Drug discovery is a bit like drilling for oil; you can never be sure till you get your hands on it. Glenmark Pharmaceuticals Ltdshareholders learnt this lesson the hard way, as one of its drugs under development faltered in clinical trials.
As a result, its market capitalization fell by Rs960 crore on Wednesday. Most large Indian drug companies have ring-fenced their core business from the effects of drug discovery. But new drug discovery is an integral part of Glenmark’s pharma business plan, which revolves around selling specialty and generic medicines. In 2008-09, its revenues were Rs2,093 crore, of which specialty contributed Rs1,107 crore and the generics the rest. Glenmark’s oglemilast was a drug under development to treat chronic obstructive pulmonary disorder (COPD)—a lung disease—and asthma.
The World Health Organization estimates COPD to be the third leading cause of deaths by 2030. Glenmark had licensed this drug in the development stage to the US-based Forest Laboratories Inc., but it didn’t appear to work effectively when tested on patients with COPD. The two firms will continue to test the drug for asthma.
Graphics: Ahmed Raza Khan / Mint
The results are a body blow to Glenmark. It had estimated this deal to be worth about $190 million (Rs925.3 crore) for the US rights and $53 million for Japan, where it has tied up with Teijin Pharma Ltd. It had got $35 million from Forest and $6 million from Teijin till date. Also, this is not the first setback for the company. Earlier, Eli Lilly and Co. suspended work on an osteoarthritis drug being developed by Glenmark. Merck and Co. Inc. had returned a diabetes molecule to the company, claiming this segment was no longer a focus area. Glenmark is now developing this drug on its own, and phase IIB trials are on.
In all, Glenmark has seven drugs in the pipeline. Even if a few reach the market, they could make up for all the money and effort spent. But it needs a quick and sizeable winner, because its financial performance is under pressure. In the June quarter, its net fell 53.7% to Rs53.5 crore. Higher expenditure and rising interest costs were two key reasons.
Crisil had downgraded Glenmark’s debt in June on rising debt levels. If oglemilast had gone to the next stage, the milestone payments would have helped it pare debt levels. But now Glenmark will soon have to raise resources to contain its debt levels.
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