RD
03
FEBRUARY, 2011
CMP = Rs.291.00
GLENMARK PHARMACEUTICALS LTD. (GPL) is a research-driven, global, fully integrated pharmaceutical company. The Company is a leader in India in the discovery of new molecules [Both NCES and Biologics] and is focused in the areas of inflammation [Asthma/COPD, etc] and metabolic disorders [Diabetes, Obesity, etc]. The Company has branded generic formulation interests in over 95 countries across the world including India, Europe, Brazil, Rest of Latin America (excluding Argentina), Russia/CIS, Africa and Asia. The formulations business spans several product segments such as Dermatology, Internal Medicine, Respiratory, Diabetes, Pediatrics, Gynecology, ENT, and Oncology. Glenmark Generics Limited (GGL) is a subsidiary of Glenmark Pharmaceuticals Limited (GPL) aims to be a global integrated generic and API leader. GGL has an established presence in North America, EU and Argentina and maintains marketing front-ends front-ends in these countries. countries. GGL has a strong base in i n Formulations development with teams operating out of laboratories in India and Latin America. The Company has a state-of-the-art manufacturing plant at Goa, India that is approved by US FDA, TPD (Canada), MHRA, UK and many other overseas regulatory authorities. GGL also markets over 45 Active pharmaceutical ingredients (APIs) to more than 80 countries across the world and had over 30 USDMFs filed and/or approved along with several DMFs in Canada. GLOBAL FOOTPRINT
Glenmark has built a visible and growing branded generic formulation presence across all its markets. A number of its products have emerged as brand leaders in India and some of these markets. Glenmark has made acquisitions in Brazil, South Africa and Czech Republic and is currently looking to acquire companies in Europe. MANUFACTURING CAPABILITIES CAPABILITIES
Over the years, Glenmark has strengthened its integration across the pharmaceutical value chain through operations across its various manufacturing plants: Location
Production Lines
Regulatory Approvals
Solid orals, liquid orals, & external creams, powders and capsules for
WHO-GMP, ANVISA, Ethiopia, Zimbabwe, Uganda, Nigeria; Tanzania, Ghana, Sudan, R.D. Congo,
regulated markets
MCC, South Africa, Oman, Ukraine, Colombia
Solid orals, semi-solid and liquid orals as
US FDA, DDA Nepal, WHO-GMP; TPD Canada,
Formulations Nasik, India
Baddi, India
well as external preparations like lotions, ANVISA Brazil, MHRA UK, Ghana creams, capsules, etc. for India and semi-regulated markets
Sao Paulo, Brazil
Solid orals, semi-solid & liquid orals for
ANVISA
Latin America Vysoke Myto,
Solid and
Czech Republic
semi-solid orals
SUKL, Czech Republic
Research and Development
The company has a pipeline of 6 NCE and NBE molecules in clinical trials. In addition, the company has two in-licensed molecules, Crofelemer and a novel monoclonal antibody, GBR 900
Glenmark Research Pipeline as on Dec 2010 Market Compound
Primary
Target
Indications
Launch
Pre Clinicals
Phase
Phase
Phase
I
II
III
Approval
Patients ww (Cr)
>
Diabetes Mellitus (Type-II)
2013
GRC 3886
Asthama, COPD
2013
O
O
O
7.5
GRC 4039
Rheumatoid arthritis, Inflammatory disorders, MS
2014
O
O
S
>2
GRC 10693
