Industry Trend Analysis - Evestra Agreement Will Boost Glenmark's Complex Generics Capabilities - MAY 2017


BMI View: Although Glenmark Pharmaceuticals does not consider female healthcare to be a central market for it, the US as a regional market is essential, and this agreement with Evestra will act to further boost Glenmark's US sales. It is a long-term agreement, with a US ANDA filing for the vaginal ring not anticipated until FY19. Although not a primary focus under Glenmark's strategic blueprint, Evestra's product fits well as an example of a complex generic; Glenmark will be looking to gain a niche position that will improve its standing in the US compared to other Indian firms.

Glenmark Pharmaceuticals USA and Evestra have completed a strategic development, licence and commercialisation agreement to develop and market a generic version of Merck & Co's NuvaRing (etonogestrel+ethinyloestradiol) vaginal ring. The product is designed to allow women to access a more affordable birth control option. Development of the generic vaginal ring is under way and the two companies expect to file an ANDA for it in FY19.

Evestra will develop the product exclusively for Glenmark for the US market and will receive certain milestone payments during various stages of the product's development, including royalties on net sales. Glenmark has secured exclusive marketing and distribution rights for the product, including an option to commercialise two additional Evestra vaginal ring products for the US market.

Evestra Focused On Female Healthcare

Based in San Antonio, TX, Evestra describes itself as an emerging biopharmaceutical R&D company with a therapeutic focus on women's healthcare. The firm is a spin-off from the Organic Chemistry Department of the Texas Biomedical Research Institute, and is involved in addressing medical needs such as endometriosis, fibroids, hormone replacement therapy and hormonal-dependent breast cancer.

Evestra has notably had a partnership with Hungary-based Gedeon Richter, a company that also has a substantial female healthcare orientation. In January 2014, Evestra and Richter signed a collaboration partnership agreement, under which Evestra was to perform certain R&D activities on contraceptive products in exchange for licensing the commercialisation rights for certain territories outside of the US. The deal consisted of upfront payments for research and early development funding, as well as clinical development, regulatory and sales performance milestones and royalty payments on net sales.

In February 2015, Richter and Evestra entered into a further collaboration agreement, under which Richter provided a USD5mn convertible loan to Evestra. The funds allowed Evestra to accelerate the development of its women's health product pipeline into clinical stages. Under the terms of the agreement, after three years Richter will have an option to decide whether the loan is to be reimbursed, including earned interest, or converted into an equity stake in Evestra.

US An Important Market For Glenmark

Announcement of the agreement with Evestra came shortly after Glenmark announced its latest quarterly results for Q316/17, ended December 31 2016. Total consolidated revenue reached INR25,350.1mn (USD375.9mn) in the latest quarter, up by 42.6% over the INR17,783.0mn reported a year earlier, and net profit rose by 143.2%, from INR1,961.8mn in Q315/16 to INR4,770.3mn (USD70.7mn). This latest quarter was the third consecutive quarter of consolidated revenue growth for Glenmark and net profit increased by 113.4% over the INR2,235.9mn reported for Q216/17, reaching its highest point for several quarters.

Glenmark's Financials In Good Shape
Glenmark's Quarterly Revenue And Profit (INRmn)
Source: Glenmark Pharmaceuticals, BMI

Within its revenue breakdown, the US has remained Glenmark's most important market for some time. US formulation sales in Q316/17 reached INR12,308.3mn (USD182.5mn), up by 102.1% over the INR6,088.7mn reported a year earlier. The firm highlighted that in December 2016, it announced the availability of ezetimibe in the US, the first generic version of Merck's Zetia, used in treating high cholesterol. The generic was the result of a licensing partnership with Par Pharmaceutical Companies ( Endo International). Glenmark and Endo are entitled to the 180-day generic marketing exclusivity provision under the Hatch-Waxman Act for being the first to file an ANDA with a Paragraph IV certification. Also during Q316/17, Glenmark gained final approval and launched its nystatin+triamcinolone acetonide cream, and launched its triamcinolone acetonide cream and potassium chloride extended-release capsules in the US. The company filed five ANDAs with the FDA and plans to file an additional ten in the next quarter.

As at December 31 2016, Glenmark's US marketing portfolio consisted of 112 generics authorised for distribution. The firm had 63 applications pending in various stages of the approval process, with 24 of these being Paragraph IV applications.

Glenmark's US business is not only its most important in terms of sales, but it also saw the greatest increase over the prior year period compared to its other regional businesses. Domestic sales made up Glenmark's second largest segment by sales, but its India formulations trailed some way behind US formulations. In Q316/17, India formulations brought in revenues of INR5,168.7mn (USD76.7mn), up by 5.9% over the INR4,880.3mn reported a year earlier. The Africa, Asia and CIS region was next largest, with sales in the latest quarter reaching INR2,511.0mn (USD37.2mn). This was an increase of 6.2% over the INR2,363.4mn reported in Q315/16. European formulations rose by 11.0%, from INR1,763.5mn to INR1,957.1mn (USD29.0mn).

US Formulation Sales Vital To Glenmark
Glenmark's Quarterly Revenues By Region (INRmn)
Source: Glenmark Pharmaceuticals, BMI

US formulation sales have seen a dramatic increase for Glenmark in recent quarters, and can be expected to surpass the INR14bn mark in Q416/17, underscoring the country's importance for the company. Against this backdrop, the agreement with Evestra will be part of efforts to ensure that US sales remain healthy. However, it is notable that in the most recent quarter, Glenmark also announced its 'Strategic Blueprint for the Next Decade'. In this, Glenmark explained that its focus will be directed to three therapeutic areas: oncology, respiratory and dermatology. The female healthcare focus contained in the Evestra agreement does not fit within this focus, but has nonetheless been considered significant enough for inclusion by Glenmark. Whilst the three therapeutic areas are target areas for Glenmark's innovative research, the firm added in its blueprint that it wanted to strengthen focus on complex generics; Evestra's vaginal ring arguably fits well into this outlook.