Oxycodone boost

The stock of Glenmark Pharma has been on a roll, driven by improving revenue visibility on account of robust growth in its domestic formulations business and strong product pipeline in the US generic market.

The company’s US subsidiary, Gelnmark Generics Inc,  on Monday received the US Food and Drug Administration’s approval for two of its new drug applications (NDAs) to manufacture and market ‘Oxycodone’ based products used in pain treatment.

The two approved NDAs give Glenmark and Lehigh Valley Technologies (LVT)  exclusive manufacturing and distribution rights to the only FDA-approved Oxycodone immediate release capsules and oral solution available in the US. According to IMS Health, the total annual market sales of these Oxycodone-based products stood at $13 million.

Analysts expect the development to add to the company’s revenues, leading to earnings upgrade.

“Consequent to the NDA approval, generic players would have to withdraw their product from the market, which would lead to Glenmark/LVT being the only players for the product. Hence, Glenmark would be able to increase the price as this product would be under its patent. We estimate Glenmark to garner revenue of US$20m and US$25m in FY12 and FY13 respectively from this product.” analysts Sriram Rathi & Sanjeev Chiniwar of Anand Rathi Financial Services wrote in their company update of December 7.

Glenmark had reported a 23% growth in topline to Rs724.26 crore in the September quarter, riding on a 22% growth in the domestic formulations business, which contributes one-third to total consolidated revenues. Also, in the US, where it has portfolio of 60 generic products, contributing another one-third to the topline, sales grew 26%.

The outlook for growth in the US appears bright as the company plans to launch six new products and is looking to file five ANDAs this quarter. The company has close to 40 ANDAs pending for approval and also has a pipeline of six new chemical entities and novel biologic entities in clinical trials.

It also has two in-licensed molecules, Crofelemer and a novel monoclonal antibody BXL1H5. Glenmark has exclusive marketing and distribution rights across 140 countries for ‘Crofelmer’, an anti-diarrhoeal drug that has successfully completed phase III trials for HIV-related diarrhoea.

“Management has guided for peak revenue potential of US$80m from the product and additional revenue from API supplies. We have not included upside from launch of Crofelmer in our financial estimates as the time of launch is not yet certain. We value this opportunity at Rs38 per share, assuming sustainable revenue of US$40m and Ebitda margin of 40%,” wrote Rathi and Chiniwar.

The stock of Glenmark Pharma, which has gained close to 37% in the last three months, closed the day at Rs384.50 on the BSE, its highest yearly close.