Glenmark - Will Innovation Pay?

“Developing new products is investment intensive, has a long gestation period with uncertain outcome. A new product can fail at any stage of the development process or could fail to get regulatory approval.” - Glenmark Annual Report, 2011-12.

Glenmark - Diversified Pharma Company with a presence in New Drug Development, Branded formulations, and generics business.

Innovation R&D: Seven novel molecules under different stages of clinical development with 2 outlicenced and 1 molecule completed phase III. So far, Signed 6 out-licencing deals since 2004 and received about USD 250 mn in milestone payments.

Glenmark has 3 dedicated R&D centers. NCE R&D Centre India is 1,25,000 Sqft facility on the outskirts of Mumbai mainly focused on Discovery and development of NCE (New Chemical Entity).

Biopharmaceutical R&D Centre, Switzerland, dedicated to the development of NBE (New Biological Entity).

Clinical R&D Centre, UK which undertakes both NCE and NBE research.

In addtion to the above, Glenmark has 3 more facilities in India to carry out R&D in Generics, branded formulations, and Clinical Research.

Apart from developing new molecules, Glenmark does R&D in NDDS (Novel Drug Delivery Systems). These products achieve their desired effects by altering release profile and safety profile of the drug. Eventhough the risk profile and the cost of development are less than that of new chemical entities, these products require a new drug application process and are protected through longer patent exclusivity periods. These products provide companies with a pipeline of products that can be marketed at a premium over simple generic products.

Formulations Business: Branded drugs with focus on Dermatology, Respiratory and Oncology. Key markets are India (30%), Russia & Africa (14%), Latin America (7%) and central Eastern Europe (5%). Among top 20 fastest growing pharma company in Russia and among top 25 pharma companies in India.

Generics Business: The company has a portfolio of over 80 Generic products in the US market with 40 products awaiting approval from USFDA. Glenmark has one of the largest ANDA approvals in Dermatology (19) and Oral Contraceptives (10) in the US. The company believes that focus on limited-competition therapeutic areas like Dermatology and Oncology, should continue to sustain growth even beyond patent cliff period of 2015 (when the number of generic launch opportunities likely to reduce as the patent expiries begin to recede).

Significant Opportunities for Growth: The company has nearly 75 per cent of revenues coming from the international market and 25 per cent from the domestic market. Drug consumption per capita in India is still among the lowest globally eventhough drug prices supposed to be cheapest in the world. Hence, there is tremendous opportunity in India itself.

Since growth from the US market may begin to taper from 2015, possessing critical mass in the rest-of-the-world market is essential to maintain growth. Most of the “pharma-emerging” markets like Brazil, Mexico, Russia etc are predominantly branded generics market which will be beneficial to Glenmark.


Sales up 36% to 4020 Cr from 2949 Cr.

EBITDA up 21% to 714 Cr from 592 Cr.

Profit at 460 Cr v/s 453 Cr. EPS 17.01 v/s 16.76

Equity Share Capital: 27.05 Cr.

Net Worth: 2401.63 Cr & Total Debt: 2244.50 Cr with Debt to Equity @ 0.93.

RoE (Avg): 20.9% & RoIC (Avg): 14%

Generating Free Cash Flow of about 500 Cr since last 2 years.

I am sure there may be better bets in pharma purely on Financial and valuation parameters. What has drawn my interest in Glenmark is the potential of innovation R&D.

A look at the molecules currently in the pipeline:

1). Revamilast - GRC 4039 - PDE4 Inhibitor: This “keeda” of being an innovator started sometime in 2000 with setting up of Glenmark Research Centre (GRC) exclusively for discovering new molecules. The first molecule unleashed was GRC 3015, a PDE4 inhibitor, for treatment of asthma and COPD. There was not a single PDE4 molecule in the market at that time and most advanced was Byk Atlanta’s Roflimulast which was in Phase III trials. Glenmark Receives Innovator award of US$ 75000 from Eli-Lily foundation.

