Accumulate Glenmark Pharma; target of Rs 345: PINC Research

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Accumulate Glenmark Pharma; target of Rs 345: PINC Research

PINC Research is bullish on Glenmark Pharma and has recommended accumulate rating on the stock with a target of Rs 345 in its December 13, 2011 research report.

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PINC Research is bullish on Glenmark Pharma and has recommended accumulate rating on the stock with a target of Rs 345 in its December 13, 2011 research report.

"Napo Pharma (Napo) has terminated the collaboration agreement with Glenmark entered in July 2005 pertaining to development and commercialization of Crofelemer in emerging countries (140 countries). Napo has alleged that Glenmark has breached the terms of the agreement. Further, Napo has also terminated agreement with Salix Pharma (Salix) to commercially develop Crofelemer in US, Europe, Japan, Canada and Mexico. We view this development as negative for Glenmark as Crofelemer was expected to contribute a one-time NPV of Rs14/share. Glenmark has stated that Napo does not have any right to terminate the agreement and requested the arbitration panel to issue an interim order directing Napo to comply with the collaboration agreement. The next thing to watch-out for would be whether Salix files for Crofelemer NDA in US by next quarter. However pending further clarity, we remove Rs14/share from our target price."

"Post the collaboration agreement in July 2005, Crofelemer had positive results from multicentre study in adult acute diarrhoea and successful completion of Phase III trials for HIVrelated diarrhoea in US. In July 2011, Glenmark had also received USD15mn as upfront payment of the total USD21.6mn from Salix for upgrading Glenmark's facility for Crofelemer API supply. Salix was expected to file Crofelemer NDA in US by next quarter and based on that Glenmark expected to launch Crofelemer in emerging markets by FY13. As a result, Crofelemer was estimated to contribute a one-time NPV of Rs14/share from 1) Crofelemer (USD 60mn sales) supply to emerging markets 2) API supply to Salix for US and EU markets 3) Payment of USD21.6mn (USD 15mn received) from Salix."

"We remove Rs14/share from our target price pending further clarity. Glenmark has stated that Napo does not have any right to terminate the agreement and requested the arbitration panel to issue an interim order directing Napo to comply with the collaboration agreement. The stock is trading at 18.2x FY12E and 14.9x FY13E recurring earnings. We recommend 'ACCUMULATE' on the stock with a revised target price of Rs 345 valuing the base business at Rs 323 (18x one year forward earnings); Rs13 P IV FTF (Zetia and Malarone) and Rs9 for R&D pipeline (GBR 500)," says PINC Research report. 

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To read the full report click on the attachment