Explained: Why Cipla share price surged up to 10% today

Shares of pharma major Cipla Ltd surged sharply in Thursday’s trading session after the US Food and Drug Administration (USFDA) granted its Goa facility a “Voluntary Action Indicated (VAI)” status. The stock rose by 9.88% to reach a day’s high of Rs 1,557.45 on the Bombay Stock Exchange (BSE). At 10:41 am, shares of Cipla were up 8.24% at Rs 1,534.25.
In a regulatory filing, Cipla said, “Pursuant to Regulation 30 of the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015, and further to our intimation dated June 21, 2024, regarding the routine current Good Manufacturing Practices (cGMP) inspection at the company’s manufacturing facility in Goa, India between June 10 and June 21, 2024, we hereby notify that the United States Food and Drug Administration (USFDA) has classified the above-referenced inspection as Voluntary Action Indicated (VAI) as per a communication received on Wednesday, October 30, 2024 (8:28 pm IST).”
The USFDA’s Voluntary Action Indicated (VAI) status is positive news for Cipla as it means that while certain observations were made during the June inspection, the regulator does not require immediate corrective action. This outcome is a relief for the company, as it signals that the regulatory issues identified are not severe enough to impact its operations or delay approvals for new drugs in the United States.
With the VAI clearance, Cipla is now set to advance critical product launches that hinge on this approval, particularly in the US market. One of the key products on its horizon is the generic version of Abraxane, a high-demand chemotherapy drug used in cancer treatment. A successful launch of this generic in the US could significantly boost Cipla’s revenue and market share, positioning the company as a strong player in the oncology segment.
The VAI status also broadens Cipla’s US pipeline potential, helping the company retain a steady flow of new product approvals for the world’s largest pharmaceutical market.
Since the Goa facility produces both oral and injectable drugs, this approval opens up new possibilities for future filings and launches from this facility. A strong presence in the US market is critical for Cipla, as it allows the company to capture a larger share of revenue from high-margin drugs and benefit from a diversified product portfolio.
This regulatory clearance is likely to have a positive impact on Cipla’s stock, as demonstrated by the 10% surge in its share price after the announcement. Investors tend to view a VAI status as a sign of regulatory confidence, especially after recent inspections that might have raised concerns.
Technically, the stock is trading above its 5-day, 10-day, 150-day, and 200-day simple moving averages (SMAs) but remains below the 20-day, 30-day, 50-day, and 100-day SMAs. Additionally, the stock’s 14-day relative strength index (RSI) stands at 45.75; a value below 30 indicates oversold conditions, while above 70 is considered overbought.
According to BSE data, Cipla’s stock has a price-to-equity (P/E) ratio of 26.09, and a price-to-book (P/B) value of 4.09. Earnings per share (EPS) are Rs 54.32, with a return on equity (RoE) of 15.68.