Institutional Equities
Glenmark Pharmaceuticals 04 March 2020
Reuters: GLEN.NS; Bloomberg: GNP IN Strategic maneuvers and R&D discipline to drive outperformance BUY We initiate coverage on Glenmark Pharma with a Buy rating and a target price of Rs390, based on 11x FY22 EPS. The target valuation multiple represents a steep discount to Sector: Pharmaceuticals peers given that for more than a decade the company has been incurring a CMP: Rs282 disproportionately large investment in NCE R&D - a high risk investment avenue. The stock can rerate and trade at higher multiples depending on the company’s execution on Target Price: Rs390 its guidance of containing R&D spend and reducing debt. Currently, the combination of financial risk and business risk (NCE development) is suppressing valuation multiples. Upside: 38% The company is pursuing strategic initiatives (stake sale) for its NCE business (hived off Vishal Manchanda into a new entity - Ichnos Sciences). A potential deal is largely contingent on the quality Research Analyst of clinical data emerging from its Phase 2b drug candidate – ISB 830 (OX 40 antagonist) in [email protected] atopic dermatitis. The Phase 2b trial should report clinical data by the middle of 2020. The Phase 2a data has been encouraging and bodes well for a favorable outcome. In +91 9737437148 addition, Glenmark is seeking partners for further development of its other specialty Gaurang Sakare assets like biosimilar Xolair. Research Associate Also, Glenmark is now sharply focused on improving free cash flow generation from the [email protected] business. Over the decade (FY10-20), Glenmark has expanded its R&D investment at 33% +9122 6073 8093 CAGR, which has depressed earnings performance and free cash flows. Over this same period, net profit growth (9% CAGR) has lagged revenue growth (15% CAGR). However, Key Data going forward, reduction in R&D spend is expected on account of closure / completion of
Initiating Coverage Initiating Current Shares O/S (mn) 282.2 majority of ongoing Phase 2 trials on its NCE projects (ISB 830, ISC 27864, GSP 304). About US$20mn to US$30mn saving can accrue from the closure of such clinical trials. Mkt Cap (Rsbn/US$bn) 77.8/1.1 From a growth standpoint, we see earnings growth outpacing revenue growth over FY20- 52 Wk H / L (Rs) 667/267 FY22, led by the curtailment in R&D spend and 6% revenue CAGR. Revenue growth will Daily Vol. (3M NSE Avg.) 2,113,434 be led by domestic sales, which have been outpacing IPM growth for the past decade. The domestic business is built around high growth therapy areas – dermatology, respiratory and cardiology. The recent launch of Remogliflozin (SGLT2) inhibitor will ensure that its Share holding (%) 1QFY20 2QFY20 3QFY20 presence in diabetes therapy also becomes profound. Promoter 46.6 46.6 46.6 The US business, which is its second largest segment, has also rebased due to price Public 53.4 53.4 53.4 decline in limited competition assets. Hence, price erosion pressures in the US will be Others - - - milder going forward. New ANDA launches (10-15 every year) should more than offset price erosion pressures and aid mid single digit growth. The API business, which is 10% of Glenmark sales, is also well placed in a favorable environment and can grow in mid to One-Year Indexed Stock Performance
high single digits. 120 Defensive valuation: Inability to reduce net debt has led to the valuation multiples being 100 compressed to historically low levels. At CMP, the stock trades at 8x FY22 EPS, and less than 80 1x revenue. The risk-reward profile is favorable at this juncture as earnings growth, if 60 accompanied by net debt reduction, can lead to a rerating in valuation multiple, which can add to 40 the potential returns. A successful outcome from the atopic dermatitis drug candidate also 20 0 remains a free call option. Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
GLENMARK PHARMA Nifty 50 Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E Net sales 91,031 98,655 104,062 111,150 118,725 EBITDA 16,154 15,858 15,834 17,961 19,672 Price Performance (%) Net profit 8,039 9,250 7,240 8,655 9,997 1 M 6 M 1 Yr EPS (Rs) 28.5 32.8 25.7 30.7 35.5 EPS growth (%) (27.5) 15.1 (21.7) 19.5 15.5 Glenmark Pharma (8.2) (29.5) (54.0) EBITDA margin (%) 17.7 16.1 15.2 16.2 16.6 Nifty Index (4.4) 3.7 3.0 PER (x) 18.5 19.7 11.0 9.2 8.0 Source: Bloomberg P/BV (x) 2.9 3.2 1.3 1.1 1.0 EV/EBITDA (x) 11.2 13.3 6.8 5.8 5.0 RoCE (%) 18.0 19.0 16.8 18.3 19.2 RoE (%) 15.6 16.5 11.6 12.3 12.5 Source: Company, Nirmal Bang Institutional Equities Research
Institutional Equities
Glenmark Investment Thesis – Opportunities and Risks OPPORTUNITY RISK R&D spend expected to subside as % of sales and help earnings Specialty R&D investments will not yield earnings contribution in the growth outpace revenue growth near to medium term investment horizon. About 15 years of investment in NCE development w/o a meaningful commercial success is testing investors’ patience
Multiple strategic initiatives to deleverage balance sheet which Management failure to address debt concerns of investors in the past includes 1) Potential Out-licensing Deals – ISB 830, Ryaltris and Xolair biosimilar 2) Stake sale in Ichnos Sciences
Stock trades at a steep discount to its intrinsic value Dividend payments have not meaningfully grown over the last 10 years and unlikely to change meaningfully in the near term as free cash flow would rather be used for debt repayment
Potential for EPS growth and rerating in valuation multiple Rerating Capex needs might turn out to be higher and absorb any benefit of would be driven by reduction in net debt earnings growth on FCF generation
A positive outcome from ongoing Phase 2b trials on atopic A negative outcome may affect Glenmark’s ability to raise capital by way dermatitis candidate (ISB 830) can be a game changer of stake sale in Ichnos Sciences
Improving outlook for API business, led by greater management Adverse market conditions focus by carving the business out into a new entity
Glenmark’s domestic business growth has consistently DPCO related price cuts can take away any benefit of growth in sales outperformed IPM growth
US business has rebased and should grow in low single digits to Delay in approvals and regulatory risk remain the key risks to execution high single digits depending on execution of limited competition of US business growth ANDA launches
A fast growing consumer business in India, which is gaining critical - mass and should improve profitability on gaining critical mass
Source: Company, Nirmal Bang Institutional Equities Research
2 Glenmark Pharmaceuticals
Institutional Equities
ISB 830 clinical data in atopic dermatitis crucial for monetization of stake in Ichnos Sciences A Phase 2b trial is currently underway for ISB 830 in atopic dermatitis. The trial should report clinical data in a couple of months (by the end of 1QFY21). Existing evidence from Phase 2a studies suggests that the drug has benefits. The trial demonstrated that just two doses of IV administration of ISB830 led to an improvement in EASI (Eczema Area and Severity Index) and IGA score. ISB830 works through a unique mechanism of action and is believed to provide durability of response. There are only two other companies (Kyowa Hakko Kirin and Kymab) that are developing an OX40 antagonist for atopic dermatitis. A successful outcome in Phase 2b should raise confidence on Glenmark’s efforts on the NCE front and more importantly ensure a successful stake sale in Ichnos Sciences. Phase 2a clinical data suggests ISB 830 appears to hold promise in Atopic Dermatitis A phase 2 proof-of-concept clinical trial on ISB 830 (OX 40 Antagonist) showed that only 2 intravenous doses of the drug, administered 4 weeks apart, induced significant improvement of tissue and clinical measurements until day 71 (42 days after the last dose). The study was primarily designed to assess safety and validate mechanism of action in atopic dermatitis. Signs of clinical efficacy were observed, as more patients achieved EASI-50 in the ISB 830 treated group vs. the placebo group. ISB 830 was well tolerated and tissue analysis showed significant reductions of Th1, Th2 and Th17/Th22-related markers as well as that of epidermal hyperplasia. This study provides first evidence for the pathogenic role of OX40 in AD and highlights the potential benefits of OX40 antagonism for the disease.
