Glenmark Life Sciences Ltd IPO Review By ICICI-Direct

Price Band | 695-720

Glenmark Life Sciences (GLS) is an active pharmaceutical ingredients (API) arm of Glenmark Ltd. Glenmark commenced the API manufacturing business by setting up a manufacturing facility in Kurkumbh, Maharashtra in 2001-02. In 2019, the API manufacturing business was spun off into Glenmark API. Currently, it has four manufacturing facilities at Ankaleshwar, Dahej in Gujarat and Mohol, Kurkumbh in Maharashtra with total installed capacity of 726.6 KL as of FY21. Revenues from regulated markets were 65.64% of FY21 revenues. As of FY21, it had a portfolio of 120 molecules globally, sold APIs in India and exported APIs to multiple countries in Europe, US, Latin America, Japan and RoW. As of May 31, 2021, it had filed 403 DMFs and CEPs.

Leadership in select APIs, strong relation with large companies

GLS is a leading developer, manufacturer of select high value, non-commoditised APIs in chronic therapeutic areas, including CVS, CNS & pain management, diabetes and continue to branch into other APIs. It has strong market share in select specialised APIs like Telmisartan (anti-hypertensive), Atovaquone (anti-parasitic), Perindopril (anti-hypertensive), Teneligliptin (diabetes), Zonisamide (CNS) and Adapalene (dermatology). Total market size in sales terms for GLS’ portfolio of 120 molecules globally was estimated at ~US$142 billion in 2020 and is expected to grow ~6.8% in the next five years. It works with 16 of the 20 largest generic companies globally.

Quality-focused compliant manufacturing

Since 2015, the company’s facilities have been subject to 38 inspections and audits by regulators including the USFDA and others. It has not received any warning letters/import alerts from regulatory authorities. Its facilities have also been subject to 432 inspections by customers during this period.

Key risk & concerns

 Regulatory concern
 Customer concentration – 50%+ revenue from five customers
 Product concentration – top 10 products contribute 66.36%
 Raw material uncertainty – three largest suppliers accounted for 40.26% of total purchases of key starting materials
 Pricing pressure from customer

Priced at FY21 EV/EBITDA of 14.7x on upper band

GLS has a good performance execution and clean regulatory track record. The company is also a leading developer and manufacturer of select high value, non-commoditised APIs in chronic therapies and works with 16 of the 20 largest generic companies globally. The growth momentum also has a strong undercurrent of global API industry growth. We recommend SUBSCRIBE to the issue.