Glenmark Pharma Looks To Double Revenue Growth Over Next Four Years

The company plans to move to zero net debt by FY26, and earn 22% return on capital employed by FY27

<div class="paragraphs"><p>Source: Unsplash</p></div>
Source: Unsplash

Glenmark Pharmaceuticals Ltd. is looking to double its revenue growth in the next four years.

To maximise shareholders' wealth, the company aims to attain zero net debt and earn a 22% return on capital employed in the next four to five years amid a continuous improvement in Ebitda margin, it said in its exchange filing.

The pharmaceutical company intends to accomplish this by increasing its share of the branded generics business, controlling R&D spending, and improving operating leverage, according to a Nov. 17 investor meeting.

The Mumbai-based drugmaker is also evaluating enhancing dividend pay-outs and share buybacks over the next four years. Despite this, share prices declined a day after the announcement.

Shares of the company declined 3.95% to Rs 412.35 apiece as of 12:40 p.m., while the benchmark Nifty 50 eased 0.54% on the NSE. It had hit an intraday low of Rs 408.50 apiece, a day after the investors' meeting.

Motilal Oswal has summarised the key takeaways:

The brokerage maintained a ‘neutral’ ratings, with a target price of Rs 420 apiece, implying a downside of 2%.

ROCE Boost

  • Aims to boost ROCE (EBIT/capital employed) to 22% by FY27 from 17% in FY22.

  • This will be done by increasing the share of business from branded generics, keeping R&D costs for the new chemical entity portfolio under control, and improving operating leverage.

  • Focusing on core therapies like dermatology, respiratory, cardiac, and anti-diabetes will help improve existing brand franchises.

  • 4-5% of growth in domestic formulation to be led by launches.

  • To further monetise the brands, the company is working to transition from prescription generics to over-the-counter products.

  • The company expects 6% annualised sales over FY22-24.

Filings update

  • The benefit from complex product filings is expected from FY25 but is subject to timely approval.

  • Glenmark Pharma has 46 ANDAs that are waiting to be approved. It is also working on eight to 10 injectables, two to three drug-device combinations, and three to four generics for the respiratory portfolio.

  • The near-term target is to complete the proof-of-concept study for ISB1342 and ISB1442 before March 2023. The successful clinical trials will enable it to launch in CY26 and CY27, respectively.

  • It also intends to close one oncology partnership before the end of FY23.

  • It plans to file an investigational new drug for ISB2001 before March 2023.

Update on regulatory issues

  • Asset utilisation at Monroe for the US market is subject to the successful resolution of regulatory issues, which are under 'official action initiated' status.

  • Injectable commercialisation is hinged on successful compliance at Monroe.

  • There is also an import alert issued to its Baddi facility by the U.S. FDA.

Other highlights

  • The management aims to attain zero net debt by FY26.

  • It intends to achieve 10-12% annualised sales growth over the next four years.

  • Reduce R&D spends to 8.5-9% of sales from FY24 versus 10.4% in H1FY23.

  • Aims to scale up revenue from Ryaltris [nasal spray] to $100-150 million [around Rs 817-1,226 crore] by FY27 from $30 million [Rs 245 crore] in FY22.

  • The company expects to maximise business prospects in Europe through an in-house pipeline as well as strategic in-licensing, given 11% of the total revenues in the second quarter were from Europe.

  • The brokerage anticipates that the European market will grow at an annualised rate of 11% between FY22 and FY24.

  • Management expects the company to grow and gain market share in the rest of the world through in- and out-licensing of key product.