E guidance. We think the stock is richly valued compared to near-term growth. Maintain REDUCE with a target price of Rs280.
Edelweiss Recommendation on Cipla is as follows,
We do not see any financial impact from this transaction. The company has indicated that the funding for these projects will be through internal sources.
We maintain ‘REDUCE’ on the stock.
