Institutional Equities

Glenmark Pharmaceuticals
04 March 2020

Reuters: GLEN.NS; Bloomberg: GNP IN

Strategic maneuvers and R&D discipline to drive outperformance BUY
We initiate coverage on Glenmark Pharma with a Buy rating and a target price of Rs390,
based on 11x FY22 EPS. The target valuation multiple represents a steep discount to Sector: Pharmaceuticals
peers given that for more than a decade the company has been incurring a CMP: Rs282
disproportionately large investment in NCE R&D - a high risk investment avenue. The
stock can rerate and trade at higher multiples depending on the company’s execution on Target Price: Rs390
its guidance of containing R&D spend and reducing debt. Currently, the combination of
Initiating Coverage

financial risk and business risk (NCE development) is suppressing valuation multiples. Upside: 38%
The company is pursuing strategic initiatives (stake sale) for its NCE business (hived off Vishal Manchanda
into a new entity - Ichnos Sciences). A potential deal is largely contingent on the quality Research Analyst
of clinical data emerging from its Phase 2b drug candidate – ISB 830 (OX 40 antagonist) in
[email protected]
atopic dermatitis. The Phase 2b trial should report clinical data by the middle of 2020.
The Phase 2a data has been encouraging and bodes well for a favorable outcome. In +91 9737437148
addition, Glenmark is seeking partners for further development of its other specialty Gaurang Sakare
assets like biosimilar Xolair. Research Associate
Also, Glenmark is now sharply focused on improving free cash flow generation from the [email protected]
business. Over the decade (FY10-20), Glenmark has expanded its R&D investment at 33% +9122 6073 8093
CAGR, which has depressed earnings performance and free cash flows. Over this same
period, net profit growth (9% CAGR) has lagged revenue growth (15% CAGR). However, Key Data
going forward, reduction in R&D spend is expected on account of closure / completion of Current Shares O/S (mn) 282.2
majority of ongoing Phase 2 trials on its NCE projects (ISB 830, ISC 27864, GSP 304).
About US$20mn to US$30mn saving can accrue from the closure of such clinical trials. Mkt Cap (Rsbn/US$bn) 77.8/1.1
From a growth standpoint, we see earnings growth outpacing revenue growth over FY20- 52 Wk H / L (Rs) 667/267
FY22, led by the curtailment in R&D spend and 6% revenue CAGR. Revenue growth will Daily Vol. (3M NSE Avg.) 2,113,434
be led by domestic sales, which have been outpacing IPM growth for the past decade. The
domestic business is built around high growth therapy areas – dermatology, respiratory
and cardiology. The recent launch of Remogliflozin (SGLT2) inhibitor will ensure that its Share holding (%) 1QFY20 2QFY20 3QFY20
presence in diabetes therapy also becomes profound. Promoter 46.6 46.6 46.6
The US business, which is its second largest segment, has also rebased due to price Public 53.4 53.4 53.4
decline in limited competition assets. Hence, price erosion pressures in the US will be Others - - -
milder going forward. New ANDA launches (10-15 every year) should more than offset
price erosion pressures and aid mid single digit growth. The API business, which is 10%
of Glenmark sales, is also well placed in a favorable environment and can grow in mid to One-Year Indexed Stock Performance
high single digits. 120

Defensive valuation: Inability to reduce net debt has led to the valuation multiples being 100

compressed to historically low levels. At CMP, the stock trades at 8x FY22 EPS, and less than 80

1x revenue. The risk-reward profile is favorable at this juncture as earnings growth, if 60

accompanied by net debt reduction, can lead to a rerating in valuation multiple, which can add to 40
20
the potential returns. A successful outcome from the atopic dermatitis drug candidate also
0
remains a free call option. Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20
GLENMARK PHARMA Nifty 50
Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E
Net sales 91,031 98,655 104,062 111,150 118,725
EBITDA 16,154 15,858 15,834 17,961 19,672 Price Performance (%)
Net profit 8,039 9,250 7,240 8,655 9,997 1M 6M 1 Yr
EPS (Rs) 28.5 32.8 25.7 30.7 35.5
EPS growth (%) (27.5) 15.1 (21.7) 19.5 15.5 Glenmark Pharma (8.2) (29.5) (54.0)
EBITDA margin (%) 17.7 16.1 15.2 16.2 16.6 Nifty Index (4.4) 3.7 3.0
PER (x) 18.5 19.7 11.0 9.2 8.0 Source: Bloomberg
P/BV (x) 2.9 3.2 1.3 1.1 1.0
EV/EBITDA (x) 11.2 13.3 6.8 5.8 5.0
RoCE (%) 18.0 19.0 16.8 18.3 19.2
RoE (%) 15.6 16.5 11.6 12.3 12.5
Source: Company, Nirmal Bang Institutional Equities Research
 Institutional Equities
Glenmark Investment Thesis – Opportunities and Risks
OPPORTUNITY RISK
R&D spend expected to subside as % of sales and help earnings Specialty R&D investments will not yield earnings contribution in the
growth outpace revenue growth near to medium term investment horizon. About 15 years of investment
in NCE development w/o a meaningful commercial success is testing
investors’ patience

Multiple strategic initiatives to deleverage balance sheet which Management failure to address debt concerns of investors in the past
includes
1) Potential Out-licensing Deals – ISB 830, Ryaltris and Xolair
biosimilar
2) Stake sale in Ichnos Sciences

Stock trades at a steep discount to its intrinsic value Dividend payments have not meaningfully grown over the last 10 years
and unlikely to change meaningfully in the near term as free cash flow
would rather be used for debt repayment

Potential for EPS growth and rerating in valuation multiple Rerating Capex needs might turn out to be higher and absorb any benefit of
would be driven by reduction in net debt earnings growth on FCF generation

A positive outcome from ongoing Phase 2b trials on atopic A negative outcome may affect Glenmark’s ability to raise capital by way
dermatitis candidate (ISB 830) can be a game changer of stake sale in Ichnos Sciences

Improving outlook for API business, led by greater management Adverse market conditions
focus by carving the business out into a new entity

Glenmark’s domestic business growth has consistently DPCO related price cuts can take away any benefit of growth in sales
outperformed IPM growth

US business has rebased and should grow in low single digits to Delay in approvals and regulatory risk remain the key risks to execution
high single digits depending on execution of limited competition of US business growth
ANDA launches

A fast growing consumer business in India, which is gaining critical -

mass and should improve profitability on gaining critical mass
Source: Company, Nirmal Bang Institutional Equities Research

