Glenmark Pharma last week became the first Indian company to receive approval for manufacture and marketing of Favipiravir for the treatment of mild-to-moderate symptoms of Covid-19, in what is a positive development for the investors of the one of the most under-performing pharma stocks.
If the drug proves to be efficacious over the next few months, Glenmark will enjoy first mover advantage at a time when the country is reporting record number new coronavirus cases.
It will likely to boost the company’s local sales in the near term, increase its visibility among doctors and patients and, above all, vindicate the company’s sustained focus on R&D.
Currently, there is no visibility on the impact of the drug launch on the company’s business. Glenmark’s management has not provided any estimate on the possible sale of this drug. The company has begun manufacturing the drug – which is due to be rolled out by early next week and is likely to be available pan-India within 8-10 days.
The ramp up in drug sales is dependent on the load of patients and how the pandemic develops. At Rs 103 a tablet and Rs 3,500 for the complete course of medication – it is moderately priced as compared with the competing drug Remdesivir, which too has received emergency drug approval for treatment of Covid-19 patients with severe conditions and is likely to be made available by June end at around Rs 5,000 a dose.
Debt on the books, high expenses towards R&D, and headwinds to its US business have adversely impacted the company’s valuations on the Street in recent years. The Glenmark stock is trading at a historically lower valuation of 16 times its trailing four quarters consolidated earnings. This is less than half of the price-to-earnings multiple of 35 of the ET Pharma Index.
Despite the price more than doubling during the period of the lockdown, the Glenmark stock is the only one in the pharma sector to trade 20% lower than its year-ago level. It is still trading at one-third the level of its record high in 2015.
The company has been on a restructuring mode with reduction in R&D expenses and employee cost. The launch of this anti-viral drug has the potential to be a game-changer for Glenmark’s fortunes on the Street as well as off it. Reduction in debt is going to be the key confirmation for the Street to buy into the company’s turnaround story. The fourth quarter numbers, to be announced next week, will provide a clue to the Street about the debt reduction levels achieved and the company’s growth trajectory.
