Thread by @Mjkfinvestment

🧵A detailed thread on Gland Pharma:

Market cap: 40,700 crores
Revenues: 2633 crores
P/E: 52.66
P/B: 4.02
ROCE: 30.15%

Gland stands out in the pharma universe with a solid track record of developing & commercializing complex products in the injectables space;

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It reported a 27% sales CAGR to INR 26b over FY18-20;

Geographies such as Europe/Canada/RoW markets grew at a higher CAGR of 46%/64%/67%.

Top 5 clients constitute 48.9% of revenues in FY20.

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Complex portfolio/manufacturing capability to lead sustainable growth.

It intends to further enhance the pipeline through efforts on peptides, long-acting injectables, suspensions, hormones, and vaccines as well as improve growth visibility over the next 3-4 year.

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The top 5 products formed ~45% of sales in FY20;

GLAND had ~45/51 launches in FY19/FY20, which contributed ~13%/9% to sales in FY19/FY20;

The US market has seen a shortage of 125+ products every year CY14-19, of which 40-60% has been in injectables.

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Well-placed to benefit from products' shortage:

There are at least 12 products in Gland's existing, filed, and tentative product portfolios in shortage in the US, with an addressable market size of USD 450m+, which presents better opportunities to grow sales and expand margins.

The US forms the strong base; RoW to build further momentum:

The US is the biggest geography for GLAND, accounting for 61% of total sales (9MFY21);

India accounted for 17% of sales; within India, 42% of sales are from the B2B and 23% of sales are from B2C customers;

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While GLAND continues to file and launch ANDAs for the US market, it is also expanding its footprint in RoW -~67% revenue CAGR over FY18-20;

It has the capacity to produce 767m units of finished dosages and 11,000 kg of API per annum.

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Eight Benefits of Gland's B2B model:

Early market entry.
Access to niche portfolio.
Ability to leverage the presence of leading front end players'.
Multiple marketing partners.
Economies of scale.
Less capital investment.
Better compliance record.
Predictable growth.

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It is developing niche products and new delivery systems such as pens and cartridges for the next leg of growth;

Gland has a team of ~265 members -with expertise in the synthesis of low molecular weight injectables, steroids, and oncology drugs;

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Gland spent 3.5% of its FY20 sales toward R&D and intends to spend at similar levels to build the product pipeline.

Benefits of backward integrations:

24 of the company's critical products are supported by in-house APIs;

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These are not only kept product costs low but also help in securing the necessary supply chain control over products.

Herapin & Enoxaparin are key molecules that contribute meaningfully to Gland's total sales;

Gland has been selling Enoxaparin in India & RoW markets since FY05;

Thus, building a robust revenue base of Heparin and Enoxaparin globally by entering into newer markets.

There is a US$ 195 bn patent-protected injectables market in the US, which will ensure that growth in the generic injectables market is likely to remain strong for years.

Sustainable niche opportunity:

There has been no generic approval for the 'Caspofungin' product since Jul'18, only 6 companies distribute this product in the market, and manufacturing the product is a complex process;

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Growth led by niche launches, increased market share in US:

Gland delivered a 23% sales CAGR in the US over FY18-20, led by new launches and increased traction in existing products;

Particularly, the approval for the generic version of Caspofungin in Sep'17;

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Well-placed for opportunities arising from shortages:

12 products in Gland's existing, filed, and tentative product portfolios are in shortage in the US -with addressable market size of USD 450m+ -providing the company better opportunities to grow its sales and expand margins.

62% shortage of drugs in the US:

Quality issues were the main reason for the shortage;

Within the generics category, plants for injectables are more difficult to maintain in compliance with regulatory norms -due to the requirement for the sterile processing of the drugs.

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Gland benefits from a consistent compliance track record:

A proven track record of regulatory compliance, with no warning letter in the company's history.

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It is also expanding its footprint in RoW markets, driving overall earnings growth of sales 9% in FY20 and 16% in 9MFY21;

Revenue from the sale of goods in India stood at INR 3b in FY20, of which INR 2b came from B2B customers (42% of India sales);

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Sales from marketing representative -promoted B2C segment stood at INR 1.1b in FY20 (23% of India sales);

Services revenue stood at INR 1.1b in FY20 (22% of sales).

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With new product launches in RoW markets, revenue contribution from these segments increased to 16% in 9MFY21 v/s 9% in FY20;

Revenue in these markets to grow to 7x over FY20-23, driven by expansion into new markets and new product launches in current markets.

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Injectables industry growing faster than other dosages and believed to have better margins with more stable business, subject to consistent compliance.

US accounts for 36% of generic injectables market:

US posted the highest growth in generic injectables over CY15-20;

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Over this period, the US generic injectables market expanded at a CAGR of 12.2% from USD 27b to USD 48b;

China, came in the slowest in terms of growth -posted a CAGR of 1.3% to USD 33b in CY20 from USD 31b in CY15;

US represents an attractive market for generic injectables;

On the other hand, China remains significantly untapped, Gland -with its proven track record in injectables, could look at entering the market with the help of its parent Fosun Pharma.

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Weaknesses:

Yet to have forward integration on the distribution front;

Requires continued investment for growth as it operates in a Capex-heavy industry;

Concentration in mostly injectables dosage forms.

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End of thread 🧵