2 Glenmark Pharmaceuticals
 Institutional Equities
ISB 830 clinical data in atopic dermatitis crucial for monetization of stake in Ichnos Sciences
A Phase 2b trial is currently underway for ISB 830 in atopic dermatitis. The trial should report clinical data in
a couple of months (by the end of 1QFY21). Existing evidence from Phase 2a studies suggests that the drug
has benefits. The trial demonstrated that just two doses of IV administration of ISB830 led to an
improvement in EASI (Eczema Area and Severity Index) and IGA score. ISB830 works through a unique
mechanism of action and is believed to provide durability of response. There are only two other companies
(Kyowa Hakko Kirin and Kymab) that are developing an OX40 antagonist for atopic dermatitis. A successful
outcome in Phase 2b should raise confidence on Glenmark’s efforts on the NCE front and more importantly
ensure a successful stake sale in Ichnos Sciences.
Phase 2a clinical data suggests ISB 830 appears to hold promise in Atopic Dermatitis
A phase 2 proof-of-concept clinical trial on ISB 830 (OX 40 Antagonist) showed that only 2 intravenous
doses of the drug, administered 4 weeks apart, induced significant improvement of tissue and clinical
measurements until day 71 (42 days after the last dose). The study was primarily designed to assess safety
and validate mechanism of action in atopic dermatitis. Signs of clinical efficacy were observed, as more
patients achieved EASI-50 in the ISB 830 treated group vs. the placebo group. ISB 830 was well tolerated
and tissue analysis showed significant reductions of Th1, Th2 and Th17/Th22-related markers as well as
that of epidermal hyperplasia. This study provides first evidence for the pathogenic role of OX40 in AD and
highlights the potential benefits of OX40 antagonism for the disease.

PERFORMANCE ON KEY EFFICACY ENDPOINTS

1. % Change in EASI (Eczema Area and Severity Index) Score
On day 71, the percentage change from baseline indicated greater mean improvement with ISB 830 relative
to placebo (56% and 38%, respectively). EASI scores between ISB 830–treated and placebo-treated
subjects showed even greater separation through day 71 in severe subjects. On day 71 (final skin biopsy
assessment visit), ITT response rates for ISB 830–treated subjects (EASI50, 76.9% [20/26]; EASI75, 42.3%
[11/26]) were greater than response rates in placebo-treated subjects (EASI50, 37.5% [3/8]; EASI75, 25.0%
[2/8]). All 5 subjects who achieved EASI75 on day 29 maintained their improvement until day 71.

ISB 830 Versus Dupixent - Efficacy Comparison

Drug Name Company Status EASI 50 Reduction EASI 75 Reduction IGA 0 or 1
ISB 830 Glenmark Phase 2b 40% 17% 12%
Dupixent Sanofi Launched 50% 47% 33%
Lebrikuzumab - - - 35% 30%
ISB 830 at week 10 – Dosed every 4 weeks. 3 doses administered at week 10.
Dupixent data at week 12 – Dosed every fortnight – 7 doses administered
Lebrikuzumab at week 16 – once every fortnight – 10 doses administered

2. Patients with an IGA response

The number of subjects with an IGA response (score of 0 or 1) on day 71 (week 10) was 6 (23.1%) of
26 for ISB 830 treated subjects compared to 1 (12.5%) of 8 for placebo-treated subjects.

3. % change in IGA score in severe patients

Notably, the proportion of subjects with severe/very severe IGA scores at baseline was greater in the
ISB 830 group (20/46[43.5%]) compared to the placebo group (5/16 [31.2%]). This finding is in line with
the observation that EASI score improvement in subjects with severe disease at baseline (SCORAD
score >50) might benefit more compared to the ITT population.

4. % change in BSA and Pruritus NRS score

The reduction in body surface area involvement and Pruritus NRS score demonstrated meaningful
improvement versus baseline but was numerically comparable to the placebo group. The Phase 2b
study outcome (expected around mid June 2020) should be more relevant to look at as the study is
adequately powered to detect clinical significance.

3 Glenmark Pharmaceuticals
 Institutional Equities
Exhibit 1: GBR 830 – Reduction in EASI score from Baseline

Source: Company, Nirmal Bang Institutional Equities Research

Competing OX40 antagonists in clinical pipeline

Kyowa Hakko Kirin – A Japanese pharmaceutical player is also working on an OX40 antagonist – KHK4083 -
currently in Phase 2 studies. In a small Japanese study, KHK4083 has shown encouraging data. The study
involved 22 patients with severe AD receiving only 3 intravenous doses, with sustained reductions in EASI.

OX 40 ANTAGONISTS PIPELINE
Company Drug name Indication Clinical status
Glenmark ISB 830 Atopic Dermatitis Phase 2b
Kyowa Hakko Kirin KHK4083 Atopic Dermatitis Phase 2a
Kymab KY1005 Atopic Dermatitis Phase 2a

ATOPIC DERMATITIS PIPELINE IS CROWDED - CAN GLENMARK DIFFERENTIATE

Name Status Phase n Target type Primary End Point
Biologics
Fevipiprant Completed II 103 CRTH2 mAb Change in EASI week 12
Timapiprant Completed II 142 CRTH2 mAb Change in EASI week 16
Omalizumab Recruiting IV 62 IgE mAb Improvement AD week 24
Ligelizumab (QGE031) Completed II 22 IgE mAb Change in EASI week 12
Ustekinumab Completed II 79 IL-12/IL-23 mAb Change in EASI week 12
Lebrikizumab (3 doses) Completed II 212 IL-13 mAb EASI50 week 12
Tralokinumab Not Yet Recruiting III 780 IL-13 mAb IGA, EASI75 week 16
Secukinumab 300mg Recruiting II 44 IL-17 mAb Change in Epidermal Thickness
Nemolizumab Not Yet Recruiting II 250 IL-31 mAb Change in EASI week 24
Dupilumab Completed III 240 IL-4Ra mAb IGA, EASI75 week 16
Mepolizumab 100mg Recruiting II 56 IL-5 mAb IGA week 16
Fezakinumab Not Yet Recruiting II 60 IL-22 mAb SCORAD, safety
ISB 830 Recruiting II 64 OX40 mAb TEAE, improvement in pathology week 12
Tezepelumab Completed II 155 TSLP mAb EASI50 week 12
Small Molecules
Baricitinib Completed II 124 JAK1 + 2 antagonist EASI90 week 16
AQX-1125 Completed II 54 SHIP1 activator TLSS
Aprimelast 30 or 40mg Completed II 191 PDE4 antagonist Change in EASI week 12
Serlopitant (2 doses) Recruiting II 450 NK1 receptor antagonist Itch intentsity week 6
Tradipitant Recruiting II 150 NK1 receptor antagonist Pruritus VAS week 2
Asimadoline Recruiting II 200 k-opiod receptor antagonist number of patients with AE
Upadacitinib (3 doses) Recruiting II 167 JAK1 antagonist Change in EASI week 16
PF-04965842 Recruiting II 268 JAK1 antagonist IGA week 12

