Does US approval for key cancer drug make Cipla shares an attractive buy amid tariff concerns?

Cipla’s shares have surged 6% since saying last week it received final approval from the US Food and Drug Administration for its generic version of Bristol Myers Squibb’s Abraxane, a cancer drug.

Does the approval to sell the much-awaited product in the US make Cipla a compelling buy, especially when Trump’s tariffs are looming on the horizon? 

“One product approval by itself doesn’t suddenly make a company more attractive,” said Prashant Nair, lead analyst for pharma and healthcare at Ambit Capital. “Earlier-than-expected approval for Abraxane is positive, but tariffs will have a bearing on Cipla.”

The extent of the impact of tariffs would depend on the quantum of the levy, the company’s efforts to scale up supplies from its US plant, and the ability to pass on the tariff to customers, Nair noted.

US President Donald Trump announced on 2 April a 10% baseline tariff on all imports and separate additional rates for trading partners – 26% for India, although he subsequently paused the measures for 90 days. US commerce secretary Howard Lutnick told ABC News on Sunday that pharmaceutical tariffs are also coming in the next month or two.

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Analysts said Cipla shares stand to gain even with the imminent tariffs because of its earlier-than-expected approval for the cancer drug and its lower dependence on the US markets. According to one analyst, the tariffs may affect Cipla’s earnings only to a minor extent.

Lower US focus

“Even at the baseline 10% tariff, all generic players that have exposure to the US – Cipla included – will feel the impact,” said an analyst who requested anonymity. While Cipla's US exposure is relatively lower than some peers, the company could still see a 3-4% earnings hit. For others, the damage could run deeper, the analyst said.

Cipla, which makes a range of respiratory, HIV and cancer medicines, is actively targeting the North American market with a pipeline of generic drug launches. 

“In North America, our focus would be to resolve supply issues, maximize the commercial execution and expedite the launches from our US facility,” Cipla CFO Ashish Adukia said on an earnings call with analysts.

Nair prefers pharma companies that are India-focused and less tied to the US market.

“Cipla’s US exposure stands at around 30% of revenue,” he pointed out.

Still, the company is holding up fairly well across its major markets—India, North America, and South Africa. In the US, delays in product approvals had been a drag, but the green light for generic Abraxane is a positive.

In India, growth has been slower than usual but there are signs of a recovery. As for South Africa, Cipla remains a market leader, Nair added.

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Sumit Gupta, a healthcare analyst at Centrum, said that Cipla is relatively shielded from the tariff hit, thanks to its lower share of revenue from the US market compared to rivals with higher US revenue dependencies – almost 46% for Zydus Lifesciences and 47% for Aurobindo Pharma. Execution and regulatory hurdles are the main downside risks for Cipla, he said.

“The recent approval of generic Abraxane could give Cipla a solid revenue bump—about $30/$50 million in FY26E/FY27E, translating to US sales growth of nearly 5% annually,” he said.

According to some analysts, the product approval was not a complete surprise. There had been concerns over possible pre-approval inspection delays because of manufacturing quality issues at the company’s Goa plant, which could have pushed the launch timeline for the much-awaited cancer drug. The plant got the go-ahead from the US FDA in October 2024.

With the green signal, “Cipla now expects to launch the product in 1HFY26 vs its guidance of a launch in 2HFY26E,” Nomura said in a report dated 11 April.

$50 million potential 

Currently, three-four generic drug companies are already in the market and the overall market size has shrunk, analysts pointed out. Cipla’s generic version of Abraxane is used for the treatment of metastatic breast cancer, locally advanced or metastatic non-small cell lung cancer, and metastatic adenocarcinoma of the pancreas, the company said in its filing to the stock exchanges on 11 April.

Nomura said Cipla can grab market share from other companies even though it missed the first-mover advantage. The foreign brokerage assumes a 65% price erosion with the additional competition and a 20% market share for Cipla in FY27.

Elara Securities (India) said despite the competition, Cipla still “has the potential to generate up to $50 million from the product annually.”

The brokerage has already factored in about $20 million in US revenue from generic Abraxane for FY26. More importantly, the approval removes the risk of a downgrade from any further delays, Elara highlighted.

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Mutual funds, too, seem to be staying put. Their holdings of the company’s shares have held steady, according to Prime Database.

The stock currently trades at about 24 times its price-to-earnings ratio, considerably lower than its five-year average of 30. Cipla shares have declined 4.3% year to date.

The company is scheduled to announce its March quarter results on 13 May. Prabhudas Lilladher expects a 9% sales growth in the March quarter, factoring in continued gains from generic Revlimid ($90 million in Q4 from $70 million last year), ongoing supply issues with Lanreotide (impacting sales by about $20 million), waning of seasonal benefits in the US, and an 8% growth in domestic formulations.