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Glenmark Pharma
Tarka litigation factored in; reiterate Buy
The New Jersey District Court jury ruled against Glenmark’s
challenge on validity of Sanofi’s Tarka patent and has asked the
company to pay one-time damages worth US$16m to Abbott
(exclusive license holder). The final verdict is expected in the
next 1-2 months. We believe the recent ~13% correction factors
in more than the value of Tarka, for Glenmark. Reiterate Buy.
To halt further sales of generic Tarka. The ruling would result
in Glenmark halting further sales of generic Tarka, which it
launched at risk in Jun ’10 after getting USFDA approval. As per
management, the challenge was on two grounds – ‘obviousness’
and ‘double patenting’, and the jury has ruled against the former.
The final verdict is expected in the coming 1-2 months.
Financial impact. We believe Glenmark would immediately stop
further sales of Tarka. We had estimated revenue contribution of
US$15m each for FY12 and FY13, with EPS of ~`1 each year.
Litigation loss would impact our EPS estimate 5% for FY12. We
do not expect any immediate payment of damages till the final
verdict is announced. Hence, we maintain our estimates, as of
now, and await the final verdict for further clarity.
Valuation and risks. We reiterate Buy on the stock and maintain
our target price is `427. Litigation loss would impact our target
price ~`20.5 (`2.5 for one-time damages and `18 for recurring
business from Tarka). We believe the recent correction already
factors in the negatives. Reiterate Buy. Risk: Failure in
development of NCEs.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Glenmark Pharma
Tarka litigation factored in; reiterate Buy
The New Jersey District Court jury ruled against Glenmark’s
challenge on validity of Sanofi’s Tarka patent and has asked the
company to pay one-time damages worth US$16m to Abbott
(exclusive license holder). The final verdict is expected in the
next 1-2 months. We believe the recent ~13% correction factors
in more than the value of Tarka, for Glenmark. Reiterate Buy.
To halt further sales of generic Tarka. The ruling would result
in Glenmark halting further sales of generic Tarka, which it
launched at risk in Jun ’10 after getting USFDA approval. As per
management, the challenge was on two grounds – ‘obviousness’
and ‘double patenting’, and the jury has ruled against the former.
The final verdict is expected in the coming 1-2 months.
Financial impact. We believe Glenmark would immediately stop
further sales of Tarka. We had estimated revenue contribution of
US$15m each for FY12 and FY13, with EPS of ~`1 each year.
Litigation loss would impact our EPS estimate 5% for FY12. We
do not expect any immediate payment of damages till the final
verdict is announced. Hence, we maintain our estimates, as of
now, and await the final verdict for further clarity.
Valuation and risks. We reiterate Buy on the stock and maintain
our target price is `427. Litigation loss would impact our target
price ~`20.5 (`2.5 for one-time damages and `18 for recurring
business from Tarka). We believe the recent correction already
factors in the negatives. Reiterate Buy. Risk: Failure in
development of NCEs.
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