Macquarie Research: Glenmark Pharmaceuticals (GNP IN, Rs312, Outperform, TP: Rs380)

Glenmark Pharmaceuticals
(GNP IN, Rs312, Outperform, TP: Rs380)
Key takeaways
􀂃 Niche opportunities in US – to drive earnings momentum: First-to-file/niche products like
Tarka (launched at risk), Dovonex (out-licensed to Taro, 2QFY11 launch), Oxycodone (NDA filed
with FDA, 1QFY12 launch) and Malarone (litigation settled, 1HFY12 launch) are multi-year
opportunities that could help to build scale in the US business.
􀂃 Capex guidance of Rs260bn for FY11 and another Rs250bn for FY12, mainly for plants for API,
Respiratory, Oral drugs and Biological products.
􀂃 In Speciality business the focus is in the therapeutic segments – Dermatology, Respiratory and
Oncology across markets.
􀂃 In the Generic business the focus is on 3 niche therapeutic areas – Dermatology, Hormones and
Oncology.
􀂃 No major impact of IFRS implementation on P&L statement while the balance sheet will be
impacted (intangible assets ~ Rs8.6bn)
􀂃 Working capital: For FY11, management guided for receivables days of ~130 days (vs FY10
receivables days ~ 155 days) and inventory days ~ 80 days (vs FY10 inventory days ~ 100 days).
Our view
􀂃 Valuations are attractive, in our view, with GNP trading at a PER of 12x FY12E earnings adjusted
for exclusivity and NCE option value. We value GNP at a TP of Rs380, at 17x FY12E core
earnings (discount of 15% to the sector) and add Rs35 and Rs25 as NPV for exclusivity
opportunity and the NCE pipeline, respectively.