Why Cipla Share Price is Falling

Shark tank fever is high these days. Just a couple of years ago, my family and I used to watch KBC hosted by Amitabh Bachchan at 9 PM every day. It was like a ritual.

Now, the ritual is to watch Shark Tank India every day.

I'm inspired by people my age earning millions through fantastic, unique, and profitable businesses. Like every other person watching Shark Tank, even I was motivated to look for unique and good business opportunities.

The first question in my head was which is the sector that never goes out of business? Be it the summer season, winter season, festive season, or even no season at all, which sector has steady demand at any given time?

The obvious answers are pharma sector, and FMCG sector... or even the banking sector.

Out of the said sectors, the star performer during the Covid-19 pandemic was the pharma sector as demand for medicines boomed. So, I thought why not look into the pharma sector... it may be the best sector to start a business in.

But then, I noticed that one of the best pharma stocks in India - Cipla has suffered a lot in the past couple of months. The company's share price has fallen drastically after the short lived rally due to Covid fears in China...Cipla share price was rising back then.

Anyways...keeping the business idea aside, I started searching for the reason why a bluechip stock like Cipla is suffering. The company's share price has fallen 12% in the past 7 trading sessions.

Here's what is affecting the pharma company.

#1 Inspection by USFDA at the Pithampur facility

From 6 February 2023 to 17 February 2023, the United States food and drug administration (USFDA) carried out a current good manufacturing practice (CGMP) inspection at the Pithampur manufacturing facility of Cipla.

At the end of the inspection, the USFDA issued form 483 with the following observation:

• Failure to review any unexplained discrepancy.
• Procedures to prevent microbiological contamination not established, written, followed.
• Asceptic processes are deficient regarding system for monitoring environmental conditions.
• Appropriate controls not exercised over computers or related systems.
• Procedures for handling written or oral complaints are deficiently written or followed.
• Field report not submitted as required under Standard Operating Procedure (SOP).
• Responsibilities and procedures applicable to quality unit not fully followed.
• Lab records do not include complete data.

Now according to the company, these observations are critical but not grave. Hence, it will take time to solve them, but these will not result in an import alert for the facility.

Pithampur facility is crucial for Cipla. The plant is likely to contribute 15% of the current financial year's operating profit and 5% of the consolidated revenue.

The plant manufactures its blockbuster respiratory products such as Albuterol and Arformoterol; and gAdvair. According to experts, gAdvair cleared the pre-approval inspection of the regulator at the Indore unit, but the final approval is unlikely until the company clears the recent USFDA observations.

Also, these regulatory concerns are not recent. Cipla's Goa facility also faces similar concerns.

#2 OAI status for the Goa facility

On 24 November 2022, Cipla informed stock exchanges that it has received a communication from the USFDA that the classification of the company's Goa manufacturing facility continues to be as official action indicated (OAI).

An OAI status means objectionable conditions were found and regulatory action should be recommended.

The company originally received OAI status in August 2022. The communication received in November pushed the launch of its cancer drug Abraxane into the financial year 2025.

So currently, Cipla is facing strong headwinds from USFDA inspections which are dragging down its share price.

How shares of Cipla have performed recently

Cipla share price is down 16% in 2023 so far. In the past one year, it has fallen by 4%.

Cipla touched its 52-week high of Rs 1,185.2 on 01 November 2022. Its 52-week low was Rs 884.5 touched today on 02 March 2023.

About Cipla

Cipla is a global pharmaceutical company with presence in more than 80 countries with 46 manufacturing plants producing over 1,500 products. Its product portfolio comprises generics and drugs in key therapeutic segments.

In India, Cipla is one of the largest pharmaceutical companies and the largest Indian exporter to emerging markets.

During the pandemic, Cipla rolled out 7 products as a part of their Covid-19 portfolio. These include drugs, sanitisers, and antigen and anti-body testing kits.

For more details about the company, you can have a look at Cipla's factsheet and quarterly results on our website.

You can also compare Cipla with its peers.

Cipla vs Sun Pharma

Cipla vs Dr Reddy's Lab

Cipla vs Lupin

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