During 2002-03 three more molecules GRC 3566/3590/3785 released as potential Backup candidates for GRC 3015. Other PDE4 under clinical studies by different pharma MNC’s have shown side effects of nausea and vomiting. Hence in 2003-04 Glenmark comes up with a highly selective PDE-4 Inhibitor Called GRC-3886 with no emetic side-effects and enters into a tie-up with Quintiles, a leading global Contract research organization for clinical testing of GRC-3886 in UK.

During 2003-04 GRC 3886 completes phase I trials in UK. The company collaborates with Forest Lab for North America (Sep 2004) and Teijin Pharma for Japan (April 2005) for developing and commercializing the molecule. GRC 3886 named as Oglemilast and goes into ph-II trial in US in April 2006, targeted to be launched in 2009-10 and receives USD 35 Mn as milestome payments.

Then, in Aug 2009 bad news comes from Forest Labs that Oglemilast did not show satisfactory reuslts during phase IIb of clinical trials. Glenmark Shares tumble over 17%.

Current molecule GRC 4039, again a PDE4 inhibitor is in clinical trials since 2006 and is in Phase II for treatment of respiratory disorders and Rheumatoid arthritis.

2). GRC 17536 - TRPA1 antagonist: During 2005-06, GRC 6211 - TRPV1 antagonist, molecule for a range of pain including osteoarthritis, enters pre-clinical stage and in 2006 completes Phase I. In October 2007, enters into an agreement with Eli Lilly and receives USD 45 Mn upfront payment. Then, on October 24, 2008, again bad news hits the market that Eli Lilly has
decided to stop further development after certain adverse findings during clinical trials. Glenmark shares hit lower circuit following the announcement.

Now, the current molecule GRC 17536, is in trials since 2010. It has completed Phase I trials for treatment of inflammatory and neuropathic pain in Netherlands and has obtained approval for Phase II studies in UK and Germany.

3). GRC 15300 - TRPV3 inhibitor: The molecule gets into pre-clinical stage during 2008-09 for treatment of Neuropathic, Osteoarthriic and other inflammatory pain. In May 2010 signs an out-licencing deal with Sanofi-Aventis and receives upfront payment of USD 20 Mn. Completes Phase I trials in UK. Phase IIa concept study is currently on.

4). Vatelizumab - GBR 500 - VLA2 antagonist: In July 2007, Glenmark purchases 2 New Biological Entities (NBE) antibodies from Chromos Molecular Systems Inc; CHR 1103 & CHR 1201. CHR 1103 named as GBR 500, is an anti-inflammatory compound to treat Crohn’s disease and Multiple Sclerosis. Phase I studies completed in US. In May 2011 out-licences to Sanofi with an upfront payment of USD 50 Mn. Subsequently it was named as Vatelizumab and currently is in Phase II studies.

5). GBR 900 - TrkA antagonist: In October 2010, gets an exclusive worldwide licence from Lay Line Genomics to LLG’s entire intellectual property in anti-TrkA field. Now known as GBR 900, completed pre-clinical stage and is in Phase I trials for chronic pain in Switzerland.

6). Crofelemar - CFTR inhibitor: IN July 2005, gets into an agreement with Napo Pharma, US to develop crofelemer for treatment of HIV-related diarrhea. In December 2011, Napo terminates the deal but Glenmark goes to International Centre for Dispute Resolution (ICDR) and gets a favourable interim order. Currently in Phase III of clinical trials.

It’s been more than a decade since they started Innovation R&D and still there is not a single new molecule that is in the market. Even if something comes out of all the above, what is the guarantee that it will become a blockbuster? I have invested in Glenmark and hope that it will be in my portfolio for a long time.

I have gone thru Annual Reports from 2001. What gives me confidence is certain comments of Mr. Glenn Saldanha:

Annual Report 2008-09: “The excitement of a rapidly progressing innovative pipeline clouded by a below-par business performance. What affected us at Glenmark was a mix of macro-environmental issues and certain unprecedented business events. The company was also impacted by inability to monetize any portion of its pipeline in 2008-09. Setback on GRC 6211 was the first reversal we faced on a fairly advanced NCE.”