PERFORMANCE ON KEY EFFICACY ENDPOINTS 1. % Change in EASI (Eczema Area and Severity Index) Score On day 71, the percentage change from baseline indicated greater mean improvement with ISB 830 relative to placebo (56% and 38%, respectively). EASI scores between ISB 830–treated and placebo-treated subjects showed even greater separation through day 71 in severe subjects. On day 71 (final skin biopsy assessment visit), ITT response rates for ISB 830–treated subjects (EASI50, 76.9% [20/26]; EASI75, 42.3% [11/26]) were greater than response rates in placebo-treated subjects (EASI50, 37.5% [3/8]; EASI75, 25.0% [2/8]). All 5 subjects who achieved EASI75 on day 29 maintained their improvement until day 71.
ISB 830 Versus Dupixent - Efficacy Comparison Drug Name Company Status EASI 50 Reduction EASI 75 Reduction IGA 0 or 1 ISB 830 Glenmark Phase 2b 40% 17% 12% Dupixent Sanofi Launched 50% 47% 33% Lebrikuzumab - - - 35% 30% ISB 830 at week 10 – Dosed every 4 weeks. 3 doses administered at week 10. Dupixent data at week 12 – Dosed every fortnight – 7 doses administered Lebrikuzumab at week 16 – once every fortnight – 10 doses administered
2. Patients with an IGA response The number of subjects with an IGA response (score of 0 or 1) on day 71 (week 10) was 6 (23.1%) of 26 for ISB 830 treated subjects compared to 1 (12.5%) of 8 for placebo-treated subjects.
3. % change in IGA score in severe patients Notably, the proportion of subjects with severe/very severe IGA scores at baseline was greater in the ISB 830 group (20/46[43.5%]) compared to the placebo group (5/16 [31.2%]). This finding is in line with the observation that EASI score improvement in subjects with severe disease at baseline (SCORAD score >50) might benefit more compared to the ITT population.
4. % change in BSA and Pruritus NRS score The reduction in body surface area involvement and Pruritus NRS score demonstrated meaningful improvement versus baseline but was numerically comparable to the placebo group. The Phase 2b study outcome (expected around mid June 2020) should be more relevant to look at as the study is adequately powered to detect clinical significance.
3 Glenmark Pharmaceuticals
Institutional Equities
Exhibit 1: GBR 830 – Reduction in EASI score from Baseline
Source: Company, Nirmal Bang Institutional Equities Research
Competing OX40 antagonists in clinical pipeline Kyowa Hakko Kirin – A Japanese pharmaceutical player is also working on an OX40 antagonist – KHK4083 - currently in Phase 2 studies. In a small Japanese study, KHK4083 has shown encouraging data. The study involved 22 patients with severe AD receiving only 3 intravenous doses, with sustained reductions in EASI.
OX 40 ANTAGONISTS PIPELINE Company Drug name Indication Clinical status Glenmark ISB 830 Atopic Dermatitis Phase 2b Kyowa Hakko Kirin KHK4083 Atopic Dermatitis Phase 2a Kymab KY1005 Atopic Dermatitis Phase 2a
ATOPIC DERMATITIS PIPELINE IS CROWDED - CAN GLENMARK DIFFERENTIATE Name Status Phase n Target type Primary End Point Biologics Fevipiprant Completed II 103 CRTH2 mAb Change in EASI week 12 Timapiprant Completed II 142 CRTH2 mAb Change in EASI week 16 Omalizumab Recruiting IV 62 IgE mAb Improvement AD week 24 Ligelizumab (QGE031) Completed II 22 IgE mAb Change in EASI week 12 Ustekinumab Completed II 79 IL-12/IL-23 mAb Change in EASI week 12 Lebrikizumab (3 doses) Completed II 212 IL-13 mAb EASI50 week 12 Tralokinumab Not Yet Recruiting III 780 IL-13 mAb IGA, EASI75 week 16 Secukinumab 300mg Recruiting II 44 IL-17 mAb Change in Epidermal Thickness Nemolizumab Not Yet Recruiting II 250 IL-31 mAb Change in EASI week 24 Dupilumab Completed III 240 IL-4Ra mAb IGA, EASI75 week 16 Mepolizumab 100mg Recruiting II 56 IL-5 mAb IGA week 16 Fezakinumab Not Yet Recruiting II 60 IL-22 mAb SCORAD, safety ISB 830 Recruiting II 64 OX40 mAb TEAE, improvement in pathology week 12 Tezepelumab Completed II 155 TSLP mAb EASI50 week 12 Small Molecules Baricitinib Completed II 124 JAK1 + 2 antagonist EASI90 week 16 AQX-1125 Completed II 54 SHIP1 activator TLSS Aprimelast 30 or 40mg Completed II 191 PDE4 antagonist Change in EASI week 12 Serlopitant (2 doses) Recruiting II 450 NK1 receptor antagonist Itch intentsity week 6 Tradipitant Recruiting II 150 NK1 receptor antagonist Pruritus VAS week 2 Asimadoline Recruiting II 200 k-opiod receptor antagonist number of patients with AE Upadacitinib (3 doses) Recruiting II 167 JAK1 antagonist Change in EASI week 16 PF-04965842 Recruiting II 268 JAK1 antagonist IGA week 12
4 Glenmark Pharmaceuticals
Institutional Equities
Large ongoing clinical trials should close by end of 4QFY20/1QFY21 translating into a reduction in R&D spend – 60% of the R&D spend by Glenmark is on specialty R&D. Lately, there has been efforts to restrict this spend and prioritize efforts. The ongoing Phase 2 trial on its lead asset ISB 830 is nearing completion (4QFY20) and Glenmark should save about US$15mn annually in R&D spend post completion of this trial. In addition, ongoing Phase 2 studies on GRC 27864 have recently concluded. The drug is likely to be discontinued as it has not demonstrated clinical benefit. Likewise, ongoing Phase 2 trials on GSP304, which is a nebulized version of Tiotropium (Spiriva) for the treatment of COPD, also stands completed, which should allow savings to be reflected from 4QFY20 onwards. In our view, Glenmark may not be taking this project further. In case ISB 830 is successful in ongoing Phase 2b trial, the company would look to out-license the same and hence incremental spend on the product will not be out of Glenmark P&L. The company has also concluded Phase 1 trials on its biosimilar version of Xolair (Omalizumab) and is looking to out-license the same. Exhibit 2: R&D Expenses Trend (Rsmn) (%) 13.16 14,000 12.33 12.50 14 11.61 12,000 11.00 12 10.20 10.00 9.48 10,000 9.01 10