4 Glenmark Pharmaceuticals
 Institutional Equities
Large ongoing clinical trials should close by end of 4QFY20/1QFY21 translating into a reduction in
R&D spend – 60% of the R&D spend by Glenmark is on specialty R&D. Lately, there has been efforts to
restrict this spend and prioritize efforts. The ongoing Phase 2 trial on its lead asset ISB 830 is nearing
completion (4QFY20) and Glenmark should save about US$15mn annually in R&D spend post completion of
this trial. In addition, ongoing Phase 2 studies on GRC 27864 have recently concluded. The drug is likely to
be discontinued as it has not demonstrated clinical benefit. Likewise, ongoing Phase 2 trials on GSP304,
which is a nebulized version of Tiotropium (Spiriva) for the treatment of COPD, also stands completed,
which should allow savings to be reflected from 4QFY20 onwards. In our view, Glenmark may not be taking
this project further.
In case ISB 830 is successful in ongoing Phase 2b trial, the company would look to out-license the same
and hence incremental spend on the product will not be out of Glenmark P&L. The company has also
concluded Phase 1 trials on its biosimilar version of Xolair (Omalizumab) and is looking to out-license the
same.
Exhibit 2: R&D Expenses Trend
(Rsmn) (%)
14,000 13.16 14
12.33 12.50
11.61
12,000 11.00 12
10.20 10.00

12,980
9.01 9.48

11,220
10,000 10

13,008

12,227
7.72

10,660

11,873
8,000 6.37 8

7,250
6,000 4.68 6
6,760

3.09
5,410

4,000 4
3,870
1,380

2,000 2
FY 12 2,560
773

0 0

FY 20E

FY 21E

FY 22E
FY17
FY 10

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19
FY 11

R&D Expenses R&D as % of Revenue

Source: Company, Nirmal Bang Institutional Equities Research

5 Glenmark Pharmaceuticals
 Institutional Equities
US business highlights
 Glenmark is the 14th largest generics manufacturer by prescription volume and the products are used to
fill about 83mn scrips each year in the US. Over the last 10 years, the company has grown the US
business at 16% CAGR but due to recent cost pressures, the revenue has seen a decline of 9.9% and
9.6% in the last two years.
 The company has shifted focus from vanilla generic oral solids to value-added niche generics in relatively
high barrier-to-entry segments such as oral contraceptives and skin treatments.
 In the US, the company continues to seek approvals for new products while improving cost efficiency
and defending the market share. The company has consistently gained market share in Naproxen,
Mupirocin, Omeprazole, Olmesartan, Verapamil ER and Clobetasol propionate.
 The Baddi formulations facility remains under warning letter and the resolution of the same is critical in
order for Glenmark to sustain its base business in the US.

Exhibit 3: US business revenue growth

(US$mn) (%)
600 553 80
64.9
498 482
500 49.5 450 445 463 60
37.4
400 370 40
309 333
20.2
300 250 11.1 20
23.6 4.0 4.0
(4.8) 182 202 (1.0)
200 (9.9) (9.6) 0

100 151 (34.6) (20)

0 (40)
FY20E

FY21E

FY22E
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

USA Revenue Growth

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 4: US ANDAs filed and approvals received

(Units)
30
25
24
25
22
21
20 20
20 18 18
17
16 16
14
15 13 13 13 13
12
9
10 8
5
5

0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
ANDAs Filed ANDAs Approvals Received
Source: Company, Nirmal Bang Institutional Equities Research

6 Glenmark Pharmaceuticals
 Institutional Equities
Exhibit 5: US ANDAs pending and authorised to distribute
(Units)
180
158
160
140 131
119
120 112
97
100 85 90
77 76
80 69 65 66
61 59 62 58
60 53
47
41 39
40
20
0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Pending ANDAs ANDAs Authorised to Distribute

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 6: Products where Glenmark has above 10% market share

Glenmark Market Share (%) 2014 2015 2016 2017 2018 2019
Omeprazole 0.0 3.6 10.7 12.8 16.9 16.5
Pravastatin Sodium 23.7 24.5 23.1 19.2 15.8 15.9
Fluconazole 21.6 20.3 22.1 17.6 13.4 16.7
Ondansetron Odt 25.4 34.4 22.7 14.3 11.5 13.1
Naproxen 6.3 18.9 39.6 40.5 44.3 45.3
Ondansetron Hcl 34.1 35.0 36.4 31.2 25.4 24.2
Topiramate 12.9 14.4 16.6 17.7 14.9 11.7
Mupirocin 13.3 15.0 35.0 36.2 34.6 33.8
Clobetasol Propionate 0.0 0.0 0.0 0.2 7.5 12.5
Ropinirole Hcl 22.9 21.6 20.7 19.0 18.4 22.8
Olmesartan Medoxomil 0.0 0.0 0.0 0.0 5.2 19.1
Levocetirizine Dihydrochloride 17.5 33.2 36.4 33.9 24.6 29.3
Oxcarbazepine 34.4 31.7 28.1 29.1 27.5 26.7
Pramipexole Dihydrochloride 43.3 48.2 45.2 40.6 42.3 47.6
Verapamil Er 25.2 41.6 40.6 45.2 45.6 80.2
Drospirenone-Ethinyl Estradiol 0.0 6.6 48.5 46.3 36.4 49.6
Norgestimate-Ethinyl Estradiol 100.0 100.0 70.4 62.8 60.9 71.4
Source: Bloomberg, Nirmal Bang Institutional Equities Research

7 Glenmark Pharmaceuticals
 Institutional Equities
Ryaltris™
 Ryaltris™ [Olopatadine hydrochloride (665 mcg) and Mometasone Furoate (25 mcg)], developed by
Glenmark, is a novel fixed-dose combination nasal spray of an anti-histamine and a steroid, indicated for
the treatment of symptoms associated with seasonal allergic rhinitis (SAR) in patients over 12 years of
age.
 Ryaltris™ is currently under review with the USFDA as a treatment for seasonal allergic rhinitis in the US.
During 3QFY20, the company filed an application for Ryaltris approval in the European Union.
 The company has entered into an exclusive licensing deal with Hikma for the commercialization of the
product in the US. Under the terms of the agreement, Glenmark will be responsible for the continued
development and regulatory approval of Ryaltris™ by the USFDA, while Hikma will be responsible for the
commercialization of Ryaltris™ in the US. Hikma would also have the ability to produce the product
utilizing its nasal manufacturing capabilities in Columbus, Ohio.
 Glenmark will receive an upfront payment, regulatory approval and commercial milestone payments as
well as royalties from Hikma for Ryaltris™.
 The agreement with Hikma is Glenmark’s fourth regional licensing deal for Ryaltris™. Glenmark has
already signed licensing deals for commercialising Ryaltris™ in China (Grand Pharma Co. Ltd), Australia
(Seqiris), New Zealand and South Korea (Yuhan Corporation).

