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Below are Views On Future-ready CDMO player with eyes on the Biosimilar market By Mr. Srinivas Sadu, MD and CEO, Gland Pharma, - Motilal Oswal

What makes GLAND stand out from among the pack?

Injectables have a higher entry barrier because of quality requirements and capex involved in setting up new facilities. Profitability in the business depends on throughput/yield from these facilities and consistent compliance. GLAND’s B2B business model ensures supply to a higher number of partners in a single product, lowering the risk of price erosion. Around 10% of its overall revenue has a profitsharing component, which exposes it to pricing pressure faced by its partners.

Enters the Biosimilar CDMO space via the vaccine bridge

A higher proportion of new drugs being developed now are Biologics v/s the past. It is looking at working with innovators and Biosimilar companies for CDMO opportunities. To enter this segment, it is looking to leverage its recent contract to supply Sputnik V vaccine to RDIF. It intends to learn the technical capabilities of manufacturing the vaccine, which is similar to the manufacture of Biologics. It has already acquired a vaccine drug substance manufacturing unit, which can be repurposed to manufacture Biologics/Biosimilars. It has an excellent track record in Injectable compliance. Once the manufacturing capabilities are in place, it intends to leverage parent Fosun Pharma’s Biosimilar subsidiary to offer its CDMO services. Given its experience in the CDMO segment, via the B2B Injectables business model, GLAND is in a strong position to grow this segment meaningfully over the next 3-4 years, ahead of any other competitor in India.

Sputnik V: Work-in-progress for improving the yield of the second dose

GLAND has completed technical batches for the first dose of the Sputnik vaccine and is working on improving the yield of the second dose. The management is also focused on the manufacture of Sputik light as well. It is already manufacturing exhibit batches. While commercialization of other vaccines has reduced the opportunity to some extent in India, the same remains intact in other emerging countries. Booster dose requirements are likely to make the vaccine an ongoing opportunity, rather than just a one-time affair. The contract is to supply to RDIF, and a diminishing India opportunity has a little impact on GLAND.

US is seeing some pricing pressure creep-in

GLAND is seeing some pricing pressure in the US Generics industry, although it remains largely insulated due to its B2B business model. Increase in pricing pressure in the US is driven by: a) inventory sell-off by competitors, and b) absence of USFDA facility inspections. Around 15-20% of its facilities faced regulatory actions from the USFDA each year before the COVID-19 outbreak, effectively reducing its supply volumes. However, the absence of USFDA inspections over the last 15 months have led to a greater number of compliant facilities being able to supply and drive price erosion in the US. GLAND remains vigilant to see if these trends continue in the long-run.

Ahead of the curve on complex products

There are 35-40 injectable products that are characterized as Complex Generics, based on difficulty in product development, API development and production, manufacture of Formulations, and the device or delivery route. GLAND is working on 15 products and expects to start filing these products from FY22 onwards. Although it has developed some capabilities, such as manufacturing of sterile API for complex products in-house, it will look to partner wherever it lacks development and manufacturing capabilities. It will also look at M&A opportunities to add such capabilities. Many other Generic companies are focusing on Complex Generics, but GLAND is firmly in the driving seat, with its legacy strength in Injectables.

Other markets

COVID-19 has accelerated GLAND’s geographic expansion aspirations, bolstered by its product portfolio, large manufacturing capacity, and consistent compliance. It is currently leveraging its product registrations in these markets, which it had made earlier. China remains a large long-term opportunity, and GLAND will leverage its parent Fosun’s distribution for some of these products. It is expecting first approvals and revenue generation from China in FY22, with significant headroom to grow. Fosun has a distribution network in African markets, which GLAND can use to supply products that are already registered.

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