Mumbai’s afternoon sun has bathed Glenmark House in Andheri East in a warm glow as Glenn Saldanha, Chairman and Managing Director of Glenmark Pharmaceuticals Ltd, strides into a boardroom for an interview. Saldanha, who has led Glenmark for nearly 30 years, the last 12 as CMD, has had enough of the volatile business of making APIs or active pharmaceutical ingredients, taking debt for working capital and depending on best-selling brands with margins measured in teaspoons.
Debt is now a bad word in Glenmark House. Saldanha’s buzzwords now are complex generics and speciality drugs (read: fat margins). Glenmark jettisoned its Rs 4,600-crore debt in the second quarter of 2024 by selling a 75% stake in its API business to Nirma Ltd on September 21, 2023, for around Rs 5,651 crore. It aims to be debt-free by 2026.
Its success with Ryaltris, a nasal spray that is a fixed-dose combination of an anti-allergic and a steroid, launched in Q1 of 2021-22, has cleared the congestion of ideas. Glenmark expects Ryaltris to fetch sales of $80 million in 2025—and it has not even entered major markets such as China and Brazil. (Ryaltris has been commercialised in 31 geographies.) The US Food & Drug Administration (FDA) cleared Ryaltris in January 2022.
Glenmark’s journey has not been smooth. The company has grappled with manufacturing issues, which led to warnings from the FDA. The debt burden has impacted its ability to invest freely.
Complex generics and speciality drugs will spur profits, reduce its dependence on debt for working capital, and help it capture more international markets.
With Debt Do We Part
Working capital needs and the depreciation of the Indian rupee versus the US dollar drove the increase in debt. As of December 31, 2023, Glenmark had a debt of around Rs 3,523 crore. The Nirma deal, the company said, is expected to extinguish its total debt and turn it net cash positive. Glenmark Life Sciences will operate independently and focus on meeting dynamic market demands.
Glenmark’s revenue (consolidated) increased marginally 2.9% year-on-year (YoY) for the nine-month period ended December 31, 2023 (9MFY24), while its operating profit (consolidated) declined nearly 45% YoY to `952.83 crore. However, the company witnessed a loss (consolidated) of `219.2 crore compared to a profit of `780.5 crore during the year-ago period, due to exceptional items (loss) of `454.17 crore during this period, related to litigation in the US.
For the quarter ended December 2024 (Q3FY24), its top line (consolidated) declined 16% YoY, primarily due to a temporary dip in sales following changes in its distribution model in India. These changes will also allow Glenmark to expedite the nationwide roll-out of its anti-counterfeit packaging. Adjusted to exclude the one-time impact, the consolidated revenue would have seen an approximate growth of 9% over the previous year.
In FY23, Glenmark’s gross sales (consolidated) increased by 5.6% over the previous year. The Ebitda for the period was `2,278.4 crore, with an Ebitda margin of around 17.5%. However, due to the exceptional loss related to the litigation, the profit after tax was significantly reduced to Rs 377 crore, down 62% YoY.
Glenmark, currently in a transitional phase, is optimistic despite the identified challenges. “We continue to outperform in our key therapy areas and look forward to a resurgence of our US business... driven by new product launches,” says Saldanha.
Brokerage ICICI Securities expects a 90% upside in profit after tax on Glenmark Pharma and a 5.5% YoY drop in revenues in the January-March quarter of FY24.
Focus on Key Therapies
Glenmark is focussing on dermatology, respiratory, and oncology. It has filed two ANDAs (abbreviated new drug applications) with the FDA for generic nasal sprays and completed trials for a generic version of Flovent in inhaler form for asthma treatment. It plans to seek approval in 2024-25. Its respiratory product portfolio spans India, emerging markets, and Europe. “In India, Glenmark has surged to the second position in this segment, driven by products such as Ascoril, Alex, Vilor-F, Nindanib and Nebsmart,” says Alok Malik, President and Business Head-India Formulations for Glenmark. “Dermatology is another core area where we excel, ranking second in India.”
It is also working on oncology, aiming to increase its contribution to the overall business through multiple drug launches in India and other markets.
Apart from its core therapy areas, the company says it also has a substantial presence in the diabetes and cardiovascular segments in India. The company recently launched Lirafit, the first liraglutide biosimilar for type 2 diabetes in India. The biosimilar is poised to provide potential clinical benefit at a massively reduced cost and be easily accessible to patients.
“Our goal is to achieve two-thirds of our consolidated revenue from branded markets,” says Saldanha. The company focusses on strategically expanding in key regions while strengthening its existing market presence.
Saldanha says Glenmark uses advanced forecasting techniques, demand planning, and supply chain analytics to anticipate market needs accurately. “This optimisation of resources in inventory and supply chain management is vital for enhancing operating margins and overall working capital,” says Saldanha.