7.72 12,980
8,000 11,220 8
6.37 13,008
12,227 10,660
6,000 4.68 11,873 6 7,250
4,000 3.09 6,760 4 5,410
2,000 2
3,870
1,380 773
0 2,560 0
FY17
FY 10FY 13FY 14FY 15FY 16FY 18FY 19FY FY 11FY 12FY
FY 20EFY 21EFY FY 22EFY R&D Expenses R&D as % of Revenue Source: Company, Nirmal Bang Institutional Equities Research
5 Glenmark Pharmaceuticals
Institutional Equities
US business highlights Glenmark is the 14th largest generics manufacturer by prescription volume and the products are used to fill about 83mn scrips each year in the US. Over the last 10 years, the company has grown the US business at 16% CAGR but due to recent cost pressures, the revenue has seen a decline of 9.9% and 9.6% in the last two years. The company has shifted focus from vanilla generic oral solids to value-added niche generics in relatively high barrier-to-entry segments such as oral contraceptives and skin treatments. In the US, the company continues to seek approvals for new products while improving cost efficiency and defending the market share. The company has consistently gained market share in Naproxen, Mupirocin, Omeprazole, Olmesartan, Verapamil ER and Clobetasol propionate. The Baddi formulations facility remains under warning letter and the resolution of the same is critical in order for Glenmark to sustain its base business in the US.
Exhibit 3: US business revenue growth
(US$mn) (%) 600 80 64.9 553 498 482 500 49.5 450 445 463 60 37.4 400 370 40 333 20.2 309 300 11.1 20 250 4.0 4.0 23.6 (1.0) (4.8) 182 202 200 (9.9) (9.6) 0
100 151 (34.6) (20)
0 (40)
FY11 FY12 FY13 FY14 FY15 FY17 FY18 FY19 FY10 FY16
FY20E FY21E FY22E USA Revenue Growth Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 4: US ANDAs filed and approvals received (Units) 30 25 24 25 22 21 20 20 20 18 18 17 16 16 14 15 13 13 13 13 12 9 10 8 5 5
0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 ANDAs Filed ANDAs Approvals Received Source: Company, Nirmal Bang Institutional Equities Research
6 Glenmark Pharmaceuticals
Institutional Equities
Exhibit 5: US ANDAs pending and authorised to distribute (Units) 180 158 160 140 131 119 120 112 97 100 85 90 77 76 80 69 65 66 61 59 62 53 58 60 47 41 39 40 20 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Pending ANDAs ANDAs Authorised to Distribute Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 6: Products where Glenmark has above 10% market share Glenmark Market Share (%) 2014 2015 2016 2017 2018 2019 Omeprazole 0.0 3.6 10.7 12.8 16.9 16.5 Pravastatin Sodium 23.7 24.5 23.1 19.2 15.8 15.9 Fluconazole 21.6 20.3 22.1 17.6 13.4 16.7 Ondansetron Odt 25.4 34.4 22.7 14.3 11.5 13.1 Naproxen 6.3 18.9 39.6 40.5 44.3 45.3 Ondansetron Hcl 34.1 35.0 36.4 31.2 25.4 24.2 Topiramate 12.9 14.4 16.6 17.7 14.9 11.7 Mupirocin 13.3 15.0 35.0 36.2 34.6 33.8 Clobetasol Propionate 0.0 0.0 0.0 0.2 7.5 12.5 Ropinirole Hcl 22.9 21.6 20.7 19.0 18.4 22.8 Olmesartan Medoxomil 0.0 0.0 0.0 0.0 5.2 19.1 Levocetirizine Dihydrochloride 17.5 33.2 36.4 33.9 24.6 29.3 Oxcarbazepine 34.4 31.7 28.1 29.1 27.5 26.7 Pramipexole Dihydrochloride 43.3 48.2 45.2 40.6 42.3 47.6 Verapamil Er 25.2 41.6 40.6 45.2 45.6 80.2 Drospirenone-Ethinyl Estradiol 0.0 6.6 48.5 46.3 36.4 49.6 Norgestimate-Ethinyl Estradiol 100.0 100.0 70.4 62.8 60.9 71.4 Source: Bloomberg, Nirmal Bang Institutional Equities Research
7 Glenmark Pharmaceuticals
Institutional Equities
Ryaltris™ Ryaltris™ [Olopatadine hydrochloride (665 mcg) and Mometasone Furoate (25 mcg)], developed by Glenmark, is a novel fixed-dose combination nasal spray of an anti-histamine and a steroid, indicated for the treatment of symptoms associated with seasonal allergic rhinitis (SAR) in patients over 12 years of age. Ryaltris™ is currently under review with the USFDA as a treatment for seasonal allergic rhinitis in the US. During 3QFY20, the company filed an application for Ryaltris approval in the European Union. The company has entered into an exclusive licensing deal with Hikma for the commercialization of the product in the US. Under the terms of the agreement, Glenmark will be responsible for the continued development and regulatory approval of Ryaltris™ by the USFDA, while Hikma will be responsible for the commercialization of Ryaltris™ in the US. Hikma would also have the ability to produce the product utilizing its nasal manufacturing capabilities in Columbus, Ohio. Glenmark will receive an upfront payment, regulatory approval and commercial milestone payments as well as royalties from Hikma for Ryaltris™. The agreement with Hikma is Glenmark’s fourth regional licensing deal for Ryaltris™. Glenmark has already signed licensing deals for commercialising Ryaltris™ in China (Grand Pharma Co. Ltd), Australia (Seqiris), New Zealand and South Korea (Yuhan Corporation).