Neuropathic Pain, Osteoarthritic & inflammatory pains
2014
O
O
S
>6
GRC 6211
Neuropathic Pain, Osteoarthritic, Urinary Incontinence
O
O
S
GRC 15300
Neuropathic Pain, Osteoarthritic, Skin Disorders
O
R
GRC 17536
Neuropathic Pain, Bronchoconstriction
O
R
GBR 500
Multiple Sclerosis, Inflammatory disorders
2014
O
R
GBR 600
Anti Platelet, Adjunct to PCI/ Acute Coronary Syndrome
2014
O
S
GBR 900
Monoclonal antibody
2014
Crofelemer
Anti Diarrhoeal (For HIV+)
2011
O
O
GRC 8200
2014
O
O
O
S
12.5
>6
> 0.4
Out- Licensed
Potential
Opportunity Current Mkt Size
Peak Sales (Cr)
168000 Cr by
> 4800
2015 137760 Cr
7680 Cr
24000 Cr
43200 Cr
33600 Cr
9600 Cr
> 14400
Deal Country
(Cr)
In advanced discussions N America
912
Japan
254
> 14400
> 9600
> 14400
> 4800
> 4800
140 O
O
A
O-Over, S- Yet to Start or starting soon, R-Running, WW-Worldwide, A-Approved
384
Size
Countries Worldwide
LATEST UPDATES Glenmark gets US FDA nod to sell painkiller drug in US 6 Dec, 2010: Drug maker Glenmark today said it along with its US-based partner has got the US health
regulator's nod to manufacture and market two oxycodone products, used for treating moderate to severe pain, in the American market. The company's US arm, Glenmark Generics Inc and Lehigh Valley Technologies (LVT) have received US Food and Drug Administration nod for Oxycodone immediate release capsules, the company said in a filing to the Bombay Stock Exchange. The approval is for 5 mg capsule and 100 mg/5 ml oral solution, it said, adding, Glenmark Generics Inc and LVT have also signed a new supply and marketing agreement. Under the terms of agreement, LVT will be responsible for manufacturing of the Oxycodone product line for Glenmark's exclusive marketing and distribution in the generic form, the company said. "LVT would retain exclusive marketing rights to the branded version of the Oxycodone product line," it added. Further, the US firm will also retain exclusive marketing rights to additional strengths of Oxycodone product line in both generic and branded forms. According to market research firm IMS health , Oxycodone Hydrochloride immediate release capsule and liquid formulations had total market sales of USD 13 million for the 12 months ended September 2010. FDA nod for three Glenmark drugs 24 Dec, 2010: Glenmark Pharmaceuticals said it has received the US health regulator's approval to
market three generic products in the American market. Glenmark Generics Inc, the US-based subsidiary of the company has received final approval from the US Food and Drug Administration (USFDA) for two products, Indomethacin capsules in strengths of 25 mg and 50 mg and Sulfamethoxazole and Trimethoprim tablets in double and single strengths, Glenmark said in a statement. These products are currently available and the company has commenced shipping from their New Jersey facility, the company said. According to IMS Health, total sales achieved for Indomethacin in the US market for the 12 month period ending September 2010 were $20 million. Sales of Sulfamethoxazole and Trimethoprim stood at $31 million for the same period in the US market. While Indomethacin is used in treating arthritis, Sufamethoxazole and Trimethoprim tablets are indicated for urinary tract infections.
