Cipla’s Revlimid Patent Settlement With Innovator A Positive Surprise, Say Analysts
Capsules are arranged for a photograph in Tokyo, Japan. (Photographer: Kiyoshi Ota/Bloomberg)

Cipla’s Revlimid Patent Settlement With Innovator A Positive Surprise, Say Analysts

Analysts maintained their bullish investment recommendation for Cipla Ltd. after the drugmaker settled a patent litigation for a generic of a blood cancer pill with innovator Celgene Corp, a wholly owned subsidiary of Bristol Myers Squibb.

Celgene, according to the settlement, has agreed to provide Cipla with a licence to its patents required to manufacture and sell certain volume-limited amounts of lenalidomide — a copy cat version of Revlimid — in the U.S. beginning sometime after the March 2022, the Indian drugmaker had said in an exchange filing on Dec. 11.

For each consecutive 12-month period following the volume-limited entry date until Jan. 31, 2026, the volume of generic lenalidomide sold by Cipla cannot exceed certain agreed upon percentages. In addition, Celgene has agreed to provide Cipla with a licence to its patents required to manufacture and sell an unlimited quantity of generic lenalidomide in the U.S. beginning Jan. 31, 2026, the filing said. Cipla’s ability to market lenalidomide in the U.S. will be contingent on its obtaining approval of an abbreviated new drug application, it said.

Previously, two Indian drugmakers — Natco Pharma Ltd. and Dr. Reddy’s Laboratories Ltd. — and the U.S.-based Alvogen had settled patent litigations for Revlimid with Celgene.

Shares of Cipla gained more than 4% in early trade on Monday to Rs 789.10 apiece, compared with a 0.53% rise in the benchmark Nifty 50.

Here’s what the analysts have to say…

Emkay Global

  • Maintains ‘Buy’, raises target price to Rs 1,000 from Rs 995 apiece
  • Increased target price includes Revlimid generic NPV of Rs 45 per share
  • Base case net present value calculation is conservative and assumes — settlement terms in line with Alvogen; all the 11 companies or Para IV filers of Revlimid will be launching before Jan. 31, 2026 though in a staggered manner; 10% incremental price erosion per generic in FY23, increasing to 25% incremental price erosion in FY26; and weighted average cost of capital of 10%
  • Settlement with innovator Bristol Meyers Squibb (Celgene) came as a positive surprise


  • Maintains a ‘buy’ rating with a target price of Rs 861 apiece
  • Target price based on 24 times Aug’22 EPS of Rs 36. Target price does not factor in potential upside from Revlimid generic
  • Based on the discounted cash flow model, potential value for Cipla for this opportunity is of Rs 42 per share
  • In the absence of disclosures regarding the date of entry and volume restrictions, it is difficult to precisely estimate the potential upside for Cipla
  • Pricing will depend on the number of players entering into the settlement and the sum total of all restricted volumes. In the first three years — between October 2022 and October 2025, the sum total of restricted generic volumes will not exceed 100% even if a large number of settlements occur. Hence, the price erosion will remain much lower than in a multiplayer generic market

Credit Suisse

  • Rates ‘outperform’ and raises target price to Rs 885 from Rs 835 apiece
  • NPV of Revlimid generic opportunity for Cipla is about $300 million. Target price increase factors in gRevlimid at 2 times NPV. The settlement gives Cipla certainty over cashflows and a strong boost to its U.S. sales run rate—annual addition of greater than $100 million
  • Cipla has surprised positively with settlement on gRevlimid, which could lead to a potential entry in FY23. The settled market share is not known for FY23-FY26 and the estimates of cash flows of $300 million over FY23-FY26 are based on an assumption that the total generic market share in gRevlimid in the final year (FY26) will not cross 75% so as to have minimal impact on price erosion
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