Gland Pharma Ltd IPO Note

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.