Wednesday, March 14, 2012

>CIPLA: A potential opportunity in Dymista which is a combination of azelastine and fluticasone; has been a development partner for Sweden-based speciality pharma company Meda AB

Sweden-based speciality pharma company Meda AB (MEDA) has indicated that its NDA for a combination inhaler branded Dymista (azelastine and fluticasone) for allergic rhinitis could be approved in H2CY12. Cipla is the development/manufacturing partner of Meda for this product. The global market size for azelastine is ~US$250mn market while that for fluticasone is ~US$350mn. We expect Cipla to benefit significantly when this product is launched in the US and EU markets in CY12. We have currently not built this prospect into our estimates and expect upgrades if and when this product is approved. Maintain BUY with target price of Rs393/share.

 Dymista, the opportunity: Dymista is a combination of azelastine and fluticasone and is administered through an inhaler device. Having filed an NDA in the US in Jun’11 and a pre-registration in EU in Oct’11, Meda is preparing for a launch of the product in H2CY12. Individually, fluticasone (a steroid) and azelastine (antihistamine) have global sales of ~US$250mn and ~US350mn respectively and we believe that a combination has potential to offer better treatment. In one single product, patients will receive the benefit of a steroid (to treat the inflammation) and an antihistamine (for rapid effect and relief of nasal congestion).

 Cipla as a partner: Cipla has been a development partner for Meda and will also be the manufacturer for the product – both the formulation as well as the inhaler device. In CY09, it expanded its partnership to include other major markets like Australia, Brazil, Europe, Japan and South Korea over and above the US and EU. We believe Cipla will gain from the combination product as its sales pick up.

 Timelines: Meda has filed an NDA (for seasonal allergic rhinitis) in the US in Jun’11 and has indicated that its PDUFA (Prescription Drug User Fee Act) date for Dymista will be early May’12 indicating an imminent launch thereafter. In the EU Meda has filed a pre-registration in Oct’2011 and an NDA would be filed soon.

 Recent underperformance provides an opportunity: Since the announcement of Q3FY12 results, the Cipla stock has corrected ~10%. Our estimates have not changed post the Q3FY12 results and we continue to believe that Cipla’s export potential remains under-appreciated. At current price, Cipla trades at 17.8x FY13E EPS – ~10% discount to peer average. We find value in the stock and thus recommend BUY with target price of Rs393/share.

To read full report: CIPLA