Apart from two final approvals, the company received a tentative approval from USFDA for Eszopiclone, the generic version of Sepracor's Lunesta, which according to IMS Health achieved annual sales of $760 million for the 12-month period ending September, 2010. Eszopiclone is used to treat insomnia Earlier this year, Glenmark had entered into a settlement and licence agreement with Sepracor to resolve a United States patent infringement suit related to its filing an abrreviatd new drug approval (ANDA) for Eszopiclone with the USFDA. Under the terms of this agreement, Glenmark would be permitted to launch its generic product after November 30, 2013, which is 2.5 months prior to the expiry of Sepracor patent or May 30, 2014. Glenmark loses patent case to Abbott over hypertension drug th
15 January, 2011: Indian drug firm Glenmark has lost a patent case against US firm Abbott Laboratories
over hypertension drug Tarka, subsequently it will pay $16 million in damages to the US firm. A federal jury in Newark, New Jersey, has rejected Glenmark's challenge to the validity of the patent that expires in February 2015. Glenmark argued that the patent covered an invention that was protected by an expired patent. As per the latest order, Jurors awarded $15.2 million for lost profits and $8,03,514 for higher prices that Abbott would have been able to charge had Glenmark not infringed the patent. While Glenmark officials could not be reached for comments, sources said the company will appeal against the verdict. The Indian firm May last year got the US FDA's final approval to launch the generic version of the drug, whose original patent was held by Sanofi Aventis but later sold to Abbott. This was, however, challenged by Abbott which applied for preliminary injunction but the court had overruled it. Subsequently, Glenmark launched the drug in June in the US market. Abbott, which paid $290 million for an exclusive licence to Tarka, was seeking $25 million as compensation for profit it lost because of Glenmark's sale of the generic drug. Paris-based Sanofi's patent on Tarka was first approved by drug regulators in 1996. Tarka is an anti-hypertension drug owned by Abbott and marketed by Sanofi Aventis with an annual sale of $58 million. Meanwhile, if the company, on a conservative basis, withholds the sale of the drug, its fourth quarter revenues and earnings would be impacted accordingly. The damages, if awarded, would also reduce the company's earnings for FY11. However, these are likely to have negligible impact on the company's total performance. The revenue loss stands at less than 4% of the company's annual revenues of 2,908 crore (on a trailing four quarter basis).
FINANCIALS: CONSOLIDATED
For the third Quarter of FY2011, Glenmarks consolidated revenue was at Rs. 750.81 Cr as against Rs. 641.68 Cr, an increase of 17%. Revenue from the generics business was at Rs. 298.75 Cr, as against Rs. 280.44 Cr, a growth of 7%. The Specialty formulation business revenue was at Rs. 452.06 Cr as against Rs. 361.24 Cr for the corresponding quarter of the previous year, registering a growth of 25%. For the nine month ended Dec 31, 2010, Glenmarks consolidated revenue was at Rs. 2156.93 Cr as against Rs. 1775.69 Cr, an increase of 21%. Revenue from the generics business was at Rs. 890.00 Cr, as against Rs. 776.72 Cr, a growth of 15%. The Specialty formulation business revenue was at Rs. 1266.93 Cr as against Rs. 998.97 Cr for the corresponding nine months of the previous year, registering a growth of 27%. CONSOLIDATED REVENUE & NET PROFIT In Rs. Crores Sector wise & Geographical Revenue Break-Up
Q3 FY' 10-11
9 Months Ended Dec'10
2008-09
2007-08
Growth %
2008-09
2007-08
Growth %
US Europe Latin America API Total Generic Business
204.08 15.4 4.29 74.97 298.74
188.64 6.62 7.59 77.57 280.42
8.18% 132.63% -43.48% -3.35% 6.53%
610.86 40.91 23.33 214.88 889.98
537.81 20.15 26.28 192.47 776.71
13.58% 103.03% -11.23% 11.64% 14.58%
Specialty Business Latin America ROW Europe India Total Specialty Business
52.82 115.42 44.76 239.03 452.03
28.03 90.57 35.12 184.27 337.99
88.44% 27.44% 27.45% 29.72% 33.74%
142.72 277.02 101.11 656.56 1177.41
101.51 249.39 90.37 534.45 975.72
40.60% 11.08% 11.88% 22.85% 20.67%
Revenue without Out Licensing
750.77
618.41
21.40%
2067.39
1752.43
17.97%
0
23.24
-100.00%
89.51
23.24
285.15%
Total Consolidated Revenue
750.77
641.65
