Glenmark Pharmaceuticals Ltd’s Crofelemer opportunity looks more certain after it got a favourable interim arbitration award. The company has said in the past that Crofelemer, an anti-diarrhoeal drug, can fetch it $80 million ( 440 crore today) in peak sales in the 140 emerging markets where it has the rights to sell the drug for treating HIV-associated diarrhoea.

The timing of the award is opportune as the US drug regulator is expected to give its decision on using the drug for treating HIV-associated diarrhoea under a fast-track mechanism in the first week of September. An approval from the US food and drug administration (FDA) will mean an imminent launch in the US and facilitate regulatory approvals in other countries.

Three companies have their finger in the Crofelemer pie. Napo Pharmaceuticals Inc. discovered the molecule and licensed it to Salix Pharmaceuticals Inc. and Glenmark for developing and marketing the drug in certain territories. The litigation was subsequent to Napo seeking to terminate these agreements citing a breach of contract.

Glenmark has the rights to supply the basic inputs for the drug to Salix and sell the drug in 140 emerging markets, including India, for indications related to HIV, and acute adult and paediatric diarrhoea.

Salix has done the necessary filings with the US FDA, which Napo claims was subsequent to its move to terminate the arrangement. The regulator’s decision will be known by 5 September. If the drug gets a go-ahead to treat diarrhoea in HIV-afflicted patients, it will clear the way for Glenmark to eventually launch the drug in territories where it has rights.

Glenmark said the International Centre for Dispute Resolution has ruled that Glenmark has the exclusive right to market the drug in the 140 countries it has approval in, including through relief agencies. It also has two years from the time it gets approval from India’s drug regulator to file for approval in other countries. The panel has deferred other issues to a second phase, but the current award appears to resolve some of the substantive issues in this deal.

The company’s share strengthened after this announcement. Crofelemer will make a meaningful contribution to sales and profit, and more importantly it will be a steady source of revenue, especially when it enjoys patent protection. Once the drug gets approval for other indications as well, the size of the market opportunity could increase. Now that Glenmark’s claim over the rights to market Crofelemer has been established
by the arbitrators, investors will await the US drug regulator’s decision on the drug to see if they can factor it in their
earnings forecasts.

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