Glenmark Pharmaceuticals : FDA approval for Ursodiol ::JPMorgan

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Glenmark Pharmaceuticals Ltd. Overweight
GLEN.NS, GNP IN
US FDA approval for Ursodiol


 US FDA approval for Ursodiol. Glenmark Pharma today announced
the US FDA approval for ANDA for the generic version of Ursodiol
tablets. Ursodiol tablets are available in 250mg and 500mg strengths and
are indicated for the treatment of biliary cirrhosis. Ursodiol helps in
decreasing the amount of cholesterol produced by the liver and absorbed
by the intestines. It is used to treat or prevent small gallstones in
overweight patients who cannot have gallbladder surgery.
 Potential market of US$60MM with limited competition. Ursodiol
tablets had annual US sales of US$60MM for the 12-month period
ending Mar-11, according to IMS. Also, currently there is only one other
generic player approved to sell Ursodiol tablets in the US market. We
estimate the potential revenue opportunity for GNP to be around
US$6MM (assuming 20% market share for six months) for the current
year, rising to US$12MM (assuming 25% market share and reduced
market to US$50MM owing to price discounts) for FY13 from Ursodiol
tablets.
 Focus on niche products in US bodes well. GNP continues to focus on
niche products with limited competition, which bodes well for the
margin profile of its US generics business. GNP’s US portfolio consists
of 70 generic products authorized for distribution. It also has 40 ANDA
applications pending approval, in addition to 13 Para IV applications, of
which four are sole first to file (FTF) opportunities.
 Maintain OW, price target Rs400. We believe news flow on
monetization of the innovation pipeline, new drug approvals in the US
and FTF settlements will drive a stock re-rating. Our Mar-12 PT of
Rs400 values the core generics business at Rs352 per share, FTF
opportunities at Rs18.5 per share and innovation pipeline at Rs29.5 per
share. Key risks include potential regulatory issues (esp. related to US
FDA), inability to monetize the NCE pipeline, further deterioration in
working capital, and an inability to expand product basket.