Cipla faces revenue and margin pressure ahead of Revlimid patent expiry

Synopsis

Cipla faces revenue and margin pressure due to the upcoming Revlimid patent expiry, leading to underperformance and analyst downgrades. Margin is expected to drop significantly in FY26 and FY27, with concerns about finding a suitable buyer after Torrent's acquisition of JB Chemicals. While Cipla is pursuing new respiratory and complex generic assets, analysts doubt these will fully offset Revlimid's decline.

ET Intelligence Group: Cipla has underperformed the sector indices in the past twelve months following expected pressure on revenue and margin amid Revlimid patent expiry next year. The company expects margin to drop by 140-240 bps year-on-year in the current fiscal year. It has a couple of launches for FY26 but it still might not be able to compensate for the decline in Revlimid. Analysts have retained 'reduce' rating on the stock, citing muted growth for FY26-27.

Cipla has guided operating margin before depreciation and amortisation to fall to 23.5-24.5% in FY26 from 25.9% in the previous year, due to Revlimid patent expiry. Elara Capital expects a further contraction of 300 bps in FY27 as the full loss of Revlimid will be reflected in that year.

Agencies

Cipla's future course of action when it comes to finding a suitor will be another concern that investors may have to grapple with given Torrent Pharmaceuticals' recent acquisition of JB Chemicals & Pharmaceuticals. According to media reports Torrent was in talks with Cipla to buy majority stake two years ago. But the proposal hit a roadblock due to differences in valuation. Now that Torrent has acquired a stake in JB Chemicals, Cipla's promoters will have to look for other buyers in case they wish to pare stake.

On the front of revenue visibility, Cipla has filed for 6 respiratory assets in US, including Symbicort and Qvar and four more to be filed in the next 12-18 months.

The generic Advair is expected to be commercialised in this fiscal year. In peptides and complex generics, 9 filings are done, and it aims to file 10 more assets in 12 to 24 months, with two-three filings in FY26 itself.

The company has net cash of ₹10,807 crore. It expects to spend 5% of revenue as capex this year, which could be towards mergers and acquisitions. Revenue for FY25 grew by 8.2% year-on-year to ₹2,754.8 crore. Though the company expects a similar growth rate for FY26, Elara anticipates flat-to-low single-digit percentage growth.

In FY25, North America business posted a record-high annual revenue of $934 million and $221 million for March 2025 quarter. The company expects June quarter's revenue to be muted at around $220 million.

"Resolution of supply issues in Lanreotride, the launch of Abraxane and Tasigna and potential launch of Advair and two-three peptide products may not, it seems, be able to compensate for decline in Revlimid in FY26," said Elara, while projecting 6-7% fall in US business for FY26 and FY27. It has downgraded the stock to 'reduce' while lowering target price by 7% to ₹1,465.

Emkay Global has reiterated 'reduce' with a TP of ₹1,500 citing execution risks and valuation concerns.

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