Complex generics & Speciality Medicine
Saldanha says Glenmark’s strategy will have two components: One, it will move up the value chain towards developing speciality medicines like Ryaltris and complex generics. Two, it will innovate novel drugs for unmet medical needs.
Glenmark has evolved into a global pharmaceutical company emphasising complex generics and speciality medicines. “Over the years, we have heightened our emphasis on these speciality products, unlocking the full potential of our resources,” says Saldanha.
Glenmark plans to expand its dermatology, respiratory, and oncology range to fuel its growth. “This strategic focus includes consistent investments in complex generics and speciality products,” says Saldanha. “Glenmark will continue enhancing its existing business, introducing new products in established therapy areas, and exploring new markets.”
Glenmark reckons profitable growth will come from a sharper focus on complex generics, including injectables, drug-device combinations, and respiratory products.
Ryaltris, used to treat symptoms of seasonal allergic rhinitis in people 12 years and older, is a game-changer for Glenmark. It marks the company’s entry into the lucrative speciality drug market, allowing it to increase profits and build its first global brand. “With Ryaltris marking our entry into speciality products, it has further strengthened our conviction to increase the share of branded products in our overall product mix to improve our profitability and financial position further,” says Saldanha.
“Our efforts are directed towards developing and launching new drugs and formulations poised to become global brands, aligning with our evolving strategic objectives,” says Saldanha. Glenmark’s continuous innovation has given it a good pipeline. “Our expansive pipeline of products across therapeutic areas positions us to capitalise on rapidly growing markets as well as emerging regions such as Asia, West Asia, and Africa,” he says. “Leveraging our existing portfolio and upcoming product launches, we aim to penetrate new markets, particularly in key regions like Europe and Asia.”
Saldanha says Glenmark uses its scientific expertise and robust development capabilities to climb the value chain towards complex generics and speciality medicines.
The company’s growth extends across all key emerging markets, with strategic partnerships enhancing its capabilities. In dermatology, Glenmark acquired exclusive rights to commercialise Winlevi, an anti-acne cream, in Europe and South Africa. The company collaborated with Pfizer in India to market abrocitinib, which is used to treat atopic dermatitis, the most common form of eczema.
Saldanha highlights the potential of a licence agreement with Jiangsu Alphamab Biopharmaceuticals and 3D Medicines (Beijing) for Envafolimab, an injection for treating certain advanced solid tumours and cancer in India, Asia Pacific, West Asia, Africa, Russia, the Commonwealth of Independent States, and Latin America.
Innovation Engine
“Innovation is deeply ingrained in Glenmark’s ethos. With a legacy of over two decades in new drug discovery, we have out-licensed nine clinical stage assets, totalling around $300 million,” Saldanha says.
Earlier this year, Glenmark announced a partnership with its biotech subsidiary, Ichnos Sciences Inc., to form Ichnos Glenmark Innovation (IGI), an alliance to advance cancer treatment. The IGI alliance combines Glenmark’s expertise in the research and development of small molecules with Ichnos’s skill in creating novel biologics. Its focus is on developing innovative therapies for treating haematological malignancies and solid tumours.
IGI’s pipeline has three innovative oncology molecules in clinical trials. The US FDA has granted two of them “orphan drug” designation, which entitles special support to drugs that show promise in treating, preventing, or diagnosing rare diseases but don’t have a mass market.
Saldanha says IGI has out-licensed two drugs for autoimmune diseases to prominent companies. “All of Glenmark’s investments in innovative assets will be channelled through IGI. This alliance marks a significant step towards Glenmark’s vision of introducing novel drugs from India to the global market while optimising development costs and delivering long-term value to shareholders,” says Saldanha.
The company recently secured an out-licensing deal for its OX40 antagonist monoclonal antibody portfolio, further amplifying Glenmark’s credibility as a leading research-led pharmaceutical company from India.
Consolidation for Growth
According to the wealth management platform KRChoksey, Glenmark Pharmaceuticals is the 14th in India’s market, with a share of about 2.13%. Glenmark also has nine brands among the top 300, and is second in respiratory and dermatology, fifth in cardiac, and 17th in diabetes, according to the IQVIA MAT February 2024.
Glenmark’s commitment to pioneering products is evident in Zita DM, a tailored formulation for diabetic patients. KRChoksey praises this as meeting a crucial market need. They also highlight Glenmark’s first biosimilar, Lirafit, of liraglutide, an anti-diabetic, in India.
“Glenmark has shifted to a formulations-only model, focussing on key therapeutic areas. Its high-margin India and RoW sales and a recovering US market are expected to drive growth. Cost optimisation efforts and a reduction in innovation R&D spending will enhance profitability and potentially bridge the valuation gap with peers,” says Nitin Agarwal, Managing Director & Head of Institutional Equity Research, Lead Analyst, Healthcare, Pharmaceuticals and Chemicals, DAM Capital Advisors Ltd.
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