Glenmark’s debt reduction and life sciences industry IPO could trigger revaluation



Glenmark Pharmaceuticals Ltd remains in the limelight, with its stock rising more than 50% from the March lows and trading near 52-week highs. The increase was driven by strong sales growth in the domestic formulations industry, driven by covid treatment drugs. The company also sees better prospects in its US operations, while improved cash flow can lead to lower debt.

High debt had been one of the main concerns of the streets in the past. The company’s net debt to ₹3549 crore at the end of FY21, although less than ₹The debt of 3,758 crore at the end of FY20 remains high. The company hopes to generate ₹400 crore of free cash flow in fiscal year 22. In addition, it provides for an IPO for Glenmark Life Sciences. Both measures can lead to ₹1000- ₹A debt reduction of 1,200 crore and may trigger a revaluation, analysts say.

Glenmark Life Sciences specializes in the manufacture of active pharmaceutical ingredients (APIs). Its portfolio includes 120 products (10 products in laboratory development, four in laboratory validation and 106 currently on the market) according to the draft red herring or DRHP prospectus filed by the company.

APIs relate to various therapeutic areas such as cardiovascular disease, CNS, diabetes, anti-infective and others. The total market size in terms of sales for the 120 products worldwide was estimated to be around $ 140 billion in 2020 and is expected to grow by approximately 4.3% over the next five years to reach approximately $ 180 billion d ‘by 2026.

In addition, the company aims for an increasing share in the CDMO activity (contract development and manufacturing operations). In addition, the company plans to expand the manufacture of molecules in the peptide segment.

The company expects the growth of APIs to remain stable due to the increasing prevalence of noncommunicable diseases, increasing demand from regulated markets for drugs indicated for hypertension, diabetes and cancer, and aging. Population.

In addition to the progress of the IPO, the street will be scrutinizing the company’s earnings performance in the June quarter. The company grew around 105% in the quarter, according to data from the Indian pharmaceutical market. Therefore, strong growth in domestic sales can be expected in April-June. The company’s extensive dermatology and other specialty portfolios and product lines are also supporting growth.

US activity contributes just over a quarter to overall sales and experiences stable price erosion, as evidenced by the performance of the fourth quarter. Thus, aided by new launches, growth in the United States could accelerate. The healthy product pipeline remains favorable with 41 Abbreviated New Drug Applications (ANDAs) awaiting approval at year-end 21. Additionally, the company plans to file 18-20 ANDAs, including 4-5 of the installation of Monroe.

“We have increased our EPS estimate for FY22 / FY23 for Glenmark by 2.5% / 2% to account for increased sales of COVID-19 (FabiFlu) drugs and the stability of the business of based in the United States, ”said analysts at Motilal Oswal Financial Services Ltd.

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