8 Glenmark Pharmaceuticals
 Institutional Equities
India business
Exhibit 7: India business revenue growth
(Rsmn) (%)
45,000 30.7 35
40,000

31,102
30

27,770
35,000

38,321
25

23,038
20.6

34,523
30,000
18.6
25,000 16.4 20
15.3 15.8
20,000

23,851
11.1 12.0 11.0 11.0 15

21,093
15,000 9.2

7,606

17,490
10

15,105
10,000

13,096
3.5

10,021
8,447
5,000 5
0.0
- 0

FY20E

FY21E

FY22E
FY10

FY11

FY12

FY14

FY15

FY16

FY18

FY19
FY13

FY17
India Growth

Source: Company, Nirmal Bang Institutional Equities Research

 In India, the company has shown consistent growth over the last 10 years, growing faster than the
Indian Pharmaceutical Market (IPM). The company has grown at 17% CAGR from FY2010 to FY2019
against market growth of low double digits over the same period. As a result, the company’s market
share has risen from 1.46% to 2.18%. The Indian business is concentrated in few chronic therapies,
making the company immune to seasonal fluctuations.
 The company was ranked 26 in FY2010, but consistently outgrowing the market has enabled it to gain
market share and was ranked 14th in FY2019. Going forward, the company is expected to outperform
the market with new launches. The company has 9 products in the Top 300 products in IPM.
 The company has three key focus therapeutic areas viz., Dermatology, Respiratory and Cardiology,
which are ranked 2nd, 4th and 6th in IPM. The company has consistently grown the market across
these three therapies. In Anti-Diabetics segment, Glenmark became the first company to launch the
novel patent-protected and globally researched SGLT2 inhibitor Remogliflozin Etabonate 100 mg for
Type 2 diabetes.
 The company has a strong presence across OTC segments as well with Candid Dusting Powder (DP)
and Scalpe+. Candid DP is a 30 year-old flagship and a prescription leader in the category of fungal
skin infection. Scalpe+ is a 17-year old brand with a proven track record in dandruff treatment.

Exhibit 8: India business mix trend

(%)
10.0 9.2 9.2 9.1
8.7 8.7 8.6
9.0 8.2 8.1
8.0 7.9
8.0
7.0
6.0
4.5 4.8 4.8
5.0 4.1 4.3 4.5
3.8 4.0
4.0 3.3 3.63.5 3.8 4.0
2.7 2.8 3.3
3.0 2.2 2.9
2.4
2.0 2.0
1.0
0.0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Cardiology Respiratory Dermatology

Source: Company, Nirmal Bang Institutional Equities Research

9 Glenmark Pharmaceuticals
 Institutional Equities
Exhibit 9: India business rank in IPM
Rank
30
26
25
25 23
20
19
20 17 17
15
14
15 13

10

0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
IPM Rank
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 10: Glenmark’s brands in Top 300 brands in IPM

Units
10 9 9
9 8 8 8
8
7 6
6 5 5
5 4 4
4
3
2
1
0
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Brands in Top 300 in IPM

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 11: Glenmark’s market share in IPM

(%)
2.50
2.29 2.29
2.18
2.25 2.09
1.95 1.97
2.00 1.82
1.69
1.75
1.56
1.46
1.50

1.25

1.00
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
IPM Market Share

Source: Company, Nirmal Bang Institutional Equities Research

10 Glenmark Pharmaceuticals
 Institutional Equities
Remogliflozin should help Glenmark build a strong diabetes platform
Glenmark is the first company in the world to launch Remogliflozin and India is the first country to get access
to this innovative drug. Remogliflozin Etabonate is a novel SGLT2 Inhibitor: Glenmark in-licensed
Remogliflozin from BHV Pharma and has gained approval for marketing in India based on Phase 3 trials.

Exhbit 12: SGLT2 Drugs Marketed in India

Molecule – SGLT2 inhibitors Innovator Marketing Partners Daily cost Dosing
Empagliflozin Boehringer Ingelheim Lupin 57 Once daily
Cannagliflozin Johnson & Johnson Cipla, USV 55 Once daily
Dapagliflozin AstraZeneca Sun Pharma 55 Once daily
Remofliflozin Glenmark and BHV Pharma Mankind Pharma and Torrent Pharma 25 Twice Daily

SGLT2 Inhibitor Market

SGLT2 Inhibitor represents a Rs6,000-7,000mn market opportunity in India and continues to expand rapidly.
The key attributes of this class that is translating into rapid acceptance being
1) Effective Glycemic Control
2) Complementary mechanism of action
3) Weight loss benefit
4) Does not raise hypoglycaemia risk
5) Offers renal protective effect
6) Mild reduction in blood pressure
7) Proven benefit in reducing cardiovascular risk
Current market share of SGLT2 inhibitors in the diabetes market and potential market opportunity
The SGLT2 class is a relatively new treatment modality in the diabetes space and hence the market
penetration is low (about 1% in volume terms). However, evidence of superior cardiovascular benefit and
renal protection that has emerged from several large outcome studies conducted on this class of drugs is
pushing physicians to use the class of drugs more often.
Renal protection benefits are unique and not associated with any other class of drugs for diabetes
A Meta analysis of clinical data on the most widely used SGLT2 inhibitors suggests renal protective effect of
SGLT2 inhibitors. The meta-analysis suggests that the use of SGLT2 inhibitors cuts the risk for the primary
composite end point of dialysis, kidney transplant or mortality from kidney disease by 33% with consistent
benefit observed across trials. In addition, they also reduced the risks of End Stage Renal disease and Acute
Kidney Injury by 35% and 25%, respectively, allaying earlier concerns that SGLT2 inhibitors increase AKI risk.
About 20-25% of diabetes patients have concomitant chronic kidney disease (CKD)
Assuming one third penetration of SGLT2 inhibitors in the diabetes patients having concomitant CKD, the
market share of SGLT2 inhibitors can expand multi-fold from here on. Assuming the build-up happens over
the next five years, SGLT2 opportunity can expand to a Rs5000 crore market. Remogliflozin by virtue of its
affordability benefit can gain a fair share of the pie.