17.01%
2156.9
1775.67
21.47%
Consolidated Operating Profit
139.71
133.91
4.33%
493.71
361.39
36.61%
Operating Profit Margin (%)
18.61%
20.87%
22.89%
20.35%
Consolidated Net Profit
109.55
94.07
376.72
228.41
Net Profit Margin (%)
14.59%
14.66%
17.47%
12.86%
Generic Business
Out - Licensing Revenue
16.46%
64.93%
SPECIALTY BUSINESS: ROW Markets: India, Africa, Asia, CIS & Latin America region India
Sales for the formulation business in India increased to Rs. 239.03 Cr for the third Quarter of this financial year as compared to Rs. 184.27 Cr in the previous corresponding quarter, recording a growth of 30%. According to the latest ORG-IMS data it was reported that the company registered value growth of 25.1% vis-à-vis that of the industry growth which was 15.8% [ORG: Apr 10 to Dec10] As per ORG-IMS (MAT- Nov09 vs. MAT Nov10), Glenmark increased market share in various therapeutic categories viz. Anti-infective from 1.14 % to 1.31 %; Cardiac from 1.85 % to 2.25%, Respiratory from 2.25 to 2.42 % , Pain from 0.92% to 0.99 %, Gynaecology 1.09 % to 1.23 % and dermatology from 7.86 % to 8.34 %. During the quarter, the IF business introduced six new products. The main product launches were Altacef-CV indicated for respiratory infections, Bon-K2 for osteoporosis and Candid soap for fungal infections. Flublast, an anti-influenza medication launched in Aug10 performed very well during the quarter. Africa, Asia and CIS Region
For the third quarter of the financial year, revenue from Africa, Asia and CIS region was Rs. 115.42 Cr as against Rs. 90.57 Cr for the previous corresponding quarter, recording an increase of 27%. In the region, Glenmark filed 30 product dossiers during the quarter and received 22 product approvals. Russia/CIS Region
The secondary sale for the Russian subsidiary has shown a good growth in the third quarter. According to Pharmexpert data, on a MAT basis, the company is growing at a rate of 26% (market MAT December 2010 growth is at 7%) and has consistently improved rankings in the market to the current rank of 62 in Dec 2010. In this quarter the company has launched Glencet, the first Generic for Levocetrizine in Russia. The brand has received a positive response from doctors in the first month of the launch itself. This launch will help Glenmark consolidate its position in both respiratory and dermatology segment, the two key segments where the molecule is widely prescribed. With a growth rate of 54% (Pharmexpert Dec 2010 data) we continue to be the fastest growing company in the dermatology segment with healthy growth rates for all the Derma brands. Africa/Middle East
The Africa Middle East has achieved a growth of 36% in quarter ended Dec10, aided by robust growth from South Africa, Nigeria, Kenya, Sudan, Mauritius & Tanzania The quarter was also marked with several first-to-market innovative products across therapeutic categories such as the introduction of Glenmark into the lucrative Antiasthma segment in Kenya; the introduction of the high end cosmetic range in the UAE; strengthening of the pain portfolio with the launch of Valus AP in Malawi. Asia
In Asia, the key markets of Malaysia, Vietnam and Myanmar recorded secondary sales growth of 40 %. In Malaysia, new registrations for Montelukast, Adapalene MS and Demelan were obtained. These
registrations will help us make a strong entry in the hospital segment. Deriva MS and Klenzit MS were launched in Malaysia, Vietnam, Philippines and Sri Lanka. Latin America
Glenmarks revenue from its Latin American and Caribbean operations was at Rs. 52.82 Cr for the third Quarter of 2010 11 as against Rs. 28.03 Cr a growth of 88%. The growth is attributed to improvement in the Brazilian business, contribution from newer markets like Venezuela, Peru, Ecuador as well as a low base effect of the previous year. Going forward we expect strong sequential growth from the region. In the region, Glenmark filed 10 product dossiers during the quarter and received 9 product approvals. Europe
Glenmark Europes operations registered third quarter revenue of Rs. 44.76 Cr as compared to Rs. 35.12 Cr for the previous corresponding quarter, an increase of 27%. The region continues to explore new inlicensing opportunities to grow the each of the businesses. GENERICS BUSINESS:
