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Despite the generic Tarka setback, we believe the US will continue to drive growth given a spate
of recent approvals and potential niche opportunities. Also, Glenmark's NCE pipeline could
surprise – we believe in-licensing interest among big pharmaceutical companies will revive. Buy;
new Rs335 TP (16% lower).
We expect the US and India to drive steady growth
Despite the generic Tarka setback and the weak showing in 3QFY11 in the US markets, we
believe Glenmark’s US business (28% of FY11F revenues) should remain a key growth driver.
Glenmark guides for 25% US growth in FY12, expecting a contribution to kick in from a recent
spate of approvals. It also expects limited competition from generic Malarone (12m sales worth
US$62m in the US, launch in 3QCY11) and Oxycodone (US$13m, likely de facto exclusivity for
two to three years). Its domestic formulation business, 31% of FY11F revenues, also appears
well poised, with 23% growth in 9MFY11. We believe the company is well placed to benefit from
newer products, newer markets and increased profitability following the significant investments it
has made over the past few years.
Positive news flow in its NCE pipeline could provide upside
Glenmark maintains a reasonable track record in monetising its new chemical entity (NCE)
pipeline. This could play out in its favour as interest in in-licensing of molecules by big pharma
has begun to revive due to drugs coming off-patent and a consolidation phase ending. Also, we
expect Crofelemer to become commercialised in the rest of the world in FY13 following
commercialisation in the US in FY12F by Glenmark’s partners.
We cut our earnings and target price; stock looks attractively priced; maintain Buy
We exclude generic Tarka from our forecasts and lower our FY12-13 EBITDA margin
assumptions 180bp, resulting in a 13% cut to our FY12F earnings. We continue to value
Glenmark at a 15% discount to its peers, which, after our earnings cut, results in a 16% reduction
in our target price, to Rs335 from Rs400 (base business at 18.2x FY12F PE yields Rs298ps, to
which we add a value of Rs3.5ps for one-off Para IV products and Rs34ps for the NCE pipeline of
Crofelemer and GRC 15300). The stock has underperformed by 17% over the past three months
vs the Sensex, which we find excessive. We maintain our Buy rating.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Despite the generic Tarka setback, we believe the US will continue to drive growth given a spate
of recent approvals and potential niche opportunities. Also, Glenmark's NCE pipeline could
surprise – we believe in-licensing interest among big pharmaceutical companies will revive. Buy;
new Rs335 TP (16% lower).
Despite the generic Tarka setback and the weak showing in 3QFY11 in the US markets, we
believe Glenmark’s US business (28% of FY11F revenues) should remain a key growth driver.
Glenmark guides for 25% US growth in FY12, expecting a contribution to kick in from a recent
spate of approvals. It also expects limited competition from generic Malarone (12m sales worth
US$62m in the US, launch in 3QCY11) and Oxycodone (US$13m, likely de facto exclusivity for
two to three years). Its domestic formulation business, 31% of FY11F revenues, also appears
well poised, with 23% growth in 9MFY11. We believe the company is well placed to benefit from
newer products, newer markets and increased profitability following the significant investments it
has made over the past few years.
Positive news flow in its NCE pipeline could provide upside
Glenmark maintains a reasonable track record in monetising its new chemical entity (NCE)
pipeline. This could play out in its favour as interest in in-licensing of molecules by big pharma
has begun to revive due to drugs coming off-patent and a consolidation phase ending. Also, we
expect Crofelemer to become commercialised in the rest of the world in FY13 following
commercialisation in the US in FY12F by Glenmark’s partners.
We cut our earnings and target price; stock looks attractively priced; maintain Buy
We exclude generic Tarka from our forecasts and lower our FY12-13 EBITDA margin
assumptions 180bp, resulting in a 13% cut to our FY12F earnings. We continue to value
Glenmark at a 15% discount to its peers, which, after our earnings cut, results in a 16% reduction
in our target price, to Rs335 from Rs400 (base business at 18.2x FY12F PE yields Rs298ps, to
which we add a value of Rs3.5ps for one-off Para IV products and Rs34ps for the NCE pipeline of
Crofelemer and GRC 15300). The stock has underperformed by 17% over the past three months
vs the Sensex, which we find excessive. We maintain our Buy rating.
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