We attended drug maker Glenmark Pharma’s investor day to understand the management’s strategies across major business segments over the next four-to-five years. GNP aims to boost RoCE (Ebit/capital employed) to 22% by FY27 (from 17% in FY22), with an increased share of the branded generics business, controlled R&D spends towards the novel chemical entity (NCE) portfolio, and sustained improvement in operating leverage. It also aims to have zero net debt by FY26. We value GNP at 10x 12M forward earnings to arrive at our target price of Rs 420. We remain Neutral on the stock, given its 5% earnings CAGR over FY18-22. We expect earnings CAGR to be moderate over FY22-24 (9%). The benefit from complex product filings is expected from FY25, subject to timely approval. Asset utilisation at Monroe for the US market is also subject to successful resolution of regulatory issues.
The management intends to enhance its exiting brand franchise by focusing on core therapies like Dermatology, Respiratory, Cardiac, and Anti-Diabetes. The growth will also be supported by launches. In domestic formulation, 4-5% of growth will be led by launches. Some of its successful launches have been Remo-V, Nindanib, Ryaltriz-AZ, Fabiflu, and Vilor-F.
The company is also working on switching from prescription (Rx) to over-the-counter (OTC) to further monetise these brands. It has garnered Rs 1.8 bn sales in FY22. In the domestic formulation segment, it has delivered 13% sales CAGR to Rs 40 bn over FY18-22.
It was also noticed that the top five/ten products contributed 21%/32% to GNP’s FY22 sales, implying a well-diversified portfolio for the US market. In addition to the 46 ANDAs (abbreviated new drug application) awaiting approval, it is working on eight-to-ten injectables, two-to-three drug device combinations, and three-to-four generics in the respiratory portfolio. It expects to file g-Flovent and one g-Metered dose inhaler (g-MDI) in CY23. We value GNP at 10x 12M forward earnings to arrive at our target price of Rs 420.