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US generics to help push Glenmark recovery

US generics to help push Glenmark recovery
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First Published: Thu, Apr 15 2010. 10 10 PM IST
Updated: Thu, Apr 15 2010. 10 10 PM IST
Mumbai: Regulatory approval and patent settlements in the US and overall financial restructuring may finally open a path for Indian generic drugs maker Glenmark Pharmaceuticals Ltd to recover from the debt and margin pressure it has been facing over the past year.
The firm’s income has suffered from high-cost debts, operating losses due to write-offs in the US generics business and a slowdown in research-related cash inflow as well as new marketing approvals in the US. That market contributes about one-third to Glenmark’s revenue.
Glenmark, which had a debt of Rs2,050 crore at the end of March 2009, reduced it to Rs1,600 crore after it raised Rs415 crore through placement shares with institutional investors in September.
A proposed initial public offer (IPO) of its recently demerged generic business company Glenmark Generics Ltd is expected to cut debt further.
Glenmark suffered a setback in the last three months of fiscal 2009, when it had to write off at least Rs250 crore because of stock withdrawals and price erosion after the US market exclusivity for its anti-epilepsy drug oxcarbazepine expired.
But fiscal 2011 is looking better, with Glenmark’s traditional strength, generic drugs, leading the way.
In fiscal 2010, it got the nod for at least 13 generic drugs, one of the highest among new marketing approvals, called abbreviated new drug approvals, issued in fiscal 2010.
With three of the drugs accounting for a combined annual revenue of $2 billion (Rs8,880 crore) in the US market, Glenmark stands to benefit substantially over the next few years in which these drugs are expected to be launched.
These three drugs—copies of Zetia, Tarka and Cutivate—were also the first to be applied for, potentially offering Glenmark six months’ market exclusivity.
A Glenmark spokesperson said: “The company has grown organically in the US market. This strategy, along with the decision to choose niche categories and high-entry barrier segments, have provided continuous growth in that market in the last five years.”
The drug maker’s stock movement has also been reflecting the new outlook. On Thursday, Glenmark’s shares closed 0.35% higher at Rs269.30, while the benchmark Sensex fell 1.03% to 17,639.26 points. In the past month, the firm’s shares have gained 12.72%.
Even a minor setback in US sales directly impacts Glenmark’s profitability, said a sector analyst at a foreign brokerage on condition of anonymity because he is not permitted to speak to the media.
“The main issue that Glenmark faced in the market was the difficulty to replace the high sales it had from the market exclusivity of epilepsy drug oxcarbazepine, and the significantly delayed new approvals in the US market in the last two years,” said Kirit Gogri, a pharma sector analyst with equity research firm Quant Capital.
According to a stock review by sector analyst Nirmal Bang of Stockmarketsreview.com, a website that offers market analysis, the US market for Glenmark will grow at 32.7% between 2010 and 2012.
In November 2009, Glenmark also licensed out an anti-acne drug it developed to Medicis Pharmaceuticals Corp. for the North America region for an upfront payment of $5 million.
The drug maker is eligible for additional payments upon achieving certain development milestones of this research product, as well as royalty upon commercialization.
Glenmark Generics has reached a settlement with Medicis over patent litigation to launch a generic version of Loprox, a skincare product, in the US market.
Earlier this week, it also settled a patent litigation with GlaxoSmithKline Plc (GSK) that will let it launch a copy of the latter’s anti-malaria drug brand Malarone in the US by 2011, ahead of the expiry of GSK’s patent protection.
“While it is a small product, we believe there is a possibility that the upside for Glenmark could extend beyond 180 days. In the most conservative scenario, we believe this could add (one time) $10 million to its profit in fiscal 2012,” Prashant Nair, a sector analyst with Citi Investment Research and Analysis, said in a report.
ch.unni@livemint.com
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First Published: Thu, Apr 15 2010. 10 10 PM IST