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Thursday, May 6, 2010

Glenmark to get long-term benefits from foreign tie-ups

Glenmark Pharmaceuticals Ltd on Tuesday announced a licensing arrangement with generic drug maker Par Pharmaceutical Companies Inc., marking the second major development in this week.

The timing of the announcement is a shot in the arm for Glenmark’s unlisted subsidiary, Glenmark Generics Ltd. An initial public offer is on the cards for this subsidiary, with the funds being used to improve the group’s liquidity position and lower debt.

On 24 April, Glenmark had got tentative approval from the US Food and Drug Administration to market the generic version of ezetimibe, which is used to lower cholesterol levels. The drug had US sales of $1.4 billion (Rs6,244 crore), and Glenmark believes it has a first-to-file status on this drug, which will give it a 180-day exclusive marketing period, when no other generic of the drug can be launched.

With no generic competitors, price erosion is minimal, and the firm reaps a windfall. Glenmark has got an upfront payment from Par for an exclusive right to sell ezitimibe in the US market. Later, they will share the profits from the product. This will have to wait, since Glenmark and the innovator company Merck and Co. Inc. are fighting a lawsuit. A favourable verdict will see the product being launched.

This week Glenmark also entered into a research and commercialization partnership with Sanofi-Aventis SA. This is for a class of new molecules for pain management being developed by Glenmark, of which one molecule—GRC15300—is in the first phase of clinical trials. Glenmark will get a $20 million upfront payment from Sanofi and could potentially make $305 million more based on developmental milestones. If any of the products make it to market, both firms will share revenue.

Both developments mean that Glenmark will have to share its success with other companies, but in return, it also shares the risk and funding needs. The real returns will come only when the products go to market. The long-term nature of these developments seems to have elicited a muted response from the market. In the near term, its March quarter results will provide a clearer indication of the outlook for fiscal 2011 and a successful listing of Glenmark Generics will be a positive trigger.

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