Glenmark Pharmaceuticals -Another OC approval: It all adds up!: Macquarie Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Glenmark Pharmaceuticals
Another OC approval: It all adds up!
Event
 GNP announced final approval from USFDA for their generic version of
Ovcon tablets by Warner Chilcott, Inc. This is the fourth female hormonal
product approved and has a market size of US$30m per IMS Health, with
two other generic players in the market. With this approval the total
market size for the hormonal product approved for GNP in US is now
~ US$140m.

Impact
 GNP is the only Indian player to date to be granted ANDA approval for oral
contraceptive products. GNP’s US pipeline has a rich mix of oral
contraceptives (OC) product filings, which, given the entry barriers, should
face limited competition and generate higher margins.

 US contraceptive market is currently worth ~US$4.5bn, of which with a total of
12 cumulative fillings currently in the US GNP covers a total market size of ~
US$800m. While the ramp-up might be slow, we believe with an expanding
OC portfolio, we think GNP should be able to capture ~15-20% market share
for the basket of approved OC products in US, over the medium term.
 Strong FY12 outlook for US despite Tarka setback: While the loss of Tarka
could be a setback (US$5m/Qtr), visibility exists on other niche products that
are multiyear opportunities and could drive significant sales growth in FY12. If
we take US sales of US$185m in FY11E as a base, a few key productspecific
opportunities could help drive strong ~ 25% growth in FY12 for the US
business: (1) Felodipine (launched, US$4m/Qtr) (2) Oxycodone (launched,
US$4m/Qtr) (3) Malarone (Sept-11 launch, US$4m /Qtr) (4) Dovonex
(launched, US$2.5m/qtr) and (5) Cutivate (FY12 launch US$2.5m/Qtr).
 The ramp-up of US sales will be the key data point to watch and incremental
approvals like these give us further comfort on our FY12 US sales estimate.
Earnings and target price revision
 No change.
Price catalyst
 12-month price target: Rs470.00 based on a Sum of Parts methodology.
 Catalyst: Ramp-up in US Sales, Crofelemer approval by USFDA
Action and recommendation
 Valuations are attractive, in our view, with GNP trading at a PER of 11x
FY12E earnings, adjusted for exclusivity and NCE value, despite ~ 30%
EPS CAGR for FY11E–13E. We reiterate GNP as our top pick with a
target price of Rs470.
 We value GNP‘s core business at Rs410, based on a PER of 20x FY12E
EPS. Exclusivity earnings and NCE franchise are valued on a NPV basis at
Rs20/share and Rs40/share, respectively.


Fig 1 Target Price Calculation
Glenmark Consolidated Earnings
FY12 EPS 20.5
Target P/E x 20
Core business value 409.8
Exclusive opportunity (GGL)
Zetia FTF 12.7 Settled with Merck / Partner Par
Tarka FTF - Sole FTF, Jury Verdict against them
Malarone FTF 4 Settled with GSK
Cutivate 1.0 Sole FTF (30 month expiry April -11)
Vanos Cream (Fluocinonide) 1.8 Settled with Medicis (AG launch in Dec-13)
Product specific Opportunity GGL 20.0
NCE Valuation
GRC 15300 15.0 Outlicensed to Sanofi
Coreflemer 24.9 In licensed for RoW and API supply for Western mkts
Melogliptin 0 Still seeking partner
NCE value 39.9
Target Price 470 12 month forward target price
Source: Company data, Macquarie Research, March 2011
Approved hormonal products for GNP
 Heather: GNP got USFDA approval for Norethindrone tablets 0.35mg (generic version of
Nor-QD®) in April-2010. The product is marketed under the trade name Heather®.
Norethindrone tablets are a progestin-only oral contraceptive indicated for the prevention of
pregnancy. Heather market size ~US$38m according to IMS Health.
 Norethindrone Acetate tablets, 5mg: GNP got USFDA approval for Norethindrone Acetate
in July-2010. Norethindrone Acetate is the generic version of Duramed Research, Inc.’s
Aygestin® and is indicated for the treatment of secondary amenorrhea, endometriosis, and
abnormal uterine bleeding due to hormonal imbalance in the absence of organic pathology,
such as submucous fibroids or uterine cancer. Norethindrone Acetate tablets market size
~US$27m according to IMS Health.
 Norethindrone tablets, 0.35mg: GNP got USFDA approval in July-2010. This is the generic
version of Micronor® tablets by Ortho McNeil Janssen Pharmaceuticals, Inc. Norethindrone
tablets are a progestin-only oral contraceptive indicated for the prevention of pregnancy. Market
size ~US$40m according to IMS Health.
 Briellyn: GNP received USFDA approval for Norethindrone and Ethinyl Estradiol, USP 0.4
mg/0.035 mg tablets today (23 March). The product will be marketed under the trade name
Briellyn® and distribution is expected to start immediately. Briellyn® provides a continuous 28
day regimen for oral contraception derived from 21 tablets composed of Norethindrone and
Ethinyl Estradiol to be followed by 7 inert tablets and is indicated for the prevention of
pregnancy. This combination has annual US sales of US$ 30m, with Teva and Watson
currently other generic players for the product in the market.