8 Glenmark Pharmaceuticals
Institutional Equities
India business Exhibit 7: India business revenue growth (Rsmn) (%) 45,000 30.7 35 40,000 30 35,000 31,102 25 30,000 20.6 27,770 18.6 38,321
23,038 16.4 20 25,000 15.3 15.8 34,523 20,000 11.1 12.0 11.0 11.0 15 15,000 9.2
23,851 10 21,093 10,000 7,606 3.5 17,490 5
5,000 0.0 15,105
13,096 10,021
- 8,447 0
FY10 FY11 FY12 FY14 FY15 FY16 FY18 FY19 FY13 FY17
FY20E FY21E FY22E
India Growth Source: Company, Nirmal Bang Institutional Equities Research In India, the company has shown consistent growth over the last 10 years, growing faster than the Indian Pharmaceutical Market (IPM). The company has grown at 17% CAGR from FY2010 to FY2019 against market growth of low double digits over the same period. As a result, the company’s market share has risen from 1.46% to 2.18%. The Indian business is concentrated in few chronic therapies, making the company immune to seasonal fluctuations. The company was ranked 26 in FY2010, but consistently outgrowing the market has enabled it to gain market share and was ranked 14th in FY2019. Going forward, the company is expected to outperform the market with new launches. The company has 9 products in the Top 300 products in IPM. The company has three key focus therapeutic areas viz., Dermatology, Respiratory and Cardiology, which are ranked 2nd, 4th and 6th in IPM. The company has consistently grown the market across these three therapies. In Anti-Diabetics segment, Glenmark became the first company to launch the novel patent-protected and globally researched SGLT2 inhibitor Remogliflozin Etabonate 100 mg for Type 2 diabetes. The company has a strong presence across OTC segments as well with Candid Dusting Powder (DP) and Scalpe+. Candid DP is a 30 year-old flagship and a prescription leader in the category of fungal skin infection. Scalpe+ is a 17-year old brand with a proven track record in dandruff treatment.
Exhibit 8: India business mix trend (%) 10.0 9.2 9.2 9.1 8.7 8.7 9.0 8.6 8.0 8.2 8.1 7.9 8.0 7.0 6.0 4.8 4.8 5.0 4.5 4.3 4.5 3.8 4.1 4.0 4.0 3.3 3.63.5 3.8 4.0 2.8 3.3 2.7 2.9 3.0 2.2 2.4 2.0 2.0 1.0 0.0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 Cardiology Respiratory Dermatology Source: Company, Nirmal Bang Institutional Equities Research
9 Glenmark Pharmaceuticals
Institutional Equities
Exhibit 9: India business rank in IPM
Rank 30 26 25 25 23 20 19 20 17 17 15 14 15 13
10
5
0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 IPM Rank Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 10: Glenmark’s brands in Top 300 brands in IPM Units 10 9 9 9 8 8 8 8
7 6 6 5 5 5 4 4 4 3 2 1 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Brands in Top 300 in IPM Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 11: Glenmark’s market share in IPM (%) 2.50 2.29 2.29 2.18 2.25 2.09 1.95 1.97 2.00 1.82 1.69 1.75 1.56 1.46 1.50
1.25
1.00 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 IPM Market Share Source: Company, Nirmal Bang Institutional Equities Research
10 Glenmark Pharmaceuticals
Institutional Equities
Remogliflozin should help Glenmark build a strong diabetes platform Glenmark is the first company in the world to launch Remogliflozin and India is the first country to get access to this innovative drug. Remogliflozin Etabonate is a novel SGLT2 Inhibitor: Glenmark in-licensed Remogliflozin from BHV Pharma and has gained approval for marketing in India based on Phase 3 trials.
Exhbit 12: SGLT2 Drugs Marketed in India Molecule – SGLT2 inhibitors Innovator Marketing Partners Daily cost Dosing Empagliflozin Boehringer Ingelheim Lupin 57 Once daily Cannagliflozin Johnson & Johnson Cipla, USV 55 Once daily Dapagliflozin AstraZeneca Sun Pharma 55 Once daily Remofliflozin Glenmark and BHV Pharma Mankind Pharma and Torrent Pharma 25 Twice Daily
SGLT2 Inhibitor Market SGLT2 Inhibitor represents a Rs6,000-7,000mn market opportunity in India and continues to expand rapidly. The key attributes of this class that is translating into rapid acceptance being 1) Effective Glycemic Control 2) Complementary mechanism of action 3) Weight loss benefit 4) Does not raise hypoglycaemia risk 5) Offers renal protective effect 6) Mild reduction in blood pressure 7) Proven benefit in reducing cardiovascular risk Current market share of SGLT2 inhibitors in the diabetes market and potential market opportunity The SGLT2 class is a relatively new treatment modality in the diabetes space and hence the market penetration is low (about 1% in volume terms). However, evidence of superior cardiovascular benefit and renal protection that has emerged from several large outcome studies conducted on this class of drugs is pushing physicians to use the class of drugs more often. Renal protection benefits are unique and not associated with any other class of drugs for diabetes A Meta analysis of clinical data on the most widely used SGLT2 inhibitors suggests renal protective effect of SGLT2 inhibitors. The meta-analysis suggests that the use of SGLT2 inhibitors cuts the risk for the primary composite end point of dialysis, kidney transplant or mortality from kidney disease by 33% with consistent benefit observed across trials. In addition, they also reduced the risks of End Stage Renal disease and Acute Kidney Injury by 35% and 25%, respectively, allaying earlier concerns that SGLT2 inhibitors increase AKI risk. About 20-25% of diabetes patients have concomitant chronic kidney disease (CKD) Assuming one third penetration of SGLT2 inhibitors in the diabetes patients having concomitant CKD, the market share of SGLT2 inhibitors can expand multi-fold from here on. Assuming the build-up happens over the next five years, SGLT2 opportunity can expand to a Rs5000 crore market. Remogliflozin by virtue of its affordability benefit can gain a fair share of the pie.
