Accumulate Glenmark Pharmaceuticals - PINC Event Update

Crofelemer launch could be in limbo

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.

We recommend 'ACCUMULATE' on the stock with a revised target price of Rs345 valuing the base business at Rs323 (18x one year forward earnings); Rs13 P IV FTF (Zetia and Malarone) and Rs9 for R&D pipeline (GBR 500).

Source : Equity Bulls

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