Annual Report 2009-10: “We began the financial year on an unsteady note against the backdrop of tumultuous change in the industry and an ongoing global recession. The preceding year was one of the toughest Glenmark had ever faced - almost all of our business were impacted severely. Our drug discovery R&D lost out on potential revenues as global pharma was wary of acquiring any molecules that were under development. In addition, as sales slumped across markets, we were hit badly as our fixed ouverheads continued to be high due to significant investments we had made into fixed assets just before the crisis emerged.”

“However, we beat the odds and managed a transformation in less than a year…”

“The key aspect of our strategy was to improve our cash flow position. We focused on cost optimization, targeted improving working capital cycle, and managed to reduce net working capital.”

And finally, Annual Report 2011-12: “With limited capital expenditure expected and no acquisition plans for next couple of years, the business will continuously generate free cash.”

I have limited understanding of pharma business and my only investment in Pharma, Zydus Cadila, was not encouraging (I am no more invested in it).

I am eagerly looking for Hit Ji and other members’ view on Glenmark.


Hi Deepakji,

I have heard Glenmark as a potential multibagger in many places. The reason why I couldn’t believe is that it is already a large cap pharma company, available at a fair valuation of PE of 30, and not sure how far it can grow. But again, indian pharma biggies like Sun, Lupin, Wockhardt are dark horses, who have been growing and growing irrespective of the general market conditions.

I think Hitesh bhai can give us expert view on the growth potential for glenmark, and whether we should invest in it at such higher valuation.

Glenmark used to be the darling of the 2003-2008 bull market when it rose from 12 Rs in 2003 to as high as 730 during June 2008.

It had an equally drastic fall during the bear phase of 2008-09 it didn’t have a steady revenue stream and was mostly bolstered by landmark payments at new stages of developments from ongoing and new discoveries.

Glenmark have had the most success among the innovators till now. One company which is trying to walk on a similar path and have the cash muscle too is Piramal Enterprises

_"…_Indian companies that took the brave plunge into drug discovery have little to show for it.Ranbaxy and Dr Reddy’s gave up. Glenmark Pharma has had the maximum success, relatively speaking: it has launched one drug, but with minor revenue potential, and has out-licensed four molecules to foreign companies.

Even Piramal’s research programme , which has been in existence for 10 years, has not yielded a single viable drug, though the company has forecast one in 2013. “We are now spending a lot more on it, on every stage,” says Swati. “Our strategy is to get drugs across the finish line.” Discovering a new drug means going through five stages of rigorous trials.

It is very expensive (about $250 million, says Swati)and has a high risk of failure (about 80%****). And if the company has global ambitions, as Piramal has, it means meeting the requirements of regulators in developed markets, who are much more demanding than Indian ones. Of the 20 drugs in Piramal’s portfolio , 14 have clearance so far from the Indian regulator only.

Try and sit with the US pharma regulator to get a phase-II clearance,” says the CEO of a rival firm, on the condition of anonymity . “It is a hard and expensive process. The rigour of documentation required is nothing compared to approvals in India that many of the companies currently boast of.” Acknowledging the challenges, Swati says Piramal has a better chance because of the choices it is making in drug discovery.

"Sometimes, even if you are able to launch, there has been_so much delay in the study and approval process that competitor products catch up, taking the patent advantage away." Money is not an issue for Piramal, which also has interests in financial services and real estate…"

In the innovator space, another company which is trying to make a mark is Suven Life Sciences.

Read this:

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Q3/Fy-13 Results out…

9M/Fy-13 v/s 9M/Fy-12:
Total Income up 24.4% to 3677.86 Cr from 2955.48 Cr (Fy/11-12: 4021.68 Cr)
EBIDTA up 21% to 756.61 Cr from 625.3 Cr (Fy/11-12: 847.08 Cr)
Net Profit up 44.5% to 447.94 Cr from 309.99 Cr (Fy/11-12: 460.35 Cr)

Reported 9-month EPS 16.53 v/s 11.46 (Fy/11-12: 17.01)

Specialty Business Revenue grew 28.6% (Out-licencing revenue excluded)
Generics Business Revenue grew 44%
Total Revenue (excluding out-licencing) grew 34.3%

Molecules under R&D seems to be progressing well.

Seems like this one is a good promising company amongst pharma stocks. To me make sense to add it to one’s portfolio.