11 Glenmark Pharmaceuticals
Institutional Equities
Europe Glenmark is one of the fastest-growing mid-size/large players in Europe. This has been achieved through a combination of portfolio expansion and geographical spread. The company’s geographical footprint covers all major markets in Western Europe (WEU) and Central and Eastern Europe (CEE). o In WEU, the company has a third party out-licensing business commercializing key molecules developed in-house via partners across several markets. o In CEE, along with prescription drugs, over-the-counter (OTC) medicines are a key growth driver for Glenmark with almost 40% of the CEE business being brought in by the OTC franchise. The business has leveraged not just its in-house pipeline, but also added a significant component of in- licensing partnerships to develop a robust portfolio, delivering strong growth over the last decade. Glenmark has clocked a growth of 24% over the last 10 years, which is significantly higher than the market growth. We expect the company to clock a growth of mid single digits over the next two years.
Exhibit 13: Europe business revenue growth (Rsmn) (%) 14,000 45.2 50 40.1 35.9 12,000 11,207 40 27.4
10,000 24.7 23.8 23.7 30
12,603 12,003 8,000 11,431 20 9.5 6,000 9,058 5.0 5.0 10 0.0 2.0 4,000 (8.4) 0
2,000 9,888 (10)
9,033
6,445
3,724
5,061
2,071 3,008 1,660
- (20)
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
FY20E FY21E FY22E Europe Formulations Growth Source: Company, Nirmal Bang Institutional Equities Research
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Institutional Equities
ROW and LATAM
RoW Glenmark started its business in Russia-CIS region in 1980 and is currently ranked 44 in the retail segment in Russia. According to the IQVIA data for MAT (March 2019), Glenmark Russia recorded a growth of 8.3% in value vis-á-vis overall retail market growth of 5.8%. In the dermatology segment, Glenmark showed growth of 1.6% in value vis-á-vis overall dermatology market growth of 2.2% in value. As a result of the strong position of Glenmark Russia in the dermatology segment (retail), the company continues to rank in the Top-15 of all derma companies present in the market, with MAT March 2019 rank being 11. Among the companies present in the expectorants market (retail segment) of the local pharmaceutical market, Glenmark has a strong position and ranks 4th as of MAT March 2019. Other key markets across the CIS region include Ukraine and Kazakhstan. In other CIS markets, Glenmark Ukraine showed secondary sales growth of 26% in value in FY2018-19. The Africa region performed well in FY2018-19, recording growth in excess of 30%. The subsidiaries in South Africa and Kenya grew in excess of 30% for the financial year. The Africa business launched 56 products in the region for the entire financial year. The company will look to consolidate its position in the African markets with growth coming via in-licensing of complex generics that provide first-to-file opportunities.
Exhibit 14: RoW business revenue growth (Rsmn) (%) 54.8 16,000 60 45.6
12,759 50 14,000 37.1 12,000 40 21.5
14,077 30
10,000 16.1 13,535
13,015 20
7,171 10,992 8,000 5.3 7,101 4.0 4.0 - -1.0 2.0 10
6,000 8,123 9,869 0 8,122 -11.7
4,000 -17.7 (10) 5,926
2,000 (20)
3,864 4,069
- (30)
FY10 FY11 FY12 FY14 FY15 FY16 FY17 FY19 FY13 FY18
FY20E FY21E FY22E ROW Growth Source: Company, Nirmal Bang Institutional Equities Research
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Institutional Equities
LATAM The LATAM business contributes 4% to the total business for Glenmark and the overall performance for the overall region continued to remain subdued. The company has launched unique offerings such as Nebzmart handheld nebulizer, nasal sprays and MDI devices in the respiratory segment and a microsphere formulation of adapalene + clindamycin in dermatology, which offer benefits and more choice for prescribers and patients. In Brazil, Glenmark has entered into an exclusive partnership with Novartis to promote and distribute three of its respiratory brands. In the Caribbean region, Glenmark launched Momate AZ in the respiratory franchise. It has been a key game changer for Glenmark in the Rhinitis Allergis segment and has helped to position the company as a differentiated player with a unique product in the market. In Colombia, Glenmark launched Glemont to complement the respiratory portfolio. We foresee 10-12% growth in revenue in the next two years. Exhibit 15: LATAM business revenue growth (Rsmn) (%) 9,000 88.8 100
8,000 7,495 80 7,000 56.9
6,179 60 5,617
6,000 40.8 7,640
5,181 5,015
5,000 40 4,180 4,067 20.0 15.2 16.7 4,000 12.0 10.0 20 0.0 2.8 3,000 (1.9) 0 (21.5)
2,000 3,468 4,046 3,012 (30.9)
1,000 (20) 1,919
- 1,363 (40)
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
FY22E FY20E FY21E LATAM Growth Source: Company, Nirmal Bang Institutional Equities Research
API: Glenmark entered the API business in 2003 and built a large business based on strong product selection, focus on key regulated markets, maintaining high operational efficiencies and strong compliance culture. The API business has grown at a CAGR of 15% over the last 10 years while maintaining consistently high EBITDA margin. Overall EBITDA margin recorded for the business in FY19 was in excess of 30%. Glenmark transferred its API business to a wholly-owned subsidiary, Glenmark Life Sciences Ltd (GLS), which became operational on January 1, 2019. Over 75% of GLS revenue is supplied to regulated markets of Europe, USA and Japan. The top 10 molecules contribute 60% to the overall revenue of GLS. Exhibit 16: API business revenue growth (Rsmn) (%) 14,000 34.6 40
11,738 35
12,000 28.5 10,970
10,253 30
23.2 9,493 10,000 21.1 8,779 25 20 8,000 13.1 10.4 15 6,000 8.5 8.1 8.0 7.0 7.0
8,094 10
4,000 0.0 3,094 5 6,053
6,683 0
2,000 (7.3) 3,976
5,353 (5) 3,336
- 2,707 (10)
FY11 FY13 FY15 FY17 FY19 FY10 FY12 FY14 FY16 FY18
FY21E FY20E FY22E API Growth Source: Company, Nirmal Bang Institutional Equities Research
14 Glenmark Pharmaceuticals
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Valuation We value Glenmark at 11x FY22E EPS and arrive at a target price of Rs390. The valuation multiple is in line with its current valuation, which has seen a steep correction from its historical average (25x). The correction reflects investor impatience with respect to the company’s inability to reduce net debt meaningfully and ongoing disproportionate investment in high risk NCE R&D. Most therapeutic targets that Glenmark is chasing are not validated in terms of proof of concept studies and the track record is also not supportive. We estimate the FY22 EPS at 35.5, a growth of CAGR 2% over FY19 base earnings. Key assumptions for earnings growth being 1) India domestic business should grow faster than IPM, driven by selective presence in high growth therapies such as dermatology, respiratory and cardiology. Recent launch of Remogliflozin (SGLT2) inhibitor will ensure its presence in diabetes therapy also becomes profound, which it can leverage for further augmenting growth. 2) The US business will exhibit subdued growth trend (mid single digits) as we risk adjust our forecasts for any adverse regulatory action and mild price erosion pressures. 3) European and ROW businesses are expected to grow in low to mid single digits. 4) The API business is expected to grow at high single digits whereas the LATAM business is expected to grow in double digits on favorable bases and new launches in the region.