11 Glenmark Pharmaceuticals
 Institutional Equities
Europe
 Glenmark is one of the fastest-growing mid-size/large players in Europe. This has been achieved through
a combination of portfolio expansion and geographical spread.
 The company’s geographical footprint covers all major markets in Western Europe (WEU) and Central
and Eastern Europe (CEE).
o In WEU, the company has a third party out-licensing business commercializing key molecules
developed in-house via partners across several markets.
o In CEE, along with prescription drugs, over-the-counter (OTC) medicines are a key growth driver for
Glenmark with almost 40% of the CEE business being brought in by the OTC franchise.
 The business has leveraged not just its in-house pipeline, but also added a significant component of in-
licensing partnerships to develop a robust portfolio, delivering strong growth over the last decade.
 Glenmark has clocked a growth of 24% over the last 10 years, which is significantly higher than the
market growth. We expect the company to clock a growth of mid single digits over the next two years.

Exhibit 13: Europe business revenue growth

(Rsmn) (%)
14,000 45.2 50

11,207
40.1
12,000 35.9 40

12,603
27.4

12,003
24.7

11,431
10,000 23.8 23.7 30

8,000 20
9,058
9.5
6,000 5.0 5.0 10
0.0 2.0
4,000 0
9,888

(8.4)
9,033
6,445
3,724

5,061
2,071

3,008
1,660

2,000 (10)

- (20)
FY20E

FY21E

FY22E
FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

Europe Formulations Growth

Source: Company, Nirmal Bang Institutional Equities Research

12 Glenmark Pharmaceuticals
 Institutional Equities
ROW and LATAM
RoW
 Glenmark started its business in Russia-CIS region in 1980 and is currently ranked 44 in the retail
segment in Russia. According to the IQVIA data for MAT (March 2019), Glenmark Russia recorded a
growth of 8.3% in value vis-á-vis overall retail market growth of 5.8%. In the dermatology segment,
Glenmark showed growth of 1.6% in value vis-á-vis overall dermatology market growth of 2.2% in value.
 As a result of the strong position of Glenmark Russia in the dermatology segment (retail), the company
continues to rank in the Top-15 of all derma companies present in the market, with MAT March 2019 rank
being 11. Among the companies present in the expectorants market (retail segment) of the local
pharmaceutical market, Glenmark has a strong position and ranks 4th as of MAT March 2019.
 Other key markets across the CIS region include Ukraine and Kazakhstan. In other CIS markets,
Glenmark Ukraine showed secondary sales growth of 26% in value in FY2018-19.
 The Africa region performed well in FY2018-19, recording growth in excess of 30%. The subsidiaries in
South Africa and Kenya grew in excess of 30% for the financial year. The Africa business launched 56
products in the region for the entire financial year. The company will look to consolidate its position in the
African markets with growth coming via in-licensing of complex generics that provide first-to-file
opportunities.

Exhibit 14: RoW business revenue growth

(Rsmn) (%)
54.8

12,759
16,000 60
45.6
14,000 50
37.1
40

14,077
12,000

13,535
13,015
21.5 30
10,992

10,000
7,171

16.1
7,101

20
8,000 5.3 4.0 4.0 10
- 2.0
8,123

-1.0
9,869
8,122

6,000
-11.7 0
5,926

4,000 -17.7 (10)

3,864

4,069

2,000 (20)
- (30)
FY20E

FY21E

FY22E
FY10

FY11

FY12

FY14

FY15

FY16

FY17

FY19
FY13

FY18

ROW Growth
Source: Company, Nirmal Bang Institutional Equities Research

13 Glenmark Pharmaceuticals
 Institutional Equities
LATAM
 The LATAM business contributes 4% to the total business for Glenmark and the overall performance for
the overall region continued to remain subdued. The company has launched unique offerings such as
Nebzmart handheld nebulizer, nasal sprays and MDI devices in the respiratory segment and a
microsphere formulation of adapalene + clindamycin in dermatology, which offer benefits and more
choice for prescribers and patients.
 In Brazil, Glenmark has entered into an exclusive partnership with Novartis to promote and distribute
three of its respiratory brands.
 In the Caribbean region, Glenmark launched Momate AZ in the respiratory franchise. It has been a key
game changer for Glenmark in the Rhinitis Allergis segment and has helped to position the company as a
differentiated player with a unique product in the market.
 In Colombia, Glenmark launched Glemont to complement the respiratory portfolio.
 We foresee 10-12% growth in revenue in the next two years.
Exhibit 15: LATAM business revenue growth
(Rsmn) (%)
9,000 88.8 100

7,495
8,000 80

6,179
7,000 56.9

5,617
7,640

5,181
60

5,015
6,000 40.8

4,180
4,067
5,000 40
15.2 16.7
20.0
4,000 12.0 10.0 20
0.0 (1.9) 2.8
3,000
3,468

0
4,046
3,012

2,000 (21.5)
1,919

(30.9) (20)
1,000
FY10 1,363

- (40)
FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20E

FY21E

FY22E
LATAM Growth

Source: Company, Nirmal Bang Institutional Equities Research

API:
 Glenmark entered the API business in 2003 and built a large business based on strong product selection,
focus on key regulated markets, maintaining high operational efficiencies and strong compliance culture.
The API business has grown at a CAGR of 15% over the last 10 years while maintaining consistently
high EBITDA margin. Overall EBITDA margin recorded for the business in FY19 was in excess of 30%.
 Glenmark transferred its API business to a wholly-owned subsidiary, Glenmark Life Sciences Ltd (GLS),
which became operational on January 1, 2019. Over 75% of GLS revenue is supplied to regulated
markets of Europe, USA and Japan. The top 10 molecules contribute 60% to the overall revenue of GLS.
Exhibit 16: API business revenue growth
(Rsmn) (%)
11,738