Q1/Fy 13-14 Results out…

Total Income up 19% to 1238.24 Cr from 1040.67 Cr.
EBIDTA up 50.1% to 247.78 Cr from 165.1 Cr.
Net Profit up 64.4% to 128.68 Cr from 78.28 Cr.

EBIDTA margin is 20% v/s 19.1% (MQ-13) and 15.9% (JQ-12)
NET Profit margin is 10.4% v/s 12.5% (MQ-13) and 7.5% (JQ-12)

Total Raw material costs as a %ge to Income is 32.7% v/s 28.2% (MQ-13) and 35.2% (JQ-12)
Employee costs to Income is 17% v/s 15.6% (MQ-13) and 15.9% (JQ-12)
Other expenses to Income is 30.3% v/s 37.1% (MQ-13) and 33% (JQ-12)

Financial costs to EBIT is 21.8% v/s 19.6% (MQ-13) and 27.7% (JQ-12)
Tax Rate 23.1% v/s 2.6% (MQ-13) and 21.3% (JQ-12)

Lesser rise in raw material costs (up 10.6%) and Other expenses (up 9%) helped EBIDTA

EPS 4.75 v/s 2.89
Recorded TTM (sum of 4 quartr) diluted EPS: Rs. 24.55

On 01/08/2013, stock on BSE Closed at Rs. 572/-
(Results came in after market hours)

Highlights of the call by Capital Market:

  • The other income includes Rs 10 crore forex gain during the quarter.

  • It has received approval for four Abbreviated New Drug Applications (ANDAs), Acamprosate DR Tablets, Desoximetasone Ointment, Hydrocortisone Butyrate Cream, and Rizatriptan Orally Disintegrating Tablets.

  • The Company filed 6 ANDA’s with the U.S. FDA during the quarter, and plans to file an additional ten to fifteen applications in the forthcoming quarters.

  • It indicated that price increase in products is the standard practice if there is possibility, and further indicated that the recent price increase in few derma products is sustainable.

  • In ramped up the filings in the Niche areas and oncology is one of them. It expects to increase the number filings for the full year.

  • The India business grew by 21% during the quarter. It expects to outperform for the FY’14 and FY’15 as well.

  • It indicated that R&D portfolio is doing exceedingly well and it expects data will be come on few molecules in H2. It further indicated that trails in the GBR 500 are slow and the data out delayed to H1’FY15.

  • It expects the ROW market to grow by the 13-15% in the H2’FY14.

  • It expects the LATAM market to grow by 20-25% for the full year and indicated the Operating environment is very challenging. The Brazil continues to struggle going forward but the growth will be compensated by the higher growth from the Mexico and Venezuela.

  • The tax rate expected to be 22-23% for the FY’14 and expects to come down in FY’15 on the back of shift in products to the Indore facility.

  • The R&D Expenses are at Rs 144 crore (9.92% of sales) in Q2’FY14 and Rs 256 crore (9% of sales) in the H1’FY14. The step-up in the R&D is on multiple fronts.

  • The R&D spend is expected to be 9-9.5% of sales (earlier guided 8-8.5% of sales) for the FY’14. The increase in R&D is driven by the filings into the niche products. It clarified that NCE & NBE contribute 4-4.5% of sales and the rest is going to the US generic pipeline.

  • The Gross debt is at Rs 3590 crore (Rs 445 crore currency impact) and the Cash is Rs 1010 crore as on 30thSeptember 2013. The Net working capital days are at 115 days. The Inventory 62 days receivable 126 days Payable days is 73 days

  • The total assets addition is Rs 175 crore out of which Rs 145 crore fixed assets additions. The Total assets addition expected to be Rs 350-350 crore for FY’14

  • It reiterated that revenues to grow 20% for the FY’14 with beat in the earlier EBIDTA guidance of the Rs 1225 crore.

  • It expects the Net working capital days to be 110-115 days for FY’14.

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Highlights of the call by Capital Mkt:

The Sales for the formulation business in India grew by 21% YoY to Rs 397.16 crore for the quarter ended June 2014. Also, The Sales from the Africa, Asia and CIS Region (ROW) grew by 21% YoY to Rs 211.31 crore during the quarter.