Exhibit 17: Historical price/earnings ratio of Glenmark Pharmaceuticals (x) 45 40 35 30 25 20 15 10 5
0
Jul/13 Jul/14 Jul/15 Jul/17 Jul/18 Jul/19 Jul/16
Apr/13 Oct/13 Oct/14 Oct/15 Apr/16 Oct/16 Apr/17 Apr/18 Apr/19 Oct/19 Apr/14 Apr/15 Oct/17 Oct/18
Jan/14 Jan/15 Jan/16 Jan/17 Jan/18 Jan/19 Jan/20 PE Mean 1SD -1SD 2SD -2SD Source: Bloomberg, Nirmal Bang Institutional Equities Research
Risks to our recommendation 1) Regulatory compliance remains the key risk. Warning letters remain key issues to be resolved. The company has received a warning letter for its Baddi facility. 2) Exchange rate – Depreciation/appreciation of USD versus INR can have an adverse/favorable impact on earnings versus our forecasts. 3) Execution and commercialization capabilities for new as well as existing products are a key risk. With a large NCE pipeline, the company faces a lot of risk in terms of successful trials and marketing. The company in the past has dropped a lot of NCEs due to failure in clinical trials. 4) DPCO risk – The risk of additional drugs coming under price control, which is expected to be announced next year, is a major risk to the India business of Glenmark. The value growth of India business will largely depend on the extent of price control on drugs marketed by Glenmark. 5) CapEx needs - Higher than anticipated CapEx needs will affect net debt reduction - higher than anticipated CapEx adversely impacts free cash flows and hence reduction in net debt.
15 Glenmark Pharmaceuticals
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Ratio charts Exhibit 18: Revenue and revenue growth Exhibit 19: Gross profit and growth (Rsmn) (%) (Rsmn) (%) 140,000 36.3 40 90,000 36.7 40 35 120,000 35 80,000 25.5 30 24.7 30 70,000 23.0 22.9 100,000 25 60,000 78,063 25 19.8 20.1 16.6 17.9 72,956
118,725 20 80,000 50,000 13.6
20 68,188 15.4 111,150 13.9
65,031 15
60,645 104,062 10.4 98,655 15 40,000
91,031 7.0 7.0 60,000 4.9 10 5.5 6.8 6.8 10 30,000
40,000 0.0 5
65,714
25,006 66,298 91,857 5 20,000 7.2 - 60,052 8.4
53,470 0 76,496
46,953 (7.7) 33,587
20,000 50,123
0 10,000 (5)
40,206
41,322
19,572
29,491 26,752
- -0.9 (5) - 16,787 (10)
FY17
FY 10FY 12FY 14FY 16FY 18FY FY 11FY 13FY 15FY 19FY
FY17
FY 11 FY 12 FY 13 FY 14 FY 16 FY 18 FY 19 FY FY 10 FY 15 FY
FY 20EFY 21EFY 22EFY
FY 21E FY 22E FY FY 20E FY Total Revenues Revenue Growth Gross Profit Gross Profit Growth Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 20: EBITDA and EBITDA growth Exhibit 21: EBIT and EBIT growth
(Rsmn) (%) (Rsmn) (%) 25,000 60 20,000 70 56.2 41.7 50 18,000 60 41.4 40.6 48.0 20,000 40 16,000 42.1 50 14,000 40 30 17,178
20.6 15,571
15,000 20,367 12,000 30
19,672 20 16.5
14,680 14,049
8.0 17,961 10,000 12.0 10.3 20
13,897
10,225 16,154
0.0 10 7,830
18,097
15,858 15,834
10,000 13.4 8,000 0.0 (1.2) 12,229 10 (4.4) 14,372 9.5 (1.9) (5.3) 0 6,000 0
8,895 4.5 (1.8) (0.1) (10)
5,000 10,100 (6.3) 4,000 (10) 6,381
7,144 (20)
2,000 5,479 (20)
6,196 5,923
6,257 (10.9)
8,788 10,908
- (20.7) (30) - (22.4) (30)
FY17
FY17
FY 10FY 12FY 13FY 14FY 15FY 18FY 19FY FY 11FY 16FY
FY 10FY 11FY 12FY 13FY 14FY 15FY 16FY 18FY 19FY
FY 21EFY 22EFY FY 20EFY
FY 20EFY 21EFY 22EFY EBITDA EBITDA Growth EBIT EBIT Growth Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 22: PAT and PAT growth Exhibit 23: EPS
(Rsmn) (%) (Rs) 12,000 70 45 56.4 39
49.2 9,997 60 40 35
10,000 9,250 50 33
38.3 8,655 34.2 35 31 8,039 40 28
7,240 30 26 8,000 19.5 30 26 15.1 15.5 23 20 25 20 6,000 5,456 1.4 11,088 17 18
0.0 4,752 10 20 17 7,430 0 12 4,000 6,230 (21.7) 15 (10) 10 2,000 4,643 (20) 4,578 (12.4) (12.9)
3,310 (30) 5
- (27.5) (40) 0
FY17
FY17
FY 10FY 11FY 13FY 14FY 16FY 18FY 19FY FY 12FY 15FY
FY 10FY 12FY 14FY 15FY 16FY 19FY FY 11FY 13FY 18FY
FY 20EFY 21EFY 22EFY
FY 20EFY 21EFY 22EFY PAT PAT Growth EPS Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research
16 Glenmark Pharmaceuticals
Institutional Equities
Exhibit 24: Margin profile (%) 80 68.8 70.8 69.9 71.5 67.1 66.4 66.5 67.0 66.6 65.9 65.5 65.6 65.8 70 60 50 40 30 24.8 22.2 20.1 20.2 18.8 17.8 18.2 15.4 17.7 16.1 16.2 16.6 20 15.2
10 15.4 13.0 11.4 12.3 12.1
0 9.0 7.2 9.7 8.8 9.4 7.0 7.8 8.4
FY17