14,000 34.6 40
10,970
10,253

35
12,000 28.5
9,493

30
8,779

23.2
10,000 21.1 25
8,000 20
13.1
10.4 15
8,094

6,000 8.5 8.1 8.0 7.0 7.0 10

3,094

6,053

0.0 5
6,683

4,000
0
3,976

5,353
3,336

2,000 (7.3)
FY10 2,707

(5)
- (10)
FY20E

FY21E

FY22E
FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

API Growth

Source: Company, Nirmal Bang Institutional Equities Research

14 Glenmark Pharmaceuticals
 Institutional Equities
Valuation
We value Glenmark at 11x FY22E EPS and arrive at a target price of Rs390. The valuation multiple is in line
with its current valuation, which has seen a steep correction from its historical average (25x). The correction
reflects investor impatience with respect to the company’s inability to reduce net debt meaningfully and
ongoing disproportionate investment in high risk NCE R&D. Most therapeutic targets that Glenmark is
chasing are not validated in terms of proof of concept studies and the track record is also not supportive.
We estimate the FY22 EPS at 35.5, a growth of CAGR 2% over FY19 base earnings. Key assumptions for
earnings growth being
1) India domestic business should grow faster than IPM, driven by selective presence in high growth
therapies such as dermatology, respiratory and cardiology. Recent launch of Remogliflozin (SGLT2)
inhibitor will ensure its presence in diabetes therapy also becomes profound, which it can leverage for
further augmenting growth.
2) The US business will exhibit subdued growth trend (mid single digits) as we risk adjust our forecasts for
any adverse regulatory action and mild price erosion pressures.
3) European and ROW businesses are expected to grow in low to mid single digits.
4) The API business is expected to grow at high single digits whereas the LATAM business is expected to
grow in double digits on favorable bases and new launches in the region.

Exhibit 17: Historical price/earnings ratio of Glenmark Pharmaceuticals

(x)
45
40
35
30
25
20
15
10
5
0
Apr/13

Apr/16

Apr/17

Apr/18

Apr/19
Apr/14

Apr/15
Jan/14

Jan/15

Jan/16

Jan/17

Jan/18

Jan/19

Jan/20
Jul/13

Jul/14

Jul/15

Jul/16

Jul/17

Jul/18

Jul/19
Oct/13

Oct/14

Oct/15

Oct/16

Oct/17

Oct/18

Oct/19

PE Mean 1SD -1SD 2SD -2SD

Source: Bloomberg, Nirmal Bang Institutional Equities Research

Risks to our recommendation

1) Regulatory compliance remains the key risk. Warning letters remain key issues to be resolved. The
company has received a warning letter for its Baddi facility.
2) Exchange rate – Depreciation/appreciation of USD versus INR can have an adverse/favorable impact
on earnings versus our forecasts.
3) Execution and commercialization capabilities for new as well as existing products are a key risk.
With a large NCE pipeline, the company faces a lot of risk in terms of successful trials and marketing.
The company in the past has dropped a lot of NCEs due to failure in clinical trials.
4) DPCO risk – The risk of additional drugs coming under price control, which is expected to be
announced next year, is a major risk to the India business of Glenmark. The value growth of India
business will largely depend on the extent of price control on drugs marketed by Glenmark.
5) CapEx needs - Higher than anticipated CapEx needs will affect net debt reduction - higher than
anticipated CapEx adversely impacts free cash flows and hence reduction in net debt.

15 Glenmark Pharmaceuticals
 Institutional Equities
Ratio charts
Exhibit 18: Revenue and revenue growth Exhibit 19: Gross profit and growth
(Rsmn) (%) (Rsmn) (%)
140,000 36.3 40 90,000 36.7 40
35 80,000 35
120,000

78,063
30 70,000 25.5 30
24.7 23.0 22.9

118,725

72,956
100,000 25

111,150
25 60,000

68,188
19.8 20.1

104,062

65,031
17.9 16.6

60,645
98,655
80,000 13.6 13.9 20
20 50,000

91,031
15.4 15
10.4 15 40,000 7.0 7.0 10
60,000 4.9

65,714
25,006

66,298

91,857
5.5 6.8 6.8 10 30,000
60,052

53,470
76,496

46,953
40,000 0.0

33,587
50,123

5 20,000 7.2
40,206

41,322
8.4

19,572
0
29,491

26,752
(7.7)

FY 10 16,787
20,000 0 10,000 (5)
- -0.9 (5) - (10)

FY17
FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

FY 20E

FY 21E

FY 22E
FY17

FY 21E

FY 22E
FY 20E
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

Total Revenues Revenue Growth Gross Profit Gross Profit Growth

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 20: EBITDA and EBITDA growth Exhibit 21: EBIT and EBIT growth
(Rsmn) (%) (Rsmn) (%)
25,000 60 20,000 70
50 18,000 56.2 60
41.4 41.7 48.0
40.6 42.1

17,178
20,000 40 16,000 50

15,571
20,367

19,672

30 14,000 40

14,680
14,049
17,961

15,000 20.6
10,225

13,897
12,000 30
16,154

20 16.5

18,097
7,830
15,858

15,834

12,229
8.0 10,000 12.0 10.3 20
14,372

0.0 10
10,000 13.4 8,000 0.0 (1.2) 10
(4.4) (1.9)
8,895
9.5 0 (5.3)
10,100

6,000 0
4.5
(1.8) (0.1)
6,381

(10)
7,144

5,000 4,000 (10)

10,908

5,479

(6.3)
6,196

5,923

6,257

8,788

(20) 2,000 (10.9) (20)

- (20.7) (30) - (22.4) (30)
FY17

FY17
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19
FY 21E

FY 22E
FY 20E

FY 20E

FY 21E

FY 22E
EBITDA EBITDA Growth EBIT EBIT Growth

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 22: PAT and PAT growth Exhibit 23: EPS

(Rsmn) (%) (Rs)
12,000 70 45
9,997

56.4 39
9,250

49.2 60 40 35
8,655
8,039

10,000 38.3 50 33
34.2 35 31
7,240

40 28
8,000 30 26 26
19.5 30
5,456

23
11,088

15.1 15.5
25
4,752

20 20
7,430

6,000 1.4 17 17 18
0.0 10 20
6,230

4,000 0 15 12
(21.7)
4,643

(10)
4,578

10
3,310

2,000 (12.4) (12.9) (20)

(30) 5
- (27.5) (40) 0
FY17
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

FY 20E

FY 21E

FY 22E

FY 20E

FY 21E

FY 22E
FY17
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

PAT PAT Growth EPS

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

16 Glenmark Pharmaceuticals
 Institutional Equities
Exhibit 24: Margin profile
(%)
80 70.8 69.9 71.5
67.1 66.4 66.5 67.0 68.8 66.6 65.9 65.5 65.6 65.8
70
60
50
40
30 24.8 22.2
20.1 17.8 20.2 18.2 18.8 17.7 16.1 15.2 16.2 16.6
15.4
20
10
13.0 15.4 11.4 12.3 12.1
0 9.0 7.2 9.7 8.8 9.4 7.0 7.8 8.4

