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Glenmark Pharmaceuticals
Strong Core business growth to support earning momentum
Glenmark over the last few quarters has seen a revival in the financials
driven by the strong growth in its core business with healthy growth
coming in from across all the geographic segments of the company. Our
conservative estimate sees a CAGR of 19% over the next 3 years in its
base business driven by the sustained high growth in the domestic
formulation segment and turnaround of the US operations owing to the
flurry of ANDA approvals (14 approvals from Apr-Dec 2010) and niche
product launches. Further glenmark is expected to record a CAGR of
28% over FY10-13E in the other markets where it is present considering
the company’s significant investments in these markets and expected
high growth in the Latin American market and other Semi-Regulated
markets.
Several Niche Generic opportunities to start contributing from
FY12
The company has already launched Tarka (at-risk) in the US and is
expected to enjoy an extended exclusivity from the drug, along with this
the company would launch Malarone (as per the settlement with GSK)
and here too the company is expected to enjoy extended exclusivity as it
is still the only filer for the drug. Further the company is awaiting approval
for its NDA of Oxycodone filed by its partner LVT, when approved the
drug would offer a market opportunity of $ 16mn which the company
expect to expand by around 25-30% post the approval and USFDA driving
the other players out of the market until they obtain an ANDA approval
for themselves.
Research activities back on track
The company’s in-licensed opportunity of Crofelmer has finished Phase 3
trials and the management expects to launch the same in FY12, glenmark
expects peak revenues from this noval drug to the tune of $80 mn from
the exclusive distribution & marketing rights it has across 140 countries,
further it is the only supplier for its API globally. Along with this the
company has again proved its worth of its research capabilities by entering
into another out-licensing deal with Sanofi Aventis valued at $325 mn for
its GRC15300 molecule to treat chronic pain. Further the company has a
good pipeline of novel drugs creating possibilities for closing more such
out-licensing deals in the future.
ValuationThe stock is currently trading at attractive valuations of 15.3x and 12.4x
its FY12E and FY13E earnings respectively. We further continue to believe
that the company is trading at a discount to its peers. We value the
company’s base business at 14x its FY13E EPS of Rs. 29.4 considering
strong traction in the base business, while we value the research pipeline
(Crofelmer & GRC15300) at Rs. 62, which gives us a 15 month price
target of Rs. 473/share.
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