Cipla’s shares soared 10% on Thursday after the US FDA cleared its Goa facility

Cipla’s stock price surged over 10% on Thursday after the US FDA cleared its Goa facility. The VAI classification allows Cipla to launch key products like Abraxane, a chemotherapy drug. This development has significantly boosted investor confidence in the company.

Cipla’s shares soared 10% on Thursday after the US FDA cleared its Goa facility.

Cipla Ltd.’s shares surged by over 10% in early trading on Thursday after the USFDA granted its Goa facility a “Voluntary Action Indicated” (VAI) status. This classification followed a re-inspection of the facility by the regulator from June 10 to June 21, 2024, during which six observations were issued.

The VAI status clears a significant path for Cipla, enabling it to launch important niche products like the generic version of Abraxane. Abraxane, a chemotherapy drug based on paclitaxel, targets cancer treatment and has a market worth over $700 million. Currently, Sandoz is the only other approved generic provider, having received approval in October 2024.

Uncertainties surrounding Abraxane’s launch timeline, primarily due to regulatory challenges at Cipla’s Goa facility (where the drug is to be manufactured), had previously dampened growth projections. These extended regulatory delays at the facility led analysts to initially anticipate Abraxane’s launch no sooner than FY27.

Cipla’s shares soared 10% on Thursday after the US FDA:  However, with the Goa facility’s recent clearance, Citi brokerage sees a renewed opportunity for Cipla. This development could allow the generic Abraxane to hit the market within the current fiscal year, far earlier than the initial forecast of FY26-FY27. Citi has factored in potential sales of $24 million to $48 million from the drug for FY26 and FY27, with an additional $25 million to $40 million increase possible.

Citi expressed optimism, noting that this clearance strengthens Cipla’s pipeline visibility and has given the stock a “buy” rating with a target price of ₹1,830. Among the 38 analysts covering Cipla, 21 recommend a “buy,” eight suggest “hold,” and nine advise a “sell.” Cipla’s stock is currently trading 8% higher at ₹1,528, reflecting a 22% rise year-to-date in 2024.

Cipla’s shares surged by 10% on October 31 after the US Food and Drug Administration (FDA) designated the company’s Goa manufacturing facility as ‘Voluntary Action Indicated’ (VAI), which facilitates the launch of its key chemotherapy drug, Abraxane. As of 09:16 AM, Cipla’s stock was trading at ₹1,534.80 on the NSE.

The VAI classification indicates that, while the FDA found certain issues during its inspection, they are not severe enough to trigger official enforcement actions. This allows the company to voluntarily address these minor deficiencies and continue with product approvals and regulatory processes without interruption.

For companies like Cipla, a VAI status is generally favorable, as it enables them to move forward with planned drug launches while maintaining regulatory compliance. Previously, uncertainties surrounding the launch of Abraxane due to regulatory hurdles at the Goa facility had negatively impacted Cipla’s growth outlook, with analysts predicting that the product might only be available in FY27.

However, the recent approval of the Goa facility now clears the way for Cipla to launch Abraxane, a positive development noted by brokerage firm Citi. They highlighted that this approval enhances Cipla’s pipeline visibility, as Abraxane is a crucial product for the company.

The importance of Abraxane is evident, as it contributes 6-7% to Citi’s earnings-per-share estimates for FY26/27, excluding contributions from Revlimid. Citi has maintained its ‘buy’ recommendation for Cipla, with a price target of ₹1,830.

This development also comes as another China-based pharmaceutical company has received approval for Paclitaxel, the generic version of BMS’ Abraxane. This could jeopardize Cipla’s first-mover advantage if the Chinese competitor launches its generic before Cipla.

Citi had previously warned that a timely launch by the Chinese rival could capture a significant market share and drive down prices for Abraxane, negatively impacting Cipla’s revenue potential. Additionally, Bank of America Securities had indicated that any delays in clearing the Goa facility could hinder Abraxane’s launch, warning that such setbacks pose risks to estimates and leading them to maintain an underperform stance.

Cipla’s shares soared 10% on Thursday after the US FDA:  Cipla’s share price surged by 10% in morning trading on Thursday, October 31, following the announcement that its Goa facility has been classified as Voluntary Action Indicated (VAI). This classification allows Cipla to launch significant products from the facility in the US.

The stock opened at ₹1,518.55 on the BSE on Friday, a rise of more than 7% from the previous close of ₹1,417.45. It continued to climb, reaching a peak of ₹1,557.45 during the day, marking nearly a 10% increase. In a market release issued after hours on Wednesday, Cipla confirmed that the United States Food and Drug Administration (USFDA) classified the recent inspection as VAI on October 30, 2024, at 8:28 p.m. IST.

The VAI classification indicates that the FDA has not recommended any administrative or regulatory action following the inspection, signifying that the Goa plant complies with the agency’s current Good Manufacturing Practices (cGMP) requirements. This compliance enables Cipla to seek FDA approval to launch products from the facility.

The cGMP inspection of Cipla’s Goa manufacturing site took place between June 10 and June 21. One of the significant products expected to be launched from this facility is the generic version of the oncology drug Abraxane, used in chemotherapy treatments. The launch of this generic has faced delays due to regulatory scrutiny of the Goa facility, which has hindered Cipla’s filing process.

Analysts at Elara Securities noted in a recent report that the launch of the Abraxane generic is now closely linked to the clearance of the Goa facility by the USFDA, as alternative contract manufacturing options have proven to be more time-consuming than anticipated.