FY 20E

FY 22E
FY17

FY 21E
FY 10

FY 11

FY 12

FY 13

FY 15

FY 16

FY 18

FY 19
FY 14
Gross Margin EBITDA Margin EBIT Margin PAT Margin
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 25: Current ratio and cash ratio

(x)
3.5
2.8 2.9
3.0
2.5 2.4 2.4 2.4 2.4
2.5 2.1 2.1
2.0 1.7
2.1
1.5 1.8 1.9
1.6 1.7 1.6 1.6 1.6 1.6
1.0 1.3
0.5
0.0
FY 20E

FY 21E

FY 22E
FY17
FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

Current ratio Quick ratio

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 26: Debt-to-equity ratio

(%)
120 105.1
102.9
93.3 97.4 90.2
100 85.9
79.1 83.3 82.8
80 69.2
62.2
60 50.4
40.8
40

20

0
FY 20E

FY 21E

FY 22E
FY17
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

Debt to Equity Ratio

Source: Company, Nirmal Bang Institutional Equities Research

17 Glenmark Pharmaceuticals
 Institutional Equities
Exhibit 27: Cash conversion cycle
(Days)
400
340
350
300
250
195
200
150 113 119
88 94 82 82 82
100 75
47
15 28
50
0

FY17
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19

FY 20E

FY 21E

FY 22E
Cash Conversion Cycle

Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 28: Return on Assets

(%)
14.0
11.8 11.9
12.0 10.7
10.0 9.5
10.0 8.8 8.8
7.7 7.7 7.9 8.1
7.4
8.0 6.5
6.0
4.0
2.0
0.0
FY17
FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18
FY 10

FY 19

FY 20E

FY 21E

FY 22E
RoA
Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 29: Return on Equity

(%)
18.0
15.5
16.0 14.1
14.0 12.4 12.1
11.5
12.0 9.7
9.1 8.8 9.4
10.0 7.8 8.4
7.2 7.0
8.0
6.0
4.0
2.0
0.0
FY17
FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18
FY 10

FY 19

FY 20E

FY 21E

FY 22E

RoE
Source: Company, Nirmal Bang Institutional Equities Research

18 Glenmark Pharmaceuticals
 Institutional Equities
Exhibit 30: Return on Capital Employed
(%)
30.0
24.7
25.0 22.5 22.5
20.5
19.3 18.3
20.0 16.5
15.8 15.6
14.2
15.0 11.6 12.3 12.5

10.0

5.0

0.0

FY 20E

FY 21E

FY 22E
FY17
FY 10

FY 11

FY 12

FY 13

FY 14

FY 15

FY 16

FY 18

FY 19
RoCE

Source: Company, Nirmal Bang Institutional Equities Research

19 Glenmark Pharmaceuticals
 Institutional Equities
Glenmark Pharmaceuticals - Overview
Glenmark Pharmaceuticals Ltd has a significant presence in the branded generics markets across emerging
economies, including India. The company entered into the dermatology market through the launch of its
Candid Cream. Glenmark’s ground-breaking drug discovery effort is primarily focused in the areas of
inflammation [asthma/COPD, rheumatoid arthritis etc.], metabolic disorders [diabetes, obesity, etc.] and pain
[neuropathic pain and inflammatory pain]. The formulations business focuses on therapeutic areas such as
dermatology, anti-infective, respiratory, cardiac, diabetes, gynaecology, CNS and oncology. India is the
second largest market in terms of revenue. Glenmark was an early entrant into the US generics market and
has established itself as a leading generics player. The company is now the 14th largest generics
manufacturer by prescription and its products are used to fill about 83mn scrips each year in the US. The US
business is the largest revenue contributor by geography. Glenmark has a strong presence across Europe
with the company being one of the fastest-growing mid-size/large players. This has been achieved through a
combination of portfolio expansion and geographical spread. The business has leveraged not just its in-house
pipeline but has also added a significant component of in-licensing partnerships to develop a robust portfolio,
delivering strong growth over the last decade. ROW business includes markets in CIS and other Asian
markets, contributing 13% to the revenue. The company expects to consolidate its position in key markets in
the Middle East and African regions. An important growth lever will be the in-licensing of complex generics
that provide first-to-file opportunities. As part of the company’s attempts to boost growth in the Latin America
region, Glenmark’s Brazilian subsidiary entered into an exclusive partnership in June 2019 with Novartis to
promote and distribute three of the latter’s respiratory brands in that market.

Exhibit 31: Shareholding pattern

Particulars No. of shares (mn) % held
Promoter & promoter group 131.5 46.59
Mutual funds 11.5 4.07
Franklin Templeton 9.1 3.24
Foreign portfolio investors 85.1 30.16
HSBC Pooled Investment Fund 9.3 3.29
Franklin Templeton Investment Funds 5.3 1.87
Financial institutions/banks 8.4 2.97
LIC 4.9 1.75
Others 45.7 16.21
Source: BSE, Nirmal Bang Institutional Equities Research