For the third Quarter of FY2011, consolidated revenue from Generics business was at Rs. 298.75 Cr as against Rs. 280.44 Cr, an increase of 7% in rupee terms over the corresponding quarter of the previous year. USA Formulations
Revenues for the third quarter of FY 2011 were Rs. 204.08 Cr against revenue of Rs. 188.64 Cr in the previous year, reflecting an increase of 8% in rupee terms over the corresponding quarter of the previous year. During the third quarter, Glenmark was granted final approval by the United States Food and Drug Administration (FDA) for five Abbreviated New Drug Applications (ANDA) and received tentative approval on two. The Company launched a total of 6 products in the U.S. marketplace comprised of a mix of immediate release tablets, extended release tablets, semi-solid and controlled substance items. New products launched include Pramipexole Dihydrochloride Tablets, Mupirocin Ointment, Felodipine ER Tablets, Indomethacin Capsules, SMX/TMP Tablets and Lithium Carbonate ER Tablets 300mg. The company is on course to file 13-15 ANDAs in FY11. In the final weeks of the quarter, Glenmark launched Oxycodone capsules and oral solution in 5mg and 20mg/ml presentations, respectively. These two items are approved New Drug Applications (NDA) and comprise Glenmarks primary portfolio of pain management products. This niche market category maintains a high barrier to entry due to strict DEA regulations thereby limiting the number of competitor companies and showcasing Glenmark as the only generic company distributing these U.S FDA approved products. Oxycodone is manufactured for Glenmark in the United States through a partnership and is distributed directly from its 75,000 square ft warehouse located in Mahwah, New Jersey. In November 2010, Glenmark Pharmaceuticals Limited and Glenmark Generics Inc., USA ( Glenmark) confirmed Triax Pharmaceuticals, LLC, Astellas Pharma Europe B.V. and Astellas Pharma International B.V. ( Astellas and Triax ) filed a patent infringement suit on November 4, 2010 in the U.S. District
Court for the District of Delaware seeking to prevent Glenmark from commercializing its Abbreviated New Drug Application (ANDA) for Hydrocortisone Butyrate cream 0.1%, their generic version of Locoid Lipocream®, prior to expiration of the Orange Book patent. Based on information published by the U.S. FDA, Glenmark believes it is the first applicant to file an ANDA with a paragraph IV certification for a generic version of Locoid Lipocream®, and should its product be approved, Glenmark will be entitled to 180 days of generic market exclusivity.
EU Formulations
The European business continued to grow through a mix of product sales and licensing revenue. During the quarter, GGBV, the Dutch entity, participated in different tenders in the Netherlands with leading health insurance companies and won tenders for three more products with supplies commencing in December10. The UK business also expanded its coverage of the market by adding several new important accounts across the wholesaling and retail channels and also launched one more product in UK in this quarter. The out licensing business successfully signed four more deals for licensing out and supply of products in various EU markets and we also signed three deals for in-licensing products which will be available for sales by the UK entity in the next year. In this quarter, Glenmark supported two new product launches by third party customers in EU markets. During the quarter, Glenmark was granted Five MAs for four products in different markets and we filed an MA Application for one product through the DCP procedure. Overall, the business posted revenues of Rs. 15.40 Cr for the quarter, against revenue of Rs. 6.62 Cr for the corresponding quarter of previous year showing a growth of 133% in rupee terms. Oncology
Glenmarks revenue from the Argentina operations were Rs. 4.29 Cr in the third quarter of 2010-11 as against Rs. 7.59 Cr for the third quarter of the previous year, a decline of 44% in rupee terms. The oncology business launched three new products in the quarter. The Argentina unit continues to support Glenmarks oncology business worldwide and has facilitated the filing of 32 product dossiers across subsidiaries Active Pharmaceutical Ingredients [API]
Revenue from sale of API to regulated and Rest of the World (ROW) markets globally was Rs. 74.97 Cr for Q3 FY11 against Rs. 77.57 Cr for Q3 of the previous year, recording a decline of 3% in rupee terms.
