Glenmark, Cipla get Covid boost

However, analysts have refrained from upgrading earnings keeping rising competitive intensity in mind

Investor sentiment towards Glenmark Pharmaceuticals received a booster dose following the launch of Fevipiravir, an oral drug to treat mild-to-moderate infections, in India. The stock gained 40 per cent intra-day to reach a high of ~572.70 on Monday, before closing at ~519.80, a gain of 27.06 per cent.

Cipla, too, scaled a 52-week high and rose 9 per cent in intraday trade, before closing up 2.94 per cent. The firm, which had earlier sought an approval, is likely to start supplies of anti-viral drug Remdesivir soon.

Launch of this drug bodes well for Glenmark’s prospects. However, the stock movement was surprising, even though the company has the first-mover advantage. This is because other players are expected to launch similar molecules, and competition will increase with the launch of other drugs.

The firm has completed a clinical study on the drug, and secured an approval from the Drug Controller General of India (DCGI). “Based on this, other firms may apply for product licences by submitting the stability and other relevant data for their product. The clinical study has shown the drug’s effectiveness in treating mild Covid19 symptoms,” said an industry source. He added that over 50 entities are looking to launch this drug within a few months.

Moreover, the Covid-19 treatment opportunity is estimated at ~400 crore for Indian companies, say analysts. Considering that other companies, too, may launch the product — which is not patentprotected —gains for Glenmark will be restricted, feel analysts.

Glenmark has launched Fabiflu at ~103 per tablet. India is adding more than 14,000 cases of Covid positive patients a day, of which 70-80 per cent are mild and would need favipiravir.

“The price will reduce by over 50 per cent in the next two months. This drug has a short-term window — only as long as the pandemic lasts. Therefore, companies will rush to launch,” said an analyst. Glenmark is thus conducting trials on a combination therapy of Favipiravir with Umifenovir.

Amey Chalke at Haitong Securities says Glenmark could rake in ~40-50 crore in revenues, which is 10-12 per cent of the total Covid-19 opportunity. However, analysts are keeping an eye out for new launches by the competition, and are hence unsure regarding actual revenues. Consequently, Chalke says while there may not be an earnings upgrade immediately, there is still scope for a PE rerating. Analysts at ICICI Securities say it is very difficult to estimate the financial impact considering uncertainty over potential Covid patients and its longevity.

They have raised their target price to factor in equity multiples of 15x, up from 12x, by pricing in the potential upside from Favipiravir as well as the strong R&D capability. They maintain a ‘buy’ rating, with a revised target price of ~488 on Glenmark, based on 15x its FY22 earnings estimates (from the earlier ~390).

Meanwhile, Cipla is readying the launch of Remdesivir in an injectable form. Being needed to be administered through the intravenous route, the drug will be sold only to hospitals — mostly government-run — which are providing treatment for Covid patients.

Besides Cipla, Hetero Drugs has received a nod for manufacturing, after it entered into nonexclusive licensing agreements with US pharma giant Gilead Sciences, which is the patent holder of the drug.

Analysts say others like Cadila Healthcare, Dr Reddy’s Laboratories, and Jubilant Life Sciences are also likely to follow suit and hence, India will be a multi-player market.

Remdesivir may cost ~5,000 per vial. The drug is cheaper than products made by Bangladesh-based firms, as the API (active pharmaceutical ingredient) is made in India. A senior government official, however, said they were keeping a watch on price movement. “The cost of production for Remdesivir is also high. But we are keeping a watch on how different companies price it,” he said.

Besides, a company that is yet to launch the injectable Remedesivir said it may price it less than ~5,000 per vial. This shows how competitive the space could get. Assuming Cipla can garner all initial orders from the Maharashtra government, it could cash in on a ~30-crore opportunity, said an analyst at a domestic brokerage.