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A Rs 3,800 cr mcap gain for a Rs 90 cr revenue pop: Is Glenmark's favipiravir rally too much?

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Glenmark shares rose about 30 percent today, adding Rs 3,800 crore in mcap after it received a nod to launch favipiravir. Brokerages, however, see the revenue opportunity from the drug at Rs 25-90 crore.

A Rs 3,800 cr mcap gain for a Rs 90 cr revenue pop: Is Glenmark's favipiravir rally too much?
Shares of Glenmark Pharma jumped around 30 percent in Monday trade after the company was granted fast-track regulatory approval to launch favipiravir in India for treatment of COVID-19 patients with mild to moderate symptoms.
The company’s drug is called Fabiflu.
The drug, which is still under trial with 150 patients, has shown promise with its initial data. It demonstrated clinical improvements up to 88 percent in COVID-19, with rapid reduction in viral load by 4 days.
“Most patients apparently show reasonable improvement by 6-8 days and may not require to consume it for entire 14 days,” said a note by IDFC Securities, which tracks the company.
But the approximately 30 percent share rally today – the stock was up 40 percent at one point – resulted in a market capitalisation jump of nearly Rs 3,800 crore to around Rs 14,800 crore. (Over the past three months, Glenmark stock has surged 180 percent.)
That pales in comparison to the current revenue visibility that favipiravir offers.
According to brokerages such as IDFC Securities and BofA Securities, Fabiflu could net Glenmark anywhere between Rs 25 to 90 crore in revenues.
A treatment course of Fabiflu costs Rs 6,000-9,000 per patient for an 8-14 day course, said IDFC. “One lakh treatment courses will imply a Rs 60-90 crore opportunity,” it said, but added that exports could net additional revenues. “The management has indicated is received enquiries from multiple countries.”
Once the full clinical data is made public and efficacy more clearly established, this trend may gain momentum, IDFC added.
BofA Securities pegged the opportunity at a more conservative Rs 25-50 crore.
“Additionally, the competition risk is significant in this drug as Hikal, Strides, SMS Pharma have the API as well and Cipla is also working on another drug remdesivir,” said the brokerage.
In fact, over the weekend, Cipla and Hetero Pharma also received nods for launching their versions of remdesivir, an experimental drug made by US firm Gilead, which has licensed it to five companies in India. Remdesivir, however, is an injectable recommended for severe COVID-19 cases.

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