Mumbai/New Delhi: The market valuation of drugmaker Glenmark Pharmaceuticals Ltd has taken a beating in the past six months because of setbacks in its highly regarded research and development (R&D) activities.
Analysts tracking the company have discounted one- fourth of the base price of Glenmark shares as the company didn’t show any fresh momentum in revenues from drug discoveries in 2008, and after a drug development deal with Germany’s Merck KGaA fell through and part of another deal with US-based Eli Lilly and Co. was scrapped. Glenmark still has five other new drugs in the pipeline.
Confident: Saldanha says at this time the focus will be on conserving cash and improving working capital. Ramesh Pathania / Mint
The stock has declined nearly 80% since September, but in an interview, chief executive officer Glenn Saldanha said all that the company needs is a couple of R&D deals to bring back investor confidence. Edited excerpts:
Since Glenmark’s share valuation is strongly related to its drug discovery pipeline and the potential revenues from it, how confident are you about regaining investor confidence?
The analysts have now valued our stock at almost zero on the R&D front. That has been one of the reasons for the fall in share price along with the general slump in the stock market in the last few months. But since the core business of the company remained unaffected and is still going strong in almost all the markets, it’s a matter of one or two new licensing deals from our discovery pipeline that will steer the stock to the fore again.
Our new drug pipeline is strong with at least seven new molecules in various stages of development, and we are in talks with several potential partners for taking these molecules forward. But no specific time frame can be assured.
What is the present status of the R&D licensing deals that Glenmark has signed so far?
In 2004, the company outlicensed the US rights of oglemilast, a highly selective PDE IV inhibitor (a new class of disease-fighting group) for asthma/COPD (chronic obstructive pulmonary disease), to Forest Labs. The total deal size was $190 million (Rs948 crore today) and received $35 million as of date.
We licensed another new molecule, melogliptin (for diabetes), to Merck in 2006 in a deal valued at $250 million. Glenmark received $31 million as upfront payment.
Glenmark has got all the rights back for this very promising molecule, which will enter human trials in 2010 for further development.
In 2007, our new pain management molecule (GRC 6211—a new advanced treatment) was outlicensed to Eli Lilly for a total deal of $350 million. Glenmark received $45 million as upfront payment, though Lilly put the osteoarthritis part of this drug development programme on hold in 2008.
What is your view on the trend of consolidation in the Indian pharmaceutical industry? There is speculation about Glenmark being sold as well.
The Indian pharma industry will see a lot of changes in the coming years and the consolidation trend would continue, especially for companies that do not have a robust R&D strategy for growth and do not have scale in their generics business. Fortunately, Glenmark has proved strength in both these fronts and we have no reason to exit.
Will the current market slowdown result in tough bargaining by partners in the new R&D deals that you are looking for?
We continue to remain optimistic regarding our pipeline and we expect to conclude outlicensing deals in the next financial year.
Do you feel any pressure in the generic or specialty therapeutic business globally?
For the first nine months of this financial year, the generics business has registered growth of 57% to Rs577.4 crore. There is a slowdown of ANDA (applications for new generic versions of patented drugs) approvals by the US FDA (Food and Drug Administration, the US drug regulator), which has impacted our growth.
However, we are confident that our generics subsidiary will continue to register good growth in the next financial year.
On the therapeutic business globally, the currency devaluation and the prevalent economic environment in emerging markets has slowed growth for the branded generics business.
At this time, the focus will be on conserving cash and improving working capital.