Prasugrel and Sitagliptin were launched in the ROW markets, combined with the award of Perindopril annual tender in Malaysia. The table below shows the summary of the consolidated financial results of Q1 FY 09-10 and the consolidated results for the 12 months ended March-09 ANNUAL RESULTS: 2009 10 IN Rs. Cr Sales Turnover Op Profit Net Profit % OPM % NPM
Standalone Annual Report
Consolidated Annual Report
FY'10
FY'09
% Change
FY'10
FY'09
% Change
1,038.87 151.16 128.46 14.55 12.37
965.66 301.49 217.92 31.22 22.57
7.58 -49.86 -41.05 -53.40 -45.21
2,549.61 547.91 324.47 21.49 12.73
2,290.04 526.30 191.66 22.98 8.37
11.33 4.11 69.29 -6.49 52.06
STANDALONE QUARTERLY RESULT: Oct Dec 10 IN Rs. Cr Sales Op Profit Net Profit EPS % OPM % NPM
Standalone Quarterly Results Dec'09
Mar'10
Jun'10
Sep'10
Dec'10
277.14 49.68 37.48 1.39 17.93 13.52
289.43 43.4 28.25 1.05 14.99 9.76
257.23 86.45 60.79 2.25 33.61 23.63
293.36 41.47 27.54 1.02 14.14 9.39
318.71 68.59 57.94 2.15 21.52 18.18
CONSOLIDATED QUARTERLY RESULT: Oct Dec 10 IN Rs. Cr Sales Op Profit Net Profit EPS % OPM % NPM
Consolidated Quarterly Results Dec'09
Mar'10
Jun'10
Sep'10
Dec'10
648.34 133.91 94.07 3.48 20.65 14.51
712.50 164.79 102.61 3.80 23.13 14.40
696.33 201.28 155.54 5.76 28.91 22.34
741.38 152.71 111.62 4.13 20.60 15.06
758.49 139.71 109.55 4.06 18.42 14.44
OTHER DETAILS
Face Value Total Equity shares
: Rs.1.00 : 27.01Cr
Share Holding Pattern Promoters Residential Individuals
: 52.41% : 12.26%
FII Banks, FIs
: 27.94% : 1.51%
MFs Govt./NRI/OCB/Others
: 2.39% : 1.52%
Private corp bodies
: 1.97%
PRICE ESTIMATION
Valuation based on standalone results Adjusted Annualized EPS Average P/E of Industry
= Rs.8.60 = 24.78
Average P/E Taken So the value of each share Total Value of investments
= 15
Total No of Shares Value Per share
= Rs.129.00 = Rs.992.91Cr = 27.01Cr = Rs.36.76
So the total value per share
= Rs.165.75
Valuation based on consolidated results Adjusted Annualized EPS
= Rs.16.24
Average P/E of Industry
= 24.78
Average P/E Taken So the value of each share
= 15 = Rs.243.60
** For further details on Ratios and Comparison of Glenmark Pharma within its peers refer the attachments at the end. RECOMMENDATIONS
If we consider a 20 P/E multiple then the value becomes Rs.325 on consolidated basis. The stock is trading at a significant discount to its other frontline peers. Given that the growth of the company's core generics business remains promising, the current weakness in the stock offers a buying opportunity for investors scouting the mid-cap space. These pharma (basically generics based) companies should not be looked from only P/E point of view. If one of the molecules hits the shelves the stock price may jump but from this point of view also the prospects are looking grim in the near future because none of their molecules will be out before 2013.
Next quarter results might get impacted because of the lost patent case against US firm Abbott Laboratories over hypertension drug Tarka, subsequently it will pay around Rs. 70 Cr in damages to the US firm. Even though the performance in First Nine months of FY2011 is good, but it has depleted after peaking in the April to June quarter.
