Morgan Stanley maintains one of the most cautious stances on Indian pharmaceutical major Cipla, holding the second-lowest price target on the stock among Street analysts, even as it views the company's exclusive US licensing agreement with Qilu Pharmaceutical as a positive development for Cipla's oncology portfolio.

The Qilu Licensing Deal

Cipla has secured an exclusive US licensing deal with China-based Qilu Pharmaceutical for QL2107, a biosimilar of Merck's blockbuster cancer immunotherapy Keytruda (pembrolizumab). Under the arrangement, Cipla would market the product in the US market. Morgan Stanley considers the deal a constructive addition to Cipla's oncology ambitions, given Keytruda's status as one of the world's best-selling drugs — it generated roughly $29 billion in global sales for Merck in 2024 — and the significant market opportunity for biosimilar versions as patents on the original product expire. Keytruda's key US patent protection runs into 2028, which is why biosimilar launches are expected only in the latter part of the decade, meaning the Qilu partnership is a long-dated option on that opportunity rather than a near-term revenue driver. Licensing deals with Chinese biosimilar developers have become a common route for Indian and global drugmakers to build oncology portfolios without funding development costs themselves, and Qilu is among the Chinese manufacturers that have advanced pembrolizumab biosimilars through clinical development.

Why Morgan Stanley Is Cautious on Cipla

Despite acknowledging the strategic value of the Qilu partnership, Morgan Stanley remains underweight on the stock. The brokerage's caution stems largely from its view that the company's US business recovery is already reflected in the share price, leaving limited upside from current levels. In other words, the positives the market has been pricing in — including the US portfolio's turnaround — are, in Morgan Stanley's assessment, largely done. The stance illustrates a broader divide in how analysts treat Indian generics makers whose US businesses have rebounded: some see the recovery as sustainable andexpandable via new launches, while others, like Morgan Stanley, treat it as largely captured once valuations re-rate.

Cipla's US Recovery Already Priced In

Cipla's US generics business has been a key driver of the company's performance in recent periods, and the market has responded by marking the shares higher. Morgan Stanley argues that this improvement is now adequately captured in the valuation, which underpins its below-consensus target price for the stock.

Cipla Analyst Consensus

Morgan Stanley's target places it near the bottom of the range of analyst price targets for Cipla, in contrast with the broader consensus, which is generally more constructive on the drugmaker's prospects. For investors tracking the stock, the observable markers of how this divergence resolves include the pace of Cipla's US launches, the commercial scale-up of its respiratory portfolio, and any regulatory milestones for partnered biosimilars ahead of Keytruda's patent expiry window.

Source: CNBC-TV18