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Published on 6/11/2020 5:56:31 PM | Source: Religare Broking Ltd

IPO Note - Gland Pharma Ltd By Religare Broking

Posted in IPO Reports| #IPO #Religare Broking Ltd

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About the Company

Incorporated in 1978, Gland Pharma is a Hyderabad based company and one of the fastest growing generic injectable companies. Its one of the promoters, Shanghai Fosun Pharma, is a global pharmaceutical major which is an advantage to the company. They have an established portfolio of injectable products and are present in sterile injectables, oncology and ophthalmic, and focus on complex injectable, NCE-1s, First-to-File products and 505(b)(2) filings. The company also has an extensive track record in complex injectables development, manufacturing and marketing and a close understanding of the related sophisticated scientific, technical and regulatory processes. At present, the company have seven manufacturing facilities in India, comprising four finished formulations facilities with a total of 22 production lines and three API facilities. As of June 30, 2020, along with their partners it had a total of 1,427 product registrations and 267 ANDA filings in the United States, of which 215 were approved and 52 were pending approval. The 267 ANDA filings comprise of 191 ANDA filings for sterile injectable, 50 for oncology and 26 for ophthalmic related products. Out of total 1,427 products 371 product registrations in the United States, Europe, Canada and Australia, 54 in India and 1,002 in the rest of the world.

 

Objects of the Issue

 To fund incremental working capital requirements;

 To fund capital expenditure requirements;

 General corporate purposes

 

Valuation

According to the IQVIA Report, the global formulation market grew at a CAGR of 5.4% to USD 1,111 bn from 2014-2020. It is estimated to grow at a CAGR of 4.4% to reach ~USD 1,376 bn by 2025. Amongst it oral solids and injectables are the two largest delivery form wherein Oral solids is estimated to be USD 494bn, growing at a CAGR of 3% from 2015-2020, while injectables market is growing at CAGR of 9.8% to reach ~USD 445bn from 2015-2020. The growth of injectables has been among the fastest driven by 1) Increase in chronic diseases such as diabetes, etc. 2) With increase in cancer cases now a days chemotherapy treatment are done through injectables. 3) New ailments such as rheumatoid arthritis, multiple sclerosis, autoimmune disorders, etc. are also being treated through injectables solutions.

Gland Pharma is the biggest IPO in Pharma sector so far. The company has strong presence in B2B business (as its garners ~96-98% of revenue) and it enjoys steady cash flow, long term contracts, better operating profits and low working capital as compared to B2C players. Besides, the company has extensive portfolio of complex products in injectable and across various therapeutic areas to cater growing demand. It is also expanding its footprints in new geographies and investing large amount in manufacturing capabilities as well as R&D to keep order pipeline healthy. Further, the company has strong support from parent and as well injectables segment has high entry barriers which augur well for the company’s growth. However, there are risks associated, 1) If it fail to meet high quality standard, 2) Pricing Issue and 3) In a present scenario there is negative sentiments for China, and the company’s current Promoters are from there as well as most of the raw material are sourced from China, and this could impact investors’ sentiments. On valuation front, Gland Pharma is valued at a P/E of 18.5x FY21E annualized EPS. Going forward, we remain positive on the company’s growth and so investors having long term view can subscribe to the issue.

 

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