Glenmark Pharma (GNP) has settled its patent dispute with GlaxoSmithKline (GSK) on Malarone, an anti-malarial drug. Despite the drug’s small market size
(USD 56mn), GNP will benefit from being its only generic filer while enjoying limited or no competition starting Q2FY12E for at least a year. Consequently,
for FY12E, we expect the product to contribute incremental sales of US$ 14mn, PAT of US$ 7mn and an EPS of Rs 1.1. The stock remains attractively valued at P/E of 16.5x FY11E and 13.5xFY12E base business earnings (excluding NCE income and Para-IV income).
In a duopolistic market – with GNP and GSK being the only two players marketing the product – we have assumed 25% price erosion for GNP (22% is a standard). With a 50% market share, 10% (of sales) royalty payment to GSK, and a 50% PAT margin, we expect GNP to add revenues of US$ 14.2mn and PAT of US$ 7.1mn.