The Sales from the USA Formulations grew by subdued 9% YoY to Rs 488.67 crore for the quarter ended June 2014. However, The Sales from the Europe Formulations grew by robust 35% YoY to Rs 97.73 crore during the quarter.

The Sales from the Latin America and Caribbean operations grew by 34% YoY to Rs 117.65 crore for the quarter ended June 2014. The Mexico and the Venezuela subsidiaries grew by over 100% during the quarter while the Brazil subsidiary recorded moderate growth of 11% for the first quarter.The Sales from the Active Pharmaceutical Ingredients (API) grew by 14% YoY to Rs 127.09 crore for the quarter ended June 2014.

As per IMS MAT June 2014, Glenmark Pharmaceuticals maintained 19th rank as compared to MAT June 2013, exhibiting value growth of 18% vis–vis IPM growth of 12.1%. For the month June 2014, the business registered growth of 17.6% vis-a-vis market growth of 10.3%.

In India market, The Glenmarks Cardiac segment market share increased from 3.35% to 3.68%; the Respiratory segment market share rose from 3.44% to 3.49%; Anti-infective segment market share rose from 1.53% to 1.74%; the Anti-diabetic segment market share rose from 1.30% to 1.73%. Gynaecology segment market share rose from 1.42% to 1.50%; and the Derma segment market share was at 8.05%.

During the quarter, it received final approval for Eszopiclone Tablets. It also filed ten ANDA’s with the U.S. FDA, and plans to file one additional application in the forthcoming quarter. It currently has 72 applications pending in various stages of the approval process with the U. FDA as of 30thJune 2014, of which 31 are Paragraph IV applications.

As per IMS YTD May 2014, Glenmark Russia grew by 32.7% in value vs overall market growth of 12.4%. Also, its growth in the dermatology segment was 43.4% in value vs 10.6% derma market growth.In the other CIS markets, Ukraine continues to show positive trends in secondary sales, driven primarily by the key brands. MAT May 2014 data shows Glenmark Ukraine grew by 41.4% in value vs overall market de-growth of -3.3% in value.

The Central Eastern Europe region continued its strong sales growth in the first quarter in a de-growing market. The Czech and the Slovak unit grew secondary sales by 21% and 15% respectively. The Polish unit grew secondary sales by 17% for the quarter.

There is muted growth in the US during the quarter and expects Q2 will be better. However, it guided lower at 12-15% growth on the back of lower number approvals. It indicated that FY’15 is challenging year for the US market but expects growth to bounce back in FY’16 and expects good year for the US market. It expects to grow well for FY’17 as well.It has robust pipeline for the dermatology products in the US market. It expects to launch the products as and when receives the approvals.The Government business in the US market is high margins business.It anticipates 7 to 8 product launch for US market in FY’15.It already launched Micardis in the US market.

It expects the Azlic Acid launch in the July 2016 and is FY’16 sole 180-day opportunity.It plans to set up a facility in US market with Capex of USD 75-100 million over 5 years.

The product strategy for the US market completely changes as it no longer looks for the vanilla generic with large market size but looks for the Complex, IP related and niche products for the US market.

It expects the strong growth from the US market in the next 3 to 5 years starting from the FY’16. It indicated that 80% of the generic spend channelized to the US market and have quality of filings and portfolio which has lot of upside going forward.

The India business witnessed robust growth driven by the dermatology. It indicated that continue to gain market share in Respiratory and cardio-metabology as well.The absolute impact due to the DPCO is about Rs 10 crore.

It is hard to predict the Emerging market and expects 15-20% growth for the FY’15. It expects LATAM market to grow by 25-30% and Europe market by 20% for the FY’15 respectively.It expects some revenues from the crofelemer for FY’16 and will not anticipate lot in the current environment.

The Company started selling inhalers in the Russia and CIS market and contributes very small now. In India it has 3-4% market share and growing very fast.

There is no change in Brazil regulatory environment and still approval process is slow from ANVISA.In the NCE portfolio â GBR 900 and GBR 830 are promising candidates and expects licensing income in the near term.

