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ICICIdirect Research Posted on 01:14pm 09-Nov-2020

IPO Review - Gland Pharma (Subscribe)

Established in Hyderabad in 1978, Gland Pharma is one of the largest and fastest growing injectable-focused B2B companies, with a global footprint across 60 countries, including the US, Europe, Canada, Australia, India and other markets. It is a niche player in sterile injectables, oncology and ophthalmic solutions with focus on first-to-file, 505(b)(2) filings and NCE- 1s. Along with its partners Gland has 267 ANDA filings (101 owned) in the US as of Q1FY21, of which 215 were approved. The company has seven manufacturing facilities in India, comprising four formulations facilities with 22 production lