Lirafit Launch And BeiGene Partnership Set To Accelerate Revenue Growth And Market Share

Key Takeaways

• Upcoming biosimilar launches and strategic oncology partnerships could significantly boost Glenmark's revenue and market share in India.
  
• Glenmark's global expansion and new product launches may enhance revenue growth, while resolving GMP issues could improve margins and reduce operational costs.
  
• Ongoing market challenges and operational expenditures may pressure Glenmark Pharmaceuticals' revenue stability and profit margins, with particular issues in North America and anticipated supply disruptions.

Catalysts

Develops, manufactures, and sells generics, specialty products, and OTC pharmaceutical products in India, North America, Latin America, Europe, and internationally.

• The anticipated launch of Glenmark's new biosimilar products, particularly in the GLP-1 market with Lirafit and other GLP-1 agonists, could significantly boost revenue and market share in India due to their strong traction and exclusivity.
  
• The strategic collaboration with BeiGene for oncology products such as Tislelizumab and Zanubrutinib is expected to enhance Glenmark's revenue growth in India by tapping into the expanding oncology market once regulatory approvals are received.
  
• The projected high single-digit growth in the Rest of World (RoW) market by the end of FY '25, driven by product launches and increased market penetration, could positively impact Glenmark's overall revenue growth in the coming fiscal years.
  
• The expected resolution of GMP clearance for the Monroe facility by the end of the year could allow for commercial production to resume, potentially improving margins and earnings by reducing operational expenses and increasing capacity.
  
• The progress and potential partnership for the innovative oncology asset ISB 2001 could transform the company's earnings outlook and reduce reliance on internal funding for innovation, thus impacting future profitability and cash flow positively.

Glenmark Pharmaceuticals Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Glenmark Pharmaceuticals's revenue will grow by 11.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -7.8% today to 19.2% in 3 years time.
• Analysts expect earnings to reach ₹34.3 billion (and earnings per share of ₹78.11) by about January 2028, up from ₹-10.2 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.4x on those 2028 earnings, up from -40.3x today. This future PE is greater than the current PE for the IN Pharmaceuticals industry at 29.7x.
• Analysts expect the number of shares outstanding to grow by 15.9% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.15%, as per the Simply Wall St company report.

Glenmark Pharmaceuticals Future Earnings Per Share Growth

Risks

• The North America business has experienced a year-on-year revenue decline of 1.2%, indicating ongoing challenges in this key market that may affect overall revenue stability.
  
• The Rest of the World (RoW) region saw a revenue decline of 4.1% for the quarter, which could potentially dampen overall revenue growth if not corrected in subsequent periods.
  
• There is continued expenditure on carrying out operations at the Monroe plant, with an annual operating spend of approximately ₹25-26 million, which, without revenue generation, could pressure operating margins.
  
• Anticipated supply issues with key products like Lirafit may impact sales growth in the Indian market, potentially affecting both revenue and market share growth.
  
• A shift towards lower margins in the U.S. due to intense generic competition and ongoing price erosion in the market could limit profit margins and earnings potential from this region.

Valuation

• The analysts have a consensus price target of ₹1741.46 for Glenmark Pharmaceuticals based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₹2036.0, and the most bearish reporting a price target of just ₹1345.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ₹179.1 billion, earnings will come to ₹34.3 billion, and it would be trading on a PE ratio of 31.4x, assuming you use a discount rate of 12.2%.
• Given the current share price of ₹1453.6, the analyst's price target of ₹1741.46 is 16.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.