Glenmark Pharmaceuticals Ltd - Motilal Oswal

GLENMARK: US jury rules against Glenmark for Tarka litigation, Potential damages of US$16m; Final ruling in Feb-11

A US jury has ruled against Glenmark Pharma on one of the contentions of the patent litigation for generic Tarka (US$ 58m brand) at the US district court.

Abbott markets the drug in US and had sought US$25m as compensation from Glenmark while the US Jury has awarded damages of US$16m.

The final outcome of the case will depend on what the judge rules on all the aspects of the case (ruling expected in Feb-11).

Glenmark generates US$5m revenues per quarter from generic Tarka with approximately 55% PAT margins resulting in ~US$2.75m PAT per quarter.

Motilal Oswal believes that Glenmark is likely to temporarily halt the sales of generic Tarka till the District Court judge ruling in Feb-2011.

Motilal Oswal expects core EPS of Rs13.3 for FY11E (up 14%), Rs18.4 for FY12E (up 39%) and Rs21.5 for FY13E (up 16.4%) leading to 27% EPS CAGR for FY11-13E. Since, we do not include one-off upsides in our forecast; our estimates for Glenmark remain unchanged. The stock currently trades at 26.2x FY11E, 18.8x FY12E and 16.2x FY13E earnings. Relatively low RoE of 14-16% and high net debt of Rs15.7b will restrict further PE expansion. Maintain Neutral.

Source : Equity Bulls

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