Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Glenmark: The Forest deal analysis - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 29, 2004

    Glenmark: The Forest deal analysis

    Glenmark Pharma, a mid cap pharma company, has been in the limelight over last five trading sessions, hitting the upper circuit on all days. This spurt in the price of the company came soon after it announced that one of its NCE (new chemical entity) molecules has been out-licensed to Forest Laboratories Inc. Let's take a look at this deal and evaluate whether the optimism is worth it.

    The Deal

    • Glenmark has out-licensed its anti-asthma drug (GRC-3886) to Forest Labs for the US markets.

    • The size of the deal is about US$ 190 m provided that the product is ready for successful launch after succeeding in 3 phases of clinical trials. If successful, the aforesaid consideration will come in over a period of 5 years.

    • Apart from the above, if the product comes into the market (in 2009), Glenmark will get royalty payment to the tune of 15%-16% of sales from this drug. As per the company's estimates, the product is expected to generate revenues to the tune of US$ 1.5 to US$ 2 bn once it is launched.

    • While these payments are subject to molecule clearing all the clinical trials, what is sure for Glenmark in US$ 10 m, which the company has already received as upfront payment from Forest Labs.

    • Also, Glenmark will be the sole supplier of API's for this product when it will come into the markets.

    • In all, the total sum that Glenmark may receive after the successful completion of clinical trial Phase I is about US$ 50 m, which may come up in another 8-12 months. Of this, it is expected that the company will receive US$ 20 m - US$ 30 m by the end of FY05. The molecule is under clinical trial phase I in UK, which is performed by a UK based CRO (contract research organisation) Quintles.

    • Glenmark has retained the rights for this drug in other non-US markets and is scouting for a partner in Japan and Europe. This is again a potential opportunity.

    About Glenmark Pharma

    Glenmark Pharma is a mid-sized company with focus on niche therapeutic areas of dermatology, gynecology, pediatrics, ENT and diabetics. It is ranked 24th in the domestic formulations market and has grown at a CAGR of about 26% in last three years. The formulations business contributed about 76% to the company's revenue in FY04.

    Apart from this, the company is also focused on API (active pharmaceutical ingredients) business, which contributes about 12% to revenues. The company recently upgraded its API plants to WHO compliant and expanded their capacity. The company has filed 4 DMFs with US FDA and is in process of filing another 8-10 DMFs.

    On the international front, Glenmark has signed a deal to supply 8 ANDA's to KV Pharma (a US based generic company). Glenmark is slated to get about US$ 3-4 m of milestone payments over the next year from this. Glenmark would also get royalties on sale of these products. Total deal size is about US$ 80 m over the next 6-8 years.

    At Rs 313 the stock is trading at 42x its FY04 earnings. This valuation at first glance looks very high, but considering the fact that company will get about US$ 30 m by the end of FY05 (which is almost 3 times the FY04 earnings) as milestone payment from its out-licensed molecule, the valuation then works out to be in the range of 9.9 times the expected FY05 earnings, which is not very high. Apart from this, the out-licensing deal, which is the largest by any Indian company, the cash generated from this would be utilised towards accessing the regulated markets of US and Europe, which again could offer a window of growth.



    Equitymaster requests your view! Post a comment on "Glenmark: The Forest deal analysis". Click here!


    More Views on News

    Glenmark Pharma: Lower Zetia Sales leads to Subdued Growth (Quarterly Results Update - Detailed)

    May 18, 2017

    Base price erosion in the US and lower Zetia sales impacts profits.

    Glenmark: Zetia Generics Boost Growth (Quarterly Results Update - Detailed)

    Feb 15, 2017

    Glenmark has announced its 3QFY16 results. The company has reported 41% YoY growth in net sales and 143.2% YoY increase in net profits. Here is our analysis of the results.

    Glenmark: High Costs hit the Bottom line (Quarterly Results Update - Detailed)

    Nov 8, 2016

    Glenmark has announced its 2QFY16 results. The company has reported 15.7% YoY growth in net sales and 3.5% YoY increase in net profits. Here is our analysis of the results.

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 17, 2017 (Close)


    • Track your investment in GLENMARK PHARMA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Compare Company With Charts