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Positive newsflows for Glenmark's R&D initiatives continues as it completes the Phase I trial of
GRC 15300 (expects milestone of US$5m in next 3-4 months) and is likely to get an advance of
US$ 15m for Crofeler supplies from Salix in near term. With momentum also picking up in US
markets, we maintain Buy.
GRC 15300 - completes the Phase-I; expect US$5m
Glenmark successfully completed the Phase I trial of GRC 15300, a first in class TRPV3 -
(transient receptor potential cation channel, subfamily V, member 3) inhibitor for treatment of
pain which entered clinical trials. Sanofi has licensed the rights to all therapeutic indications
and had earlier paid an upfront licensing fee of US$20m (and the development, regulatory
and commercial milestone could reach upto US$325m+ royalties on sales).
Company expect milestone of US$5n in next 3-4 months
Plans are in place to initiate clinical proof of concept studies in neuropathic pain.
Glenmark to receive US$15m for Crofelemer supplies
On July 18, 2011, Salix's Pharma entered into an Amended Supply Agreement with Glenmark
Pharma where Glenmark agrees to manufacture and supply to Salix agreed quantities of
crofelemer.
Salix agreed to pay Glenmark an advance of $15 million against the commitment fee by July
25, 2011 and pay Glenmark the remaining $6.6 million of the commitment fee in five equal
annual instalments (earlier Salix was required to pay Glenmark a $21.6 million commitment
fee in five equal annual installments, with the first payment in July 2012). The commitment fee
is in addition to the compound purchase price payable by Salix to Glenmark.
Under the Amended Supply Agreement, the parties agreed on a scale-up plan for Glenmark's
equipment and facilities in order to meet Salix's anticipated increase in demand for
crofelemer. Glenmark will be responsible for all costs associated with the implementation of
the agreed scale-up plan, including the purchase and installation of all equipment
contemplated by the plan.
GBR 500 - US$ 50m payments received
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$50m subject to customary conditions to be taxed at 9-10% under Swiss norms. Potential
milestone receipts could total US$613m 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.
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 Axcan) 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$8m to its US revenues and US$4.5m 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. It also aims to bring
the complete product range in the OC space for US markets.
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
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Positive newsflows for Glenmark's R&D initiatives continues as it completes the Phase I trial of
GRC 15300 (expects milestone of US$5m in next 3-4 months) and is likely to get an advance of
US$ 15m for Crofeler supplies from Salix in near term. With momentum also picking up in US
markets, we maintain Buy.
GRC 15300 - completes the Phase-I; expect US$5m
Glenmark successfully completed the Phase I trial of GRC 15300, a first in class TRPV3 -
(transient receptor potential cation channel, subfamily V, member 3) inhibitor for treatment of
pain which entered clinical trials. Sanofi has licensed the rights to all therapeutic indications
and had earlier paid an upfront licensing fee of US$20m (and the development, regulatory
and commercial milestone could reach upto US$325m+ royalties on sales).
Company expect milestone of US$5n in next 3-4 months
Plans are in place to initiate clinical proof of concept studies in neuropathic pain.
Glenmark to receive US$15m for Crofelemer supplies
On July 18, 2011, Salix's Pharma entered into an Amended Supply Agreement with Glenmark
Pharma where Glenmark agrees to manufacture and supply to Salix agreed quantities of
crofelemer.
Salix agreed to pay Glenmark an advance of $15 million against the commitment fee by July
25, 2011 and pay Glenmark the remaining $6.6 million of the commitment fee in five equal
annual instalments (earlier Salix was required to pay Glenmark a $21.6 million commitment
fee in five equal annual installments, with the first payment in July 2012). The commitment fee
is in addition to the compound purchase price payable by Salix to Glenmark.
Under the Amended Supply Agreement, the parties agreed on a scale-up plan for Glenmark's
equipment and facilities in order to meet Salix's anticipated increase in demand for
crofelemer. Glenmark will be responsible for all costs associated with the implementation of
the agreed scale-up plan, including the purchase and installation of all equipment
contemplated by the plan.
GBR 500 - US$ 50m payments received
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$50m subject to customary conditions to be taxed at 9-10% under Swiss norms. Potential
milestone receipts could total US$613m 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.
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 Axcan) 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$8m to its US revenues and US$4.5m 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. It also aims to bring
the complete product range in the OC space for US markets.
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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