FY 10 FY 11 FY 12 FY 13 FY 15 FY 16 FY 18 FY 19 FY FY 14 FY
FY 20E FY 22E FY FY 21E FY Gross Margin EBITDA Margin EBIT Margin PAT Margin Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 25: Current ratio and cash ratio
(x) 3.5 2.8 2.9 3.0 2.5 2.4 2.4 2.4 2.4 2.5 2.1 2.1 2.0 1.7 2.1 1.9 1.5 1.7 1.8 1.6 1.6 1.6 1.6 1.6 1.0 1.3 0.5
0.0
FY17
FY 13FY 14FY 15FY 16FY 18FY FY 19FY
FY 20EFY 21EFY 22EFY Current ratio Quick ratio Source: Company, Nirmal Bang Institutional Equities Research Exhibit 26: Debt-to-equity ratio (%) 120 102.9 105.1 97.4 93.3 90.2 100 85.9 79.1 83.3 82.8 80 69.2 62.2 60 50.4 40.8 40
20
0
FY17
FY 10FY 11FY 12FY 13FY 14FY 15FY 19FY FY 16FY 18FY
FY 21EFY FY 20EFY 22EFY Debt to Equity Ratio Source: Company, Nirmal Bang Institutional Equities Research
17 Glenmark Pharmaceuticals
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Exhibit 27: Cash conversion cycle (Days) 400 340 350 300 250 195 200 150 113 119 88 94 82 82 82 100 75 47 28 50 15
0
FY17
FY 10FY 11FY 12FY 13FY 14FY 15FY 16FY 18FY 19FY
FY 20EFY 21EFY 22EFY Cash Conversion Cycle Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 28: Return on Assets
(%) 14.0 11.8 11.9 12.0 10.7 10.0 9.5 8.8 8.8 10.0 8.1 7.7 7.7 7.9 7.4 8.0 6.5 6.0 4.0 2.0
0.0
FY17
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 18 FY FY 10 FY 19 FY
FY 20E FY 21E FY 22E FY RoA Source: Company, Nirmal Bang Institutional Equities Research
Exhibit 29: Return on Equity
(%) 18.0 15.5 16.0 14.1 12.4 14.0 11.5 12.1 12.0 9.7 9.1 8.8 9.4 10.0 7.8 8.4 7.2 7.0 8.0 6.0 4.0 2.0
0.0
FY17
FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 18 FY FY 10 FY 19 FY
FY 20E FY 21E FY 22E FY RoE Source: Company, Nirmal Bang Institutional Equities Research
18 Glenmark Pharmaceuticals
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Exhibit 30: Return on Capital Employed (%) 30.0 24.7 25.0 22.5 22.5 20.5 19.3 18.3 20.0 15.8 15.6 16.5 14.2 15.0 11.6 12.3 12.5
10.0
5.0
0.0
FY17
FY 10FY 11FY 12FY 13FY 14FY 15FY 16FY 18FY 19FY
FY 20EFY 21EFY 22EFY RoCE Source: Company, Nirmal Bang Institutional Equities Research
19 Glenmark Pharmaceuticals
Institutional Equities
Glenmark Pharmaceuticals - Overview
Glenmark Pharmaceuticals Ltd has a significant presence in the branded generics markets across emerging economies, including India. The company entered into the dermatology market through the launch of its Candid Cream. Glenmark’s ground-breaking drug discovery effort is primarily focused in the areas of inflammation [asthma/COPD, rheumatoid arthritis etc.], metabolic disorders [diabetes, obesity, etc.] and pain [neuropathic pain and inflammatory pain]. The formulations business focuses on therapeutic areas such as dermatology, anti-infective, respiratory, cardiac, diabetes, gynaecology, CNS and oncology. India is the second largest market in terms of revenue. Glenmark was an early entrant into the US generics market and has established itself as a leading generics player. The company is now the 14th largest generics manufacturer by prescription and its products are used to fill about 83mn scrips each year in the US. The US business is the largest revenue contributor by geography. Glenmark has a strong presence across Europe with the company being one of the fastest-growing mid-size/large players. This has been achieved through a combination of portfolio expansion and geographical spread. The business has leveraged not just its in-house pipeline but has also added a significant component of in-licensing partnerships to develop a robust portfolio, delivering strong growth over the last decade. ROW business includes markets in CIS and other Asian markets, contributing 13% to the revenue. The company expects to consolidate its position in key markets in the Middle East and African regions. An important growth lever will be the in-licensing of complex generics that provide first-to-file opportunities. As part of the company’s attempts to boost growth in the Latin America region, Glenmark’s Brazilian subsidiary entered into an exclusive partnership in June 2019 with Novartis to promote and distribute three of the latter’s respiratory brands in that market.
