Will three-dose Covid vaccine give Cadila Healthcare a booster shot?

NEW DELHI: Despite being the first one to get emergency approval for its needle-free Covid vaccine for adolescents in India, shares of have not reacted much.

Analysts do see a lift to its sales, even as some of them are not factoring in sales beyond FY23 amid uncertainty over booster shots. The pricing of the dose would influence the likely gains for Cadila, with initial brokerage estimates pegging the blended price in Rs 150-320 (per dose) range.

To date, 45.6 crore people or at least 50 per cent of adults have received at least one dose of Covid-19 vaccine. The estimated population in the 12-18 years age group is nearly 25 crore.

Cadila’s will be the first needle-free, plasmic DNA-based Covid-19 vaccine to be granted approval in the world. The drugmaker said no severe cases were identified during the trials conducted on 28,000 volunteers, out of which 14,000 were aged between 12-18 years. Also, there were no drop-outs due to safety issues, it said.

Nirmal Bang Institutional Equities, which attended Cadila’s analyst meet on Monday, said the drug maker will be able to start producing the ZyCoV-D vaccine by mid-to-end September while distribution will kick off by October-end.

A decision on the pricing of the vaccine will be decided in a couple of weeks, it said, adding that Cadila will be able to produce 1-1.5 crore doses a month with current capacity.

“We have built-in Rs 1,050 crore towards Covid-19 vaccine sales with an Ebitda margin of 35 per cent in FY22. We have estimated that the company will be able to sell 7 crore doses at Rs 150 per dose in FY22. We have not baked in any Covid-19 sales for FY23 due to the uncertainty around the need for routine immunisation with Covid vaccines,” the brokerage said while suggesting a target of Rs 560 on the stock.

Motilal Oswal Securities finds Cadila’s stock worth Rs 670. This brokerage is pegging the blended price of the dose at Rs 320 while expecting a 75:25 split between the government and private channels.

“We factor in an opportunity from the Covid-19 vaccine in our estimates for Cadila. We continue to value Cadila’s base business at 25 times its 12-month forward P/E. We arrive at a combined target price of Rs 670 per share,” it said.

The interim efficacy of Cadila’s ZyCoV-D is 66.6 per cent based on 81 patients. The final efficacy will be based on a data of 158 patients. Analysts noted that ZyCoV-D has shown 100 per cent efficacy against moderate and severe disease after the second vaccine dose. It is to be stored at 2-8°C, but is also stable at 25°C for three months.

Phillip Capital said Cadila’s vaccine is thermo-stable, can be stored in 2°C to 8°C and will be stable at 25°C for 3 months. Once opened it can be used within 4 hours, which makes it suitable for emerging markets having compromised cold supply chain, it said.

“Given the fact that only 32.4 per cent of the world population and just 1.4 per cent of people in low-income countries have received at least one dose of Covid vaccine and the recent advocacy for a booster dose by advanced countries (making availability for emerging markets scarce) indicates a multi-year supply scope for ZyCoV-D despite potential competition ahead,” Phillip Capital said.

This brokerage expects Cadila to make close to 8.3 crore doses in FY22 and 15 crore doses in FY23 at a blended price of Rs 300 per dose. “Hence, we expect the ZyCoV-D to bring in incremental revenue of Rs 2,400 crore in FY22 and Rs 4,500 crore in FY23 and PAT of Rs 400 crore in FY22 and Rs 1,000 crore in FY23, resulting in 17 per cent earnings upgrade for the ongoing year and 40 per cent upgrade for the next year estimates,” it said.

This brokerage has a target of Rs 680 on the stock. The stock was trading at Rs 544.35 on Tuesday, down half a per cent.

So far, 14 out of 30 analysts tracking the stock have ‘buy’ calls, eight ‘hold’ and eight ‘sell’ recommendations.

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