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Glenmark Pharmaceuticals
Roadshow takeaways
Event
ƒ We present key takeaways from the recently concluded non-deal road-show
where we hosted the senior management of Glenmark. We hosted a meeting
for over 30 investors. We found interest level high; especially given
improvement in the balance sheet, which had in the past been a matter of
concern.
Impact
ƒ India – the “cash cow”: Management remains confident in a top-line 3 yr
CAGR of >20% for India formulations (~30% of current top line). GNP expects
this to be driven by a combination of volume growth (in low teens), new
product launches (in mid single digits) and value growth (in mid single digits).
Given the high profitability and short cash conversion cycle, India business
continues to be a ‘cash cow’.
ƒ US – multi product specific upside: US generics (~30% of current top line)
remains a key growth business driven by a rich mix of oral contraceptive and
dermatology product filings, which, given the entry barrier, should face limited
competition. Visibility exists on niche products that are multi-year
opportunities: (1) Tarka (launched at risk), (2) Dovonex (launched through
partner Taro ~ GNP receives royalty), (3) Oxycodone (NDA approved,
beginning 2HFY12 limited competition), (4) Malarone (litigation settled FTF,
Sept-11 launch) and (5) Cutivate (Sole FTF, potential launch Apr-11). These
products alone have the potential to generate US$50m to70m in FY12 sales.
consolidate its presence in these regions and expects to re-invest whatever
they generate post breaking even in FY12 for couple of years. GNP expects
sequential growth going forward given the recent restructuring of operations.
ƒ NCE research remains core to the company: GNP continues to invest
judiciously on key projects which they have identified to be: Revamilast (in Ph
2), GBR 500 (in Ph 2) and GRC 17536(in Ph1). Post the encouraging Ph3
data on Crofelemer GNP views it to be a key driver of growth FY13 and
beyond. GNP expects peak sales of US$80m in FY15 for ROW markets in the
HIV-related diarrhoea indication. Acute infectious and pediatric diarrhoea are
much bigger indications for which trials are planned in ROW countries.
Earnings and target price revision
ƒ No change.
Price catalyst
ƒ 12-month price target: Rs475.00 based on a Sum of Parts methodology.
ƒ Catalyst: 1) Niche launches in the US, 2) Crofelemer approval by the FDA
Action and recommendation
ƒ Valuations are attractive, in our view, with GNP trading at a PER of 15.3x
FY12E earnings, adjusted for exclusivity and NCE option value, despite 31%
earnings CAGR for FY11-13E. Maintain Outperform with TP of Rs475.
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