Exhibit 32: Revenue break-up

2%

10%

4% 28%

11%

13%

32%

India USA ROW Europe Formulations LATAM API Others

Source: Company, Nirmal Bang Institutional Equities Research

20 Glenmark Pharmaceuticals
 Institutional Equities
Financials
Exhibit 33: Income statement Exhibit 34: Cash flow
Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E
Net sales 91,031 98,655 104,062 111,150 118,725 EBIT 14,049 16,352 13,897 15,571 17,178
% growth (0.9) 8.4 5.5 6.8 6.8 (Inc.)/dec. in working capital 133 3,673 (984) (1,284) (1,371)
Raw material costs 30,386 33,623 35,874 38,194 40,662
Cash flow from operations 14,182 20,026 12,914 14,288 15,806
Staff costs 18,718 20,561 23,028 25,561 28,373
Other income (914) (2,081) (2,000) (2,200) (2,420)
R&D Expenses 11,220 12,980 13,008 12,227 11,873
Other expenditure 14,553 15,633 16,318 17,207 18,145 Other Expenses 28 1,845 0 0 0
Total expenditure 74,877 82,797 88,228 93,189 99,053 Depreciation 3,019 3,259 3,937 4,590 4,915
EBITDA 16,154 15,858 15,834 17,961 19,672 Tax paid (-) (3,155) (3,756) (2,957) (3,535) (4,083)
% growth (20.7) (1.8) (0.1) 13.4 9.5 Net cash from operations 13,160 19,292 11,894 13,143 14,218
EBITDA margin (%) 17.7 16.1 15.2 16.2 16.6 Capital expenditure (-) (9,901) (12,437) (8,000) (8,000) (8,000)
Other income 914 2,081 2,000 2,200 2,420 Net cash after CapEx 3,259 6,855 3,894 5,143 6,218
Interest costs 2,856 3,346 3,700 3,381 3,097
Other Investing activities 622 1,406 2,502 2,200 2,420
Gross profit 60,645 65,031 68,188 72,956 78,063
Cash from Financial Activities (2,098) (11,231) (4,195) (7,420) (6,765)
% growth (7.7) 7.2 4.9 7.0 7.0
Depreciation 3,019 3,259 3,937 4,590 4,915 Opening cash 10,564 12,347 9,378 11,579 11,501
Profit before tax & Closing cash 12,347 9,378 11,579 11,501 13,373
11,193 11,334 10,197 12,190 14,080
Exceptional Items Change in cash 1,783 (2,969) 2,201 (78) 1,873
Exceptional Items 0 1,672 0 0 0
Source: Company, Nirmal Bang Institutional Equities Research
Profit before tax 11,193 13,006 10,197 12,190 14,080
% growth -28.8 1.3 -10.0 19.5 15.5
Tax 3,155 3,756 2,957 3,535 4,083 Exhibit 36: Key ratios
Effective tax rate (%) 28 33 29 29 29
Y/E March FY18 FY19 FY20E FY21E FY22E
PAT before Minority Interest 8,039 9,250 7,240 8,655 9,997 19
Profitability & return ratios
Share of MI and Associates 0 0 0 0 0
EBITDA margin (%) 17.7 16.1 15.2 16.2 16.6
PAT after Minority Interest 8,039 9,250 7,240 8,655 9,997
% growth (27.5) 15.1 (21.7) 19.5 15.5 EBIT margin (%) 15.4 14.9 13.4 14.0 14.5
EPS (Rs) 28.5 32.8 25.7 30.7 35.5 Net profit margin (%) 8.8 9.4 7.0 7.8 8.4
% growth (27.5) 15.1 (21.7) 19.5 15.5 RoE (%) 15.6 16.5 11.6 12.3 12.5
Source: Company, Nirmal Bang Institutional Equities Research RoCE (%) 18.0 19.0 16.8 18.3 19.2
Working capital & liquidity ratios
Exhibit 35: Balance sheet
Receivables (days) 95 84 79 79 79
Y/E March (Rsmn) FY18 FY19 FY20E FY21E FY22E
Inventory (days) 250 232 237 237 237
Equity 282 282 282 282 282
Payables (days) 227 222 234 234 234
Reserves 51,353 55,770 62,331 70,307 79,625
Current ratio (x) 2.9 2.4 2.4 2.4 2.4
Net worth 51,635 56,052 62,613 70,589 79,907
Minority Interest (4) (4) (4) (4) (4) Quick ratio (x) 2.1 1.6 1.6 1.6 1.6
Net deferred tax liabilities 284 458 458 458 458 Valuation ratios
Total Loans 44,368 38,768 38,952 35,592 32,603 EV/sales (x) 2.0 2.1 1.0 0.9 0.8
Other Financial Liabilities 5,684 9,898 9,898 9,898 9,898 EV/EBITDA (x) 11.2 13.3 6.8 5.8 5.0
Other Long Term Liabilities 0 6 6 6 6 P/E (x) 18.5 19.7 11.0 9.2 8.0
Liabilities 101,967 105,177 111,923 116,539 122,868 P/BV (x) 2.9 3.2 1.3 1.1 1.0
Net Block 18,958 20,978 28,308 34,979 37,831
Source: Company, Nirmal Bang Institutional Equities Research
CWIP 9,933 12,344 9,125 5,907 5,907
Intangible Assets and Goodwill 12,623 17,370 17,321 17,279 17,512
Other Non Current Assets 14,406 14,931 14,429 14,429 14,429
Non-Current Investments 147 297 297 297 297
Inventories 20,306 22,521 24,028 25,582 27,235
Debtors 23,318 21,946 23,149 24,726 26,411
Cash 12,347 9,378 11,579 11,501 13,373
Other current assets 13,916 13,124 13,124 13,124 13,124
Total current assets 69,887 66,968 71,879 74,933 80,143
Creditors 18,698 22,208 23,694 25,226 26,856
Other current liabilities 5,289 5,503 5,743 6,058 6,395
Total current liabilities 23,986 27,710 29,437 31,284 33,251
Net current assets 45,901 39,258 42,442 43,648 46,892
Total assets 101,967 105,177 111,923 116,539 122,868
Source: Company, Nirmal Bang Institutional Equities Research

21 Glenmark Pharmaceuticals
 Institutional Equities
DISCLOSURES

This Report is published by Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) for private circulation. NBEPL is a
registered Research Analyst under SEBI (Research Analyst) Regulations, 2014 having Registration no. INH000001436. NBEPL is also
a registered Stock Broker with National Stock Exchange of India Limited and BSE Limited in cash and derivatives segments.

NBEPL has other business divisions with independent research teams separated by Chinese walls, and therefore may, at times, have
different or contrary views on stocks and markets.

NBEPL or its associates have not been debarred / suspended by SEBI or any other regulatory authority for accessing / dealing in
securities Market. NBEPL, its associates or analyst or his relatives do not hold any financial interest in the subject company. NBEPL or
its associates or Analyst do not have any conflict or material conflict of interest at the time of publication of the research report with the
subject company. NBEPL or its associates or Analyst or his relatives do not hold beneficial ownership of 1% or more in the subject
company at the end of the month immediately preceding the date of publication of this research report.

NBEPL or its associates / analyst has not received any compensation / managed or co-managed public offering of securities of the
company covered by Analyst during the past twelve months. NBEPL or its associates have not received any compensation or other
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Analyst Certification: I, Vishal Manchanda, research analyst and Gaurang Sakare, Research Associate the author of this report,
hereby certify that the views expressed in this research report accurately reflects my personal views about the subject securities,
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indirectly related to the inclusion of specific recommendations or views in this research. The analyst is principally responsible for the
preparation of this research report and has taken reasonable care to achieve and maintain independence and objectivity in
making any recommendations.

22 Glenmark Pharmaceuticals
 Institutional Equities
Disclaimer
Stock Ratings Absolute Returns
BUY > 15%
ACCUMULATE -5% to15%
SELL < -5%
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23 Glenmark Pharmaceuticals