Cipla dips 7% after Pithampur unit receives 8 USFDA observations

The company said it will work closely with the USFDA and is committed to address these comprehensively within stipulated time.

Shares of Cipla dipped 7 per cent to Rs 956.20 on the BSE in Monday’s intra-day trade after the company said that the United States Food and Drug Administration (USFDA) issued Form 483 with 8 observations after the inspection of its Pithampur manufacturing facilities.

USFDA conducted a current Good Manufacturing Practices (cGMP) inspection at the company’s Pithampur manufacturing facility from 6th - 17th February, 2023, Cipla said in an exchange filing.

On conclusion of the inspection, the company has received 8 inspectional observations in Form 483. The company will work closely with the USFDA and is committed to address these comprehensively within stipulated time, Cipla said.

At 09:23 AM; Cipla quoted 5 per cent lower at Rs 971.60, as compared to 0.16 per cent rise in the S&P BSE Sensex. The stock of pharmaceutical company was trading at its lowest level since July 2022.

In past one month, Cipla has underperformed the market, by falling 11 per cent, as against 1 per cent gain in the benchmark index.

Meanwhile, after announcement of October-December quarter (Q3FY23) earnings by Cipla on January 26, analysts at Prabhudas Lilladher reduced their FY24/FY25 earnings by ~4 per cent factoring in delay in key US launches and lower margins.

“Cipla’s Q3FY23 EBITDA was largely in-line with our estimates (24 per cent) aided by higher GMs and strong US sales. We expect 18 per cent EPS CAGR over FY23-25E given resilient earnings, improving US visibility and strong free cash flow generation,” the brokerage firm said.

Analysts further said they continue to remain positive on Cipla’s growth across key segments including India and US given strong traction in respiratory and other portfolio, ExCOVID, domestic formulation to potentially grow +10 per cent going forward and sustainability of current US revs, backed by potential key launches.

Technical View

Bias: Negative

Target: Rs 910

Resistance: Rs 980; Rs 990

Shares of Cipla have been trading with a negative bias since the start of December 2022. Barring few trading sessions in end December, the stock has largely failed to overcome its 20-DMA (Daily Moving Average) in the last three months.

Off late, the stock has also broken the major support at its 200-DMA. With today's sharp fall, the stock has is seen trading below the lower-end of the Bollinger Band on the daily chart, thus indicating a bearish bias as long as the stock sustains below Rs 991.

On the weekly scale, the stock has dipped below the 100-WMA (Weekly Moving Average), which stands at Rs 980. Overall, the Rs 980-990 range is likely to act as a stiff resistance for the stock in the near term.

On the downside, the stock seems on course to re-test the July 2022 lows around Rs 910-level.

On the positive front, in case, the stock manages to sustain above the Rs 990 hurdle, it can pullback to Rs 1,030-odd level.

(With inputs from Rex Cano)