Exhibit 31: Shareholding pattern Particulars No. of shares (mn) % held Promoter & promoter group 131.5 46.59 Mutual funds 11.5 4.07 Franklin Templeton 9.1 3.24 Foreign portfolio investors 85.1 30.16 HSBC Pooled Investment Fund 9.3 3.29 Franklin Templeton Investment Funds 5.3 1.87 Financial institutions/banks 8.4 2.97 LIC 4.9 1.75 Others 45.7 16.21 Source: BSE, Nirmal Bang Institutional Equities Research Exhibit 32: Revenue break-up 2%
10%
4% 28%
11%
13%
32%
India USA ROW Europe Formulations LATAM API Others
Source: Company, Nirmal Bang Institutional Equities Research
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Financials Exhibit 33: Income statement Exhibit 34: Cash flow Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E Net sales 91,031 98,655 104,062 111,150 118,725 EBIT 14,049 16,352 13,897 15,571 17,178 % growth (0.9) 8.4 5.5 6.8 6.8 (Inc.)/dec. in working capital 133 3,673 (984) (1,284) (1,371) Raw material costs 30,386 33,623 35,874 38,194 40,662 Cash flow from operations 14,182 20,026 12,914 14,288 15,806 Staff costs 18,718 20,561 23,028 25,561 28,373 Other income (914) (2,081) (2,000) (2,200) (2,420) R&D Expenses 11,220 12,980 13,008 12,227 11,873 Other expenditure 14,553 15,633 16,318 17,207 18,145 Other Expenses 28 1,845 0 0 0 Total expenditure 74,877 82,797 88,228 93,189 99,053 Depreciation 3,019 3,259 3,937 4,590 4,915 EBITDA 16,154 15,858 15,834 17,961 19,672 Tax paid (-) (3,155) (3,756) (2,957) (3,535) (4,083) % growth (20.7) (1.8) (0.1) 13.4 9.5 Net cash from operations 13,160 19,292 11,894 13,143 14,218 EBITDA margin (%) 17.7 16.1 15.2 16.2 16.6 Capital expenditure (-) (9,901) (12,437) (8,000) (8,000) (8,000) Other income 914 2,081 2,000 2,200 2,420 Net cash after CapEx 3,259 6,855 3,894 5,143 6,218 Interest costs 2,856 3,346 3,700 3,381 3,097 Other Investing activities 622 1,406 2,502 2,200 2,420 Gross profit 60,645 65,031 68,188 72,956 78,063 Cash from Financial Activities (2,098) (11,231) (4,195) (7,420) (6,765) % growth (7.7) 7.2 4.9 7.0 7.0 Depreciation 3,019 3,259 3,937 4,590 4,915 Opening cash 10,564 12,347 9,378 11,579 11,501 Profit before tax & Closing cash 12,347 9,378 11,579 11,501 13,373 11,193 11,334 10,197 12,190 14,080 Exceptional Items Change in cash 1,783 (2,969) 2,201 (78) 1,873 Exceptional Items 0 1,672 0 0 0 Source: Company, Nirmal Bang Institutional Equities Research Profit before tax 11,193 13,006 10,197 12,190 14,080 % growth -28.8 1.3 -10.0 19.5 15.5 Tax 3,155 3,756 2,957 3,535 4,083 Exhibit 36: Key ratios Effective tax rate (%) 28 33 29 29 29 Y/E March FY18 FY19 FY20E FY21E FY22E PAT before Minority Interest 8,039 9,250 7,240 8,655 9,997 19 Profitability & return ratios Share of MI and Associates 0 0 0 0 0 EBITDA margin (%) 17.7 16.1 15.2 16.2 16.6 PAT after Minority Interest 8,039 9,250 7,240 8,655 9,997 % growth (27.5) 15.1 (21.7) 19.5 15.5 EBIT margin (%) 15.4 14.9 13.4 14.0 14.5 EPS (Rs) 28.5 32.8 25.7 30.7 35.5 Net profit margin (%) 8.8 9.4 7.0 7.8 8.4 % growth (27.5) 15.1 (21.7) 19.5 15.5 RoE (%) 15.6 16.5 11.6 12.3 12.5 Source: Company, Nirmal Bang Institutional Equities Research RoCE (%) 18.0 19.0 16.8 18.3 19.2 Exhibit 35: Balance sheet Working capital & liquidity ratios Receivables (days) 95 84 79 79 79 Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E Inventory (days) 250 232 237 237 237 Equity 282 282 282 282 282 Payables (days) 227 222 234 234 234 Reserves 51,353 55,770 62,331 70,307 79,625 Current ratio (x) 2.9 2.4 2.4 2.4 2.4 Net worth 51,635 56,052 62,613 70,589 79,907 Minority Interest (4) (4) (4) (4) (4) Quick ratio (x) 2.1 1.6 1.6 1.6 1.6 Net deferred tax liabilities 284 458 458 458 458 Valuation ratios Total Loans 44,368 38,768 38,952 35,592 32,603 EV/sales (x) 2.0 2.1 1.0 0.9 0.8 Other Financial Liabilities 5,684 9,898 9,898 9,898 9,898 EV/EBITDA (x) 11.2 13.3 6.8 5.8 5.0 Other Long Term Liabilities 0 6 6 6 6 P/E (x) 18.5 19.7 11.0 9.2 8.0 Liabilities 101,967 105,177 111,923 116,539 122,868 P/BV (x) 2.9 3.2 1.3 1.1 1.0 Net Block 18,958 20,978 28,308 34,979 37,831 Source: Company, Nirmal Bang Institutional Equities Research CWIP 9,933 12,344 9,125 5,907 5,907 Intangible Assets and Goodwill 12,623 17,370 17,321 17,279 17,512 Other Non Current Assets 14,406 14,931 14,429 14,429 14,429 Non-Current Investments 147 297 297 297 297 Inventories 20,306 22,521 24,028 25,582 27,235 Debtors 23,318 21,946 23,149 24,726 26,411 Cash 12,347 9,378 11,579 11,501 13,373 Other current assets 13,916 13,124 13,124 13,124 13,124 Total current assets 69,887 66,968 71,879 74,933 80,143 Creditors 18,698 22,208 23,694 25,226 26,856 Other current liabilities 5,289 5,503 5,743 6,058 6,395 Total current liabilities 23,986 27,710 29,437 31,284 33,251 Net current assets 45,901 39,258 42,442 43,648 46,892 Total assets 101,967 105,177 111,923 116,539 122,868 Source: Company, Nirmal Bang Institutional Equities Research
21 Glenmark Pharmaceuticals
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DISCLOSURES
This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments.
NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets.
NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of this research report.
NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other benefits from the company covered by Analyst or third party in connection with the research report. Analyst has not served as an officer, director or employee of Subject Company and NBEPL / analyst has not been engaged in market making activity of the subject company.
Analyst Certification: I, Vishal Manchanda, research analyst and Gaurang Sakare, Research Associate the author of this report, hereby certify that the views expressed in this research report accurately reflects my personal views about the subject securities, issuers, products, sectors or industries. It is also certified that no part of the compensation of the analyst was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst is principally responsible for the preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations.
22 Glenmark Pharmaceuticals
Institutional Equities
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Name Email Id Direct Line Rahul Arora CEO [email protected] -
Girish Pai Head of Research [email protected] +91 22 6273 8017 / 18
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Nirmal Bang Equities Pvt. Ltd. Correspondence Address B-2, 301/302, Marathon Innova, Nr. Peninsula Corporate Park, Lower Parel (W), Mumbai-400013. Board No. : 91 22 6273 8000/1; Fax. : 022 6273 8010
23 Glenmark Pharmaceuticals