Cipla Faces Margin Pressure from Revlimid Decline, Eyes Growth via Eli Lilly GLP-1 Deal in India

Cipla Limited is facing a significant challenge as the contribution from its drug Revlimid declines, which is anticipated to drag down its profit margins. The company reported an improved sequential performance in the North American market for Q2 FY26, driven by recovery in Lanreotide & Albuterol sales and the launch of Filgrastim, its first biosimilar in the US market.

A major highlight is Cipla's distribution collaboration with Eli Lilly and Company for Tirzepatide, a blockbuster GLP-1 drug (marketed globally as Mounjaro and in India as Yurpeak). This partnership provides Cipla with crucial exposure to the rapidly growing GLP-1 market in India.

While the North American market is not expected to be a primary growth engine in the near term, Cipla is set to launch four major Respiratory assets and three peptide assets by CY 2026, including Advair and Liraglutide. The company is also focusing on developing its biosimilar pipeline, with plans to launch its own biosimilars from FY29, and is awaiting approval for Semaglutide in India. Cipla expects its domestic business to outperform the projected 8-10% annual growth of the Indian pharma market.

Despite a strong balance sheet with net cash of Rs 10,000 crore, Cipla's EBITDA margins are expected to moderate further to 22-23%, with FY26 guidance being downgraded. The stock is trading at a valuation (15.6x EV/EBITDA FY27e) that is ahead of its historical average. Consequently, analysts have downgraded their recommendation to Equal Weight, preferring to wait for more clarity on the GLP-1 drug franchise and complex generics pipeline.

Impact: This news impacts Cipla's near-term profitability due to Revlimid's decline. However, the strategic partnership with Eli Lilly for GLP-1 drugs and planned launches of new respiratory and peptide assets in 2026 present significant future growth opportunities. The stock's valuation and the recent downgrade in recommendation could affect investor sentiment. Impact Rating: 7/10

Difficult Terms: Revlimid: A brand name drug used to treat multiple myeloma and myelodysplastic syndromes. Its declining contribution affects Cipla's revenue. GLP-1: Glucagon-like peptide-1. A hormone that helps regulate blood sugar and appetite. Drugs targeting this pathway are key for diabetes and weight loss treatments. Biosimilar: A type of biologic drug that is highly similar to an already approved biologic drug, offering a therapeutic alternative. EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of operational profitability before accounting for financing, taxes, and non-cash expenses. Product Mix: The combination of different products sold by a company. A shift in product mix can affect overall profitability. Inorganic initiatives: Business growth achieved through external expansion such as mergers, acquisitions, or joint ventures, rather than organic internal growth. EV/EBITDA: Enterprise Value to EBITDA. A valuation multiple used to compare companies and assess their worth relative to their earnings. Tirzepatide: A specific drug developed by Eli Lilly that acts as a dual GIP and GLP-1 receptor agonist, used for managing type 2 diabetes and weight. Liraglutide, Semaglutide: These are other drugs belonging to the GLP-1 receptor agonist class, widely used for treating diabetes and obesity. Advair: A medication used for the management of asthma and chronic obstructive pulmonary disease (COPD).