Glenmark Pharmaceuticals declines 13% in two days on profit booking

The stock has jumped 40 per cent in the intra-day trade on Monday after the firm received approval for Favipiravir's (Fabiflu), a potential Covid-19 drug, by the Drug Controller General of India

Shares of Glenmark Pharmaceuticals declined 7 per cent to Rs 459 in the intra-day trade on the BSE on Wednesday, having fallen 13 per cent in the past two trading days on profit booking.

On Monday, the stock of the drug maker had rallied 27 per cent to Rs 520 after the firm received approval for Favipiravir’s (Fabiflu), a potential Covid-19 drug, by the Drug Controller General of India (DGCI).

The approval of Favipiravir (emergency usage approval) is for mild to moderate patients. While this is a positive development for the company with short term benefits from Indian market besides additional opportunity from export markets based approvals, the recent run up is unwarranted and much ahead than fundamentals, analysts believe.

“This reaction has an irrational exuberance and will likely fizzle out in the near-term as Cipla, Strides and Natco/Laurus approval will follow soon leading to a cut-throat competition. The Remdesivir has an edge over Favipiravir in terms of efficacy and backup from FDA. Favipiravir opportunity for the company in India could only be worth Rs 40 – Rs 50 crore assuming three players market. The private medical practitioners may not opt for Favipiravir as approval lacks complete clinical trials,” Prabhudas Lilladher said in an update.

In an optimistic scenario, Favipiravir can generate revenue of Rs 50 crore with EBITDA (earnings before interest, taxes, depreciation and amortization) margin of 15 per cent and EPS contribution would be between Rs 0.19-0.22. We would wait for more clarity from GNP management during Q4FY20 earnings call, it said.

At 11:08 am, Glenmark Pharma was trading 3.5 per cent lower at Rs 468 on the BSE, as compared to 0.26 per cent rise in the S&P BSE Sensex. A combined 16.2 million equity shares have changed hands on the counter on the NSE and BSE till the time of writing of this report.