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Glenmark received an approval for Ursodiol tablets which adds on to its existing limited
competition product pipeline of Oxycodone and generic Malerone. With momentum picking up in
Oral Contraceptives and R&D milestone payment also on track, we continue to see upside
potential in the stock.
List of limited competition products expands with approval of Ursodiol tablets
Glenmark has received final USFDA approval for Ursodiol tablets (generic version of Urso
250 and Urso Forte tablets by Axacan) indicated for the treatment of patients with primary
biliary cirrhosis (PBC) where it is used to dissolve gallstones in patients who do not want
surgery.
Sales achieved for Ursodiol tablets were US$60m of which branded sales was US$15m and
generic sales by Teva was US$45m -as per IMS for 12 months ending March 2011.
Glenmark would be the 3rd player to market these tablets (we however note that there is
greater competition in the capsule market) thereby making this a limited competition drug. We
have assumed 30% price erosion on the generic market of US$45mn and 20% market share
thus expecting the product to add US$8mn to its US revenues and US$4.5mn of PAT on an
annualised basis.
This adds on the existing limited competition product pipeline for Glenmark - Oxycodone
(ramping up market share now) and generic Malerone (expected launch in Sept-October
2011)
Momentum picking up in OCs
The recent approval of Norgestimate and Ethinyl Estradiol tablets (gTri-Cyclen) marks
Glenmark's 4th oral contraceptive (OC) product and 5th hormone product approval for the US
market. As per IMS, this product has total market sales of US$226m for 12 month period
ending March 2011. This is already a generic product but marketed as branded generics due
to limited competition. There are only 3 players in the market - Ortho McNeil Janssen
Pharmaceutical, a division of Johnson & Johnson (innovator), Teva and Watson. Glenmark
expects to launch the product soon and start monetising the same.
With this approval, Glenmark would be addressing total market size of US$365m (as the
earlier 4 female hormonal product approvals were addressing small market sales of only
US$140mn). Glenmark remains the only Indian company to be granted ANDA approval for an
OC product. Glenmark indicates that it had made 15 filings as of now (which has 5 approvals
now) - the remaining 10 filing would address market sales of US$580mn. The other approvals
are:
a) Heather tablets: The Company received approval in April 2010 for Heather tablets (gNor-
QD) tablets which had achieved sales of US$38mn in 2009.
b) Norethindrone: The Company received approval in July 2010 for Norethindrone 0.35mg
tablets, g(Micronor) which had reported total sales of US$43mn for the 12 month period
ending March 2010.
c) Norethindrone Acetate: The company received approval in July 2010 for Norethindrone
Acetate 5 mg tablets, g(Aygestin) which had reported sales of US$27mn for the 12 month
period ending March 2010.
d) Norethindrone and Ethinyl Estradiol: The company received approval in March 2011, the
generic version of Ovcon 35 tablets marketed under the trade name Brielly. Sales were
US$30mn for the 12 month period ending December 2010.
R&D milestone payment also on track
In May 2011, Glenmark out-licensed its GBR 500 molecule to Sanofi Aventis, the first novel
biologics out-licensing deal by an Indian pharma company, with an upfront payment of
US$50mn subject to customary conditions to be taxed at 9-10% under Swiss norms. Potential
milestone receipts could total US$613mn plus royalty payments and rights to sell in a few
markets (India, etc).
Management expects commercialisation of this molecule in 2017. We ascribe a value of
Rs20/share after applying a 20% success probability rate and building in a delay of three
years in commercialisation.
Company earlier had guided to receive the upfront milestone of US$50m in 2 tranches - US$
25m by end of June 2011 and the remaining US$ 25m in July 2011. We note that this
payment schedule has been adhered to which leads to optimism that its other R&D milestone
payments would also be on track.
Thus Glenmark's GBR 500 licensing deal with Sanofi Aventis re-validates its business model
of investing in innovative R&D. Glenmark seems well poised to benefit from the reviving
interest in in-licensing from big pharma as we believe its NCE pipeline is not fully priced in
yet.
Reiterate Buy with TP of Rs350
We maintain our Buy rating with TP of Rs350 - base business at 18.2x FY12F PE (a 15%
discount to its peers), which yields a value of Rs293/share. To this we add Rs54/share for its
NCE pipeline and Rs3.5/share for one-off Para IV products.
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