Glenmark Surges On Product Approvals

Mumbai-based pharmaceutical major Glenmark Pharmaceuticals has been witnessing a strong surge in its share price lately. In CY2012, the scrip soared by 80%, outperforming the broader indices as well as the BSE Pharma index. Of this upswing, 20% was in December 2012 alone. This sharp climb on the bourses has mainly resulted out of expectations of commercialisation of some of its research molecules and due to new products approvals.

We had recommended this stock to the readers of our magazine, Dalal Street Investment Journal (Vol. XXVII, No. 26) in the column ‘Choice Scrip’. Since the recommendation (dated December 03, 2012), the scrip has yielded a healthy return of 21%.

Glenmark has been looking at commercialising its anti-diarrhoea drug Crofelemer for some time now. It received a big upward thrust on anticipation of receiving an approval from the USFDA. It announced on January 02, 2012 that it has received approval from the US drug regulator for Crofelemer (125 mg) in partnership with US-based pharmaceutical company Salix Pharmaceuticals. This approval is very important for the company as the drug has been developed in its research facilities and its launch will be the first new chemical entity (NCE) launch by any Indian company so far. Glenmark has exclusive rights for Crofelemer in 140 countries and this approval has given a big push for the company to launch the product in more countries. This is also a big boost for its research program as it also has four other drugs in various stages of development.

As per a report in DNA, the entry of this product is expected to garner USD 60 million, approximately USD 15-20 million (over Rs 100 crore) from sale in the US and USD 50 million (about Rs 220 crore) from launch in other markets. Revenues of USD 60 million are to the tune of 8% of Glenmark’s revenues, considering the total revenues in FY12.

Another positive for the company is that it has received USFDA approval for its version of Maxalt tablet (innovator Merck). IMS data shows that the drug is worth USD 333 million in the US, for the one year period ended September 2012. Glenmark now has a pipeline of 82 approved products for the US markets. It also has 46 ANDAs awaiting approvals. This will only lead to increased product approvals in the future.

All the above developments signal strong revenues for Glenmark in FY13 and FY14. Besides, in December 2012, it inked a pact with US-based Forest Laboratories for licensing of one of the drugs in Glenmark's ongoing research pipeline. As per the agreement, Forest will pay Glenmark USD 9 million (Rs 50 crore) as an upfront payment and will also make future payments starting in FY14 towards development of the drug. This news is also positive as it is indicative of Glenmark’s ability to license its molecules.

With these approvals and developments, we expect it to fare even better this year. This is expected to translate into gains on the bourses as well. We thus recommend our investors to hold Glenmark for better returns. Those who have missed the earlier rally can also enter at current levels.