Cipla share price: The market is afraid about risks that don't exist, says Bernstein

Nithya Balasubramanian, Director-Healthcare at Sanford Bernstein, deems market worries about Cipla following the US Food and Drug Administration's (FDA's) warning to its Pithampur facility as unwarranted.

“The risk of an import alert, which is what seemed to have concerned investors last week – we think that is insignificant. I think that the risks that the market is worried about don’t exist,” she said.

Balasubramanian pointed out recent investments by brokerages as a sign of faith in the company's strong fundamentals.

The USFDA inspection of Cipla's Pithampur unit from February 6 to February 17, 2023, resulted in the issuance of Form 483, listing eight observations related to data integrity issues. The facility manufactures respiratory and oral products.

Following a warning letter, companies typically have 15 days to respond with corrective and preventive action plans. The subsequent re-inspection period can range from six months to a year.

Balasubramanian highlighted that even if an adverse scenario unfolds, Cipla has an alternative source for Albuterol, a critical product from the Pithampur facility, supplied also by Cipla's US facility.

The USFDA has instructed Cipla to engage third-party consultants to address the identified issues. The warning letter also draws parallels with repeated observations at Cipla's Goa site, which is already under a USFDA warning letter.

Balasubramanian referenced Cipla's effective resolution of FDA issues at its Goa plant, highlighting the company's capability for successful remediation.

In response to the regulatory scrutiny, Cipla reiterated confidence in its existing commercial product portfolio. The company expressed optimism in executing its de-risking plan for new products while promptly addressing the observed issues.

Shares of Cipla were trading flat at around ₹1,197 on November 28. They have shed over 4% in the past week and underperformed the benchmark over the last month.