It reiterated that revenues to grow by 16-18% for FY’15 with core EBIDTA of Rs 1500-1528 crore.The R&D spend is 9.4% of Sales.The R&D spends â 40-45% will goes to the innovator portfolio and the rest is to the Generics.

The Gross debt is at Rs 3117 crore as on 30thJune 2014 compared to Rs 3267 crore as on 31stMarch 2014. The Net debt is at Rs 2467 core as on 30thJune 2014 compared to Rs 2472 crore as on 31stMarch 2014. The Networking Captial is at Rs 1810 crore as on 30th June 2014.

During the quarter, The Total Assets increased by 102 crore, out of which Fixed assets increase in Rs 82 crore and the intangible assets increase is Rs 20 crore respectively.

Highlights of the call by Capital Mkt:

The Sales for the formulation business in India grew by 14% YoY to Rs 478.15 crore for the quarter ended September 2014. As per IMS MAT September 2014, it maintained 19th rank as compared to MAT September 2013, exhibiting value growth of 19.3% vis--vis IPM growth of 11.60%. For the month September 2014, the business registered growth of 27.20% vis-a-vis market growth of 15.50%.

The India business strengthened itself in the following therapeutic segments with significant growth in market share from IMS MAT September 2013 to MAT September 2014 respectively. The Cardiac segment market share increased from 3.50% to 3.81%; the Respiratory segment market share rose from 3.46% to 3.59%; Anti-infective segment market share rose from 1.57% to 1.79%; the Anti-diabetic segment market share rose from 1.40% to 1.85%; Gynecology segment market share rose from 1.45% to 1.47%; and the Derma segment market share changed from 8.26% to 8.07%.

The Sales from the US market fell by 9% YoY to Rs 507.55 crore for the quarter ended September 2014. During the quarter, it granted a final approval for Telmisartan Tablets â 20 mg, 40 mg and 80 mg and Fluocinonide Cream USP, 0.1%. Also, it has filed one ANDA with the U.S. FDA, and plans to file four additional applications in the forthcoming quarter. During the first six months of the financial year, Glenmark has filed for 11 ANDAs.The majority of the consolidation in US over and the headwinds from the US market over.It expects the 2 approval in Q3 and 2-3 approvals in the Q4FY15, which expected to drive the US growth in H2. The Tarka is assured launch in Q4 (February) going forward.

It expects the FY'16 and FY'16 strong years for the US market depends on the US FDA approvals.The revenues from Africa, Asia and CIS region was flat at Rs 174 crore during the quarter.

Though Glenmark Russia performed reasonably well in the local market, the devaluation of the currency and the subdued business environment is having an overall impact on the Russia business. During the quarter, Glenmark launched Kerwort (imiquimod) and Sertamykol (sertaconazole). These are two important product launches and as these products ramp up, it will enable the Russia business to record good growth in the following financial year.

The Ukraine business even though it's a very small portion of the overall ROW business was impacted severely due to the economic crisis and devaluation of the Ukraine currency. It launched two new products in Ukraine during the quarter.

The Africa region posted good secondary sales growth and performed well during the quarter. The units in South Africa, Nigeria and Kenya grew by 67%, 54% and 82% respectively.

The Asia region grew 12% in secondary sales. The performance of the Asia region was subdued during the quarter. It received 6 product approvals in the region including Combiwave SF, an inhaler product which was approved in Malaysia.

The Revenues from the Europe grew by 25% YoY to Rs 130.55 crore for the quarter ended September 2014. The UK region achieved remarkable sales growth of over 50% via increasing the sales portfolio and effectiveness of account management despite the lack of new launches and price cuts. It launched three new products during the quarter.

Excluding Romania where the business environment is extremely challenging, Eastern Europe recorded good growth. The Poland subsidiary has been the primary contributor to this performance.The revenues from Latin American and Caribbean operations grew by sharp 139% YoY to Rs 230.88 crore for the quarter ended September 2014.The LATAM is big turnaround during the quarter. It is new base for the Glenmark going forward. The growth is very strong across the markets going forward.

The Revenues from sale of API to regulated and semi-regulated markets grew by sharp 58% YoY to Rs 159.54 crore for the quarter ended September 2014. It continues to record good sales growth for Amiodarone, Perindopril and Telmisartan. The good growth during this quarter is also on account of the Crofelemer API supplies.

The GRC 17536, has shown positive data in a Phase 2a proof of concept study in patients with painful diabetic neuropathy conducted in Europe and India.It has completed preclinical studies and Phase I enabling GLP studies for its selected lead molecule, GRC 27864 and filed a Phase I application for first-in-human trial with the MHRA, UK. The Phase I studies are currently on-going.The croefelemer expenditure filings are minimal.

The India business continued doing well and expects to grow 17-20% for the FY'15. It expects the strong growth in FY'16 as well. It hopes to see some novel product approvals in India in next 6 to 12 months.Its traditionally H2 will be stronger than H1 and anticipates much stronger H2.It retained guidance for the FY'15.

A series of new FDA approvals

And today’s Morgan Stanley’s piece on earnings visibility till 2019 on some of these and some pending ones has kicked in an interest in me for this stock. IMHO At this PE, it is no value play but can be one of those steady types
Disc- got a small tracking position. This is not a buy/sell reco and I am not a qualified analyst. Pl do your research

Hi guys,

Can someone pls explain to me why there is a huge difference between the standalone and consolidated profits in FY15 and FY16 for Glenmark Pharma.

Is currency devaluation the only reason for it?? or Does any of its subsidiaries made huge losses??

In the Investor presentation, it is given that they grew arnd 20% in most of the markets (US, LA, UK, ROW, CIS & India) but still the consolidated profits are very low.

So should i consider this 720 cr consolidated profit is what the company made the whole financial year instead of standalone profits of 1468 cr while computing cash flows??

I know many pharma companies like Lupin and Cadila also has lower consolidated profits compared to standalone profits but for Glenmark, the difference is very high. Should investors be concerned over this?

Will consolidated profits be better than standalone profits in FY17??

Any input will help. Tnxs in advance.

Glenmark has got the final approval for Gcrestor (6.5Bn) drug.


Hi Senior Members, How do you see Glenmark Pharma at CMP. Looks like overreaction, stock is trading at estimated 15 PE FY18.

I want to repeat Gaurav’s question.
I have tried hard but have not been able to find any reason behind the recent sharp fall.

Is there something fundamentally wrong with the company or is it an overreaction to a mediocre quarterly result and delay in debt reduction.


Debt, negative cash flow,heightened competition in US market and push for generic in India.

Other than delay in debt reduction, all the factors you mentioned were known prior to the latest quarterly results as well, isn’t it

Another possible reason is the rating change by S&P from BB stable to Negative, citing reasons similar to what Nav_1996 mentioned. However the major concern seems to be continued negative cashflow expectations in 2018 due to higher capex spend and softer growth.

Couple of things:

  • Estimated PE of FY18 is debatable. There is a very high likelihood of profit for the full year FY18 being around INR 900crs. At CMP of 620, this translates into a forward PE of 19.4x

Following challenges plague the pharma sector in US

  • Consolidation at retailer level - Walgreen consolidation, Amazon entry?
  • Pressure on drug pricing
  • US FDA’s stringent quality norms and procedures
  • US FDA’s push towards more generics and consequently approvals i.e. more competition

US FDA’s push towards more generic approvals may revert in 2 years when some of the newly approved vendors will start failing on quality norms. However pressure on prices coupled with seemingly low barriers to entry are going to keep sales subdued in spite of several key drugs coming out of exclusivity. Pricing pressure is expected across the globe going forward.

Pharma stocks may at best show a single digit growth in sales in FY18. However the margins will remain under pressure. At current levels, I believe stocks are neither a buy nor a short. Stock prices may not fall further but they may undergo a time value correction over next 12 - 18 months. I would avoid mid and large size players like Sun Pharma, Lupin, Glenmark altogether. Small companies can still perform.


Hello Seniors,

Any idea why their operating margins fall below half of normal during last quarter (not refering to Mar-17, but last three years March quarter) ??? That is a lot of variation and unlike other pharma players.

It seems market is assigning ZERO value to their research pipeline. This is is what was happening with Biocon till last year.

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