Gland Pharma Ltd IPO Note
Nikita Bhoota
Last Updated: 9th September 2021 - 01:50 pm
Rating: Subscribe
Issue Opens: November 9, 2020
Issue Closes: November 11, 2020
Price Band: Rs1,490- 1,500
Issue Size: ~Rs6,480cr (at upper price band)
Bid lot: 10 Equity shares
|
% Shareholding |
Pre-offer |
Post-offer |
|
Promoters (Fosun) |
74% |
58% |
|
Gland Celsus |
13% |
6% |
|
Empower Trust |
5% |
3% |
|
Nilay Trust |
2% |
1% |
|
Others |
6% |
32% |
|
Total |
100% |
100% |
Source: Company,5paisa research
Company Background
Gland Pharma Limited is one of the fastest growing generic injectables-focused companies by revenue in the United States from 2014 to 2019 (Source: IQVIA Report). Company sell its products primarily under a business to business (“B2B”) model in over 60 countries as of June 30, 2020 including the United States, Europe, Canada, Australia, India and the Rest of the world. Company was established in Hyderabad, India in 1978 and have expanded from liquid parenterals to cover other elements of the injectables value chain, including contract development, own development, dossier preparation and filing, technology transfer and manufacturing across a range of delivery systems. Company is present in sterile injectables, oncology and ophthalmics, and focus on complex injectables, NCE-1s, First-to-File products and 505(b)(2) filings. Companies’ delivery systems include liquid vials, lyophilized vials, pre-filled syringes, ampoules, bags and drops. Company is expanding its development and manufacturing capabilities in complex injectables such as peptides, long-acting injectables, suspensions and hormonal products as well as new delivery systems such as pens and cartridges. Company has seven manufacturing facilities in India, comprising four finished formulations facilities with a total of 22 production lines and three API facilities. As of June 30, 2020, Company had manufacturing capacity for finished formulations of approximately 755 million units per annum.
Financials
|
Consolidated Rs Cr |
FY19 |
FY20 |
|
Revenue |
2,044 |
2,633 |
|
EBITDA (%) |
34.6 |
36.3 |
|
Pre Excep EPS |
30.5 |
49.9 |
|
PE(x) |
49.3 |
30.1 |
|
ROE (%) |
17.9 |
23.8 |
Source: company, 5paisa Research, Note: P/E is on upper end of price band.
Key Points
Gland has created a niche for itself in the B2B generic injectables segment, with the company having strong relationships with several large global injectable players (Sagent, Apotex, Fresenius and Athenex). Given its non-exclusive contracts with multiple partners, the B2B model allows Gland to garner 25- 30% market share in several of its molecules, thereby driving economies of scale at a product-level. Additionally, a vertically integrated supply chain with backward integration for key molecules (Enoxaparin, Heparin), enable Gland to maintain tight cost control.
Injectable products account for 39% of the global pharma market by value, and globally volume growth in injectable products has been higher at 6% Cagr over 2014-19 vs. a 2% Cagr for oral-solid products. Given the complexity involved in manufacturing sterile injectable products, limited competition and frequent shortages, injectable products typically have higher Ebitda margins of 35-40% (vs. 15-20% for oral-solids), thereby driving strong profitability for most of the established injectable players.
US/India are the two key markets for Gland, where the company has delivered 18% cc/25% revenue Cagr over FY18-20, led by new launches. While Gland’s pending pipeline of 82 products will drive growth in the US market in the near-term, the company is also scaling-up its development capabilities in complex injectables (peptides, penems, long-acting injectables) and newer delivery formats. Although China could be a big potential market for Gland where the company’s Chinese parentage (Fosun Pharma) places it in an advantageous position to tap the Chinese market, we haven’t seen any significant traction on this front yet (Gland has only 6 product filings in China).
Key Risk Factor:
Top-5 products account for 40-45% of Gland’s US sales, where competition is still limited in Enoxaparin and Caspofungin.
Higher USFDA scrutiny on injectables facilities, although frequent customer audits have helped Gland to stay clear of USFDA issues so far
Conclusion:
We like Gland’s long-term story and recommend to Subscribe Gland Pharma IPO issue.
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