Glenmark Pharmaceuticals share price corrected for the second consecutive session on June 24, falling 7.2% intraday, taking two-day losses to more than 13%.

The share rallied 27% on June 22 after the drug manufacturer got the approval from the Drug Controller General of India (DGCI) to market and produce antiviral drug favipiravir under the brand name FabiFlu to treat mild to moderate COVID-19 cases. 

While maintaining its sell rating on Glenmark due ti multiple headwinds on core business and retaining target of Rs 257, Prabhudas Lilladher said it believe the 27% rally in the stock was an irrational exuberance and would fizzle out in the near-term.

"1) Cipla, Strides, and Natco/Laurus approval will follow soon leading to cut-throat competition, 2) Remdesivir has an edge over favipiravir in terms of efficacy and backup from FDA 3) favipiravir opportunity for Glenmark in India could be worth Rs 40-50 crore, assuming a three-player market 4) private medical practitioners may not opt for favipiravir as approval lacks complete clinical trials," he brokerage said.

In an optimistic scenario, favipiravir can generate a revenue of Rs 50 crore with an EBITDA margin of 15%, and EPS contribution would be between Rs 0.19-0.22, the brokerage said, adding the recent run-up eas unwarranted and much ahead of fundamentals.

"We have not incorporated favipiravir opportunity in our earnings estimates, as we would wait for more clarity from GNP management during the Q4FY20 earnings call," it said. The company would consider the March quarter earnings on June 26.   

Glenmark has become the first pharmaceuticals company in India to receive regulatory approval for Favipiravir.

"Favipiravir is backed by strong clinical evidence showing encouraging results in patients with mild to moderate COVID-19. The antiviral offers broad-spectrum RNA virus coverage2 with clinical improvement noted across age group 20 to over 90 years," Glenmark said.

It successfully developed the active pharmaceutical ingredient and the formulation for FabiFlu through its in-house R&D team.

Favipiravir is approved in Japan since 2014 for the treatment of novel or re-emerging influenza virus infections.

The stock was trading at Rs 465.65, down 3.97% on the BSE at 13.12 hours IST.