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Vaccine approval adds a new dimension to the domestic business

* CDH has received emergency use authorization (EUA) for its plasmid DNA COVID19 vaccine ZyCoV-D. The latter is the first COVID-19 vaccine approved in India for adolescents in the 12-18 years age group.

* The management expects to start supplying the vaccine in India from Oct’21. Based on our conservative estimates, we expect CDH to ramp-up production to ~40m doses from Oct’21. We expect a 75:25 split between the government and private channel and a blended price of ~INR320/dose for FY22.

* We factor in an opportunity (NPV of INR12/share) from the COVID-19 vaccine in our estimates for CDH. We continue to value CDH’s base business at 25x its 12- month forward P/E. We arrive at a combined TP of INR670/share. We maintain our Buy rating.

ZyCoV-D – First DNA vaccine in the world, approved for adolescents too

* CDH has received an EUA from DCGI (Drug Controller General of India) for its COVID-19 vaccine ZyCoV-D – the world’s first DNA vaccine to be approved for humans. It is also the first COVID-19 vaccine to be approved for adolescents in the 12-18 years age group in India. It is a three dose regimen vaccine to be taken on the 0th, 28th, and 56th day and is administered through a needle-free device.

* CDH has also applied for a twodose regiment of ZyCoV-D and is in discussions with the regulator on a future course of action. Interim efficacy of ZyCoV-D is 66.6% as tested on 81 patients. The final efficacy will be based on a data of 158 patients. ZyCoV-D has shown 100% 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.

Key highlights from the management call

* CDH expects to begin supplies of 100-120m doses of ZyCoV-D per annum starting mid-Sep’21. It is in discussions with the Government of India (GoI) with regard to its pricing and supply.

* CDH is the only company manufacturing the drug substance for its vaccine. Demand for the vaccine would be driven by: a) requirement of an additional booster dose of other vaccines, b) scope for improvement in immunogenicity, and c) ability to protect from new COVID-19 variants. The management expects monthly sales of INR2-2.5b from Oct’21, which can be scaled up to a run-rate of INR5b per month. It has a marketing plan in place to drive demand through pediatricians/state government.

Vaccine scenario in India

* Till date, 456m people (~50% of adults) have received at least one dose of the COVID-19 vaccine. The estimated population in the 12-18 years age group is ~250m. ZyCoV-D is the sixth vaccine to receive EUA in India, after Covaxin, Covishield, Sputnik V, Moderna and J&J. The GoI expects 2.2b COVID-19 vaccines to be available by CY21-end.

Valuation and view

We arrive at an NPV of ~INR12/share for the opportunity arising from the COVID-19 vaccine. We continue to value CDH’s base business at 25x its 12-month forward earnings to arrive at our TP of INR658. We arrive at a TP of INR670, including the vaccine opportunity and maintain our Buy rating.

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