Buy Glenmark Pharma Ltd for the Target Rs. 2,610 by Motilal Oswal Financial Services Ltd
Scaling focus geographies through innovative product portfolio
We attended the investor day of Glenmark Pharmaceuticals (GNP) to get insights into the company’s business outlook. Here are the key takeaways:
* As a part of its strategic roadmap, GNP plans to strengthen its focus on dermatology, respiratory and oncology therapies to drive growth in India (DF) and emerging markets.
* GNP is building a robust product pipeline in respiratory and injectables for the US market to accelerate growth in its generics business. Compliance at its key facilities would support better growth prospects.
* With Ichnos Glenmark Innovation (IGI) becoming self-sufficient for funding clinical development, GNP aspires to file one IND every year going forward.
* Overall, GNP aims to deliver a broad-based revenue CAGR of 13-15% in the medium term, expand EBITDA margin to 23% by FY28 and subsequently improve return ratios.
* With a strategic reset in its DF segment in FY26 and its focus on scaling up innovative/branded sales across focus markets, we expect EBITDA to reach INR40b in FY28 from INR13b (ex-licensing income) and PAT to reach INR26b in FY28 from INR5.7b (ex-licensing income).
* We value GNP at 25x 12-month forward earnings to arrive at a TP of INR2,610. Maintain BUY.
Key highlights from the management meet
India: Differentiated launches to drive share gains; making efforts to revive diabetes portfolio
* GNP aims to grow its field force by adding 300-400 MRs to expand market coverage and sustain growth momentum in the existing therapeutic areas.
* The company is scaling up its oncology franchise with improved traction in differentiated products (Tevimbra/Brukinsa).
* Its focus of differentiated product launches in chronic respiratory and cardiac has enabled a strong industry outperformance in these therapies.
* While GNP underperformed considerably in diabetes therapy, it expects to revive the performance with the GLIPIQ launch going forward.
* The combination of prescription (Rx), over-the-counter (OTC) and directto-customer (DTC) portfolio is expected to help GNP drive healthy growth in the India market.
* We expect 25% sales CAGR over FY26-28 to reach INR57.8b.
NA: Respiratory/injectables – key growth drivers over next 2-3 years
* GNP has diversified its North America (NA) portfolio, with top 5/top 10 products contributing 25%/40% of NA revenue.
* While the filing pace has slowed over the past few years, the launch pace has been robust, with 13 products introduced in the market in FY26.
* GNP plans 2-3 filings and launches in the respiratory category in FY27.
* In addition to 20+ injectables launches in the US market, GNP is increasing its injectable pipeline. Its Monroe facility would support increased filing and launch momentum.
* Through the Ryaltris launch, GNP is in the process of building a branded business in the US. May’26 has seen a robust increase in the number of prescriptions in the US market. GNP has adopted the DTC and cash-only approach for commercialization of Ryaltris in the US market. It is also evaluating dermatology as the next brand growth platform.
* Semaglutide approval from the Canadian health regulatory agency is expected in CY27.
* Over FY26-28, we expect NA sales to reach INR43.1b at 14% CAGR.
EU: Growth to moderate in near term; WIP for new introductions
* While EU had strong growth momentum over FY24-26, GNP expects some moderation in growth prospects from this segment, largely due to increased pricing pressure in this market.
* Having said this, GNP has increased the share of branded products to 35% in FY26 from 20% in FY21.
* GNP will focus on scaling up its respiratory franchise through increased offtake of existing brands and potential new introductions over the next 12-18 months.
* We expect 10% sales CAGR to reach INR37.7b in EU over FY26-28.
EM: Branded respiratory and derma anchor growth; oncology is next lever
* Within emerging markets, GNP has diversified its presence across LatAM, Russia/CIS, APAC and MEA regions.
* The company has a strong positioning in each market through respiratory and dermatology branded portfolios.
* GNP is strengthening its oncology front-end channel to introduce and scale up revenue from the innovative portfolio.
* It is expanding its field force to increase its reach and gain market share in emerging markets.
* We expect 15% sales CAGR to reach INR38.7b over FY26-28.
Other key highlights:
* GNP aims to commercialize Ryaltris in 90 markets and has received approval in 56 markets till date. It expects peak sales of USD250-300m by FY32-33E.
* Currently, IGI is self-funded. IGI’s IPO would be subject to clinical data for assets under development.
* While the share of innovative and branded products is expected to rise, the incremental spending on marketing would keep margins in check to some extent.
* GNP would explore assets in dermatology and respiratory in terms of inlicensing.
Valuation and view
* GNP is strengthening its focus on dermatology, respiratory and oncology to drive growth in India and emerging markets.
* In NA, a stronger respiratory and injectables pipeline, backed by improving compliance, should accelerate growth in the generics business.
* With IGI now self-funded, GNP can file one IND every year. The innovation pipeline is no longer a burden on the balance sheet.
* The targets are clear, with 13-15% revenue CAGR in the medium term, EBITDA margins expanding to 23% by FY28, and better return ratios to follow.
* FY26 was the reset year. From hereon, EBITDA is expected to scale up from INR13b to INR40b by FY28 and PAT to nearly quintuple from INR5.7b to INR26b. At 25x 12-month forward earnings, our TP is INR2,610. Maintain BUY.
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