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On Tuesday, UBS maintained its Buy rating on Cipla Ltd. (CIPLA:IN) shares but reduced the price target from INR2,060.00 to INR1,960.00. The adjustment comes in light of the anticipated impact on near-term earnings due to shortages of Lanreotide, a drug in Cipla's portfolio.
Cipla has indicated that its third-quarter financial performance for fiscal year 2025 will be affected by these shortages, leading to a projected decline in U.S. sales for the December 2024 quarter to less than $220 million, down from $237 million in the second quarter of fiscal year 2025. The company has not produced Lanreotide for one to two months, which will influence the December 2024 quarter's results.
The pharmaceutical company expects sales to return to normal in the March 2025 quarter. Cipla clarified that there are no supply chain issues involved in the production of Lanreotide. Instead, the shortage is attributed to reduced production at a partner's facility, which is currently undergoing an expansion of its capacity to produce the drug. This expansion is one of the reasons for the current supply shortfall.
Cipla anticipates that the effects of the capacity enhancement at its partner's facility will become evident in the following year. The company remains optimistic that once the expansion is complete, production levels of Lanreotide will stabilize, alleviating the current constraints on supply and sales.
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