Suave and soft-spoken Glenn Saldanha, the chairman and managing director of Glenmark Pharmaceuticals despite his usual smiling demeanour and an apparent sense of relief could hardly hide the exhausting days that preceded the announcement he was making about the deal with Nirma. It was to divest the company’s 75 per cent stake in its subsidiary, Glenmark Life sciences.
To the throng of journalists assembled online for a meet on late Thursday evening, Saldanha said, “what this transaction does is that it helps both the companies achieve their long-term strategic goal in the best way forward. As for Glenmark Pharma, it helps enhance shareholder value by the opportunity to de-leverage the balance sheet, improving the overall return ratio profile of the organisation.”
From FY24, Glenmark Pharma “will turn net cash positive and going forward the journey will be very different one with a de-leveraged balance sheet. The proceeds from this transaction, net of taxes, will be around Rs 5,000 crore and most of it would go towards repaying the debt making Glenmark Pharma a net cash positive company in FY24.” The net debt today, he said, was around Rs 4,600 crore.
The company spokesperson later explained that while “the company was generating cash from operations, meaningful improvement will reflect in FY25 as the interest cost comes off.”
For Saldanha, the other significant spin offs from the deal were an ability to now “get more focussed on building its branded business, move up the value chain and have a fire-power for future. Focus will be on high growth, return on capital employed and being net cash positive.”
He said, today “almost 65 per cent of the business was coming from branded business, especially in the areas of dermatology, respiratory and oncology. This is expected to grow. The US generics business contributes to 25 per cent and a small share in generics from Europe but rest of it all is branded business.”
Glenmark Pharma was not keen on building its generics business in the US and saw its future there not in commodity generics but in complex generics. “The innovation play for the company will really start playing from FY27 when it is hoping some of the molecules between Glenmark and its biologics company Ichnos will start coming to market. Till then, it will be branded business and complex generics that will be the main growth drivers,” he said.
Glenmark Pharma with, he said, continue to focus on three areas of specialisation – dermatology, respiratory medicines and oncology. In the US the goal is to play a significant role in the complex generics space, mainly in the injectables mainly in platforms it has built its specialisation in such as dermatology and respiratory.
On R&D investments, this year the spending was 8.5 per cent of total sales and next year get to closer to 7 per cent so effectively in line with the peer group in terms of R&D spending and this wil reflect in margin improvements.