This newly listed firm doubled investors’ money in just 8 months; holds many ‘Buy’ calls

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Investors who bet on the initial public offer (IPO) of Gland Pharma must be among the happiest lots as shares of the company have more than doubled since listing in November 2020. The scrip has jumped 132% to Rs 3,484 on July 5 from the issue price of Rs 1,500.

Analysts on Dalal Street hold a ‘Buy’ rating on the pharma firm on hopes that vaccine production will spike revenue over the next two years. Of late, the company posted a net profit of Rs 997 crore for the financial year ended March 31. It had reported a profit of Rs 772.9 crore last year. Consolidated revenue from operations for the financial year ended stood at Rs 3,462.9 crore against Rs 2,633.2 crore in the preceding fiscal.

While announcing the latest financial results, Srinivas Sadu, MD and CEO, Gland Pharma said, “Overall the business has performed well and grew steadily during these challenging times. The new vaccine business is expected to accelerate the company’s long-term strategy of entering into the Biosimilar space.”

The company is expected to invest about Rs 270 crore in its new biologics facility to produce the Russian Covid vaccine Sputnik V and production of the vaccine is likely to kick off by the third quarter of FY22.

Glands core markets consist of the US, Europe, Australia and Canada. Collectively, these core markets constitute around 68% of the company’s overall FY2021 revenues. Gland’s revenues from core markets grew by a handsome 22% for FY2021 with US sales growing by 21% to Rs 2126 crore and constituted around 90% of the core market revenues. Growth could be largely attributable to the volume pick up in existing products coupled with new product launches such as – Micafungin, Bivalirudin and Ziprasidone offering a significant addressable market opportunity.

“Going ahead, growth in the US markets is expected to be strong, backed by multiple positives. Gland has a strong product pipeline in the US with a total of 284 ANDA fillings done as of FY2021 and of these, Gland has received approval for 234 ANDAs while 50 are awaiting approval,” Sharekhan said.

The company is an established player globally in sterile injectables and is one of the fastest-growing generic injectable companies. The injectables space inherently has high-entry barriers, thus pointing to relatively low competition. It has extensive and vertically integrated injectables manufacturing capabilities and has a consistent regulatory compliance track record, with no observations received from the USFDA.

Shareholding pattern

As of March 31, promoters including Fosun Pharma Industrial Pte, Ample Up, Fosun Industrial, Lustrous Star and Regal Gesture together held a 58% stake in the company. Fosun Pharma is a leading healthcare group in China. Market watchers believe that strong parentage to aid smooth entry and faster penetration in China.

“Gland enjoys a strong parentage from its Chinese parent company, which has a well-established presence in that nation. China has emerged as one of the strong growth levers for Gland as the Chinese regulators are fast-tracking approvals for drugs that are off-patent and have approvals from the other regulators such as the EU and the US,” Sharekhan said.

Should you buy?

Brokerage Sharekhan has a ‘Buy’ rating on Gland Pharma with a price target of Rs 4,100. “A confluence of multiple growth drivers are expected to boost the overall performance for Gland. A sturdy product pipeline, opportunities from drug shortages and from loss of exclusivity of products and high entry barriers for the injectables space would boost US sales, which are expected to clock a 20% CAGR over FY2021-FY2023. Further Gland is expected to benefit from the emerging opportunities in the China markets, leveraging the strong muscle of its parent company which has an established presence in China,” the brokerage said.

On the other hand, Bernstein last month initiated coverage on the stock with a price target of Rs 3,824. “We view biosimilars contract manufacturing and injectables in China as long-term opportunities that can fundamentally shift the growth trajectory. We estimate EBITDA of $0.5-0.6 per dose from the Sputnik V deal and believe this segment can contribute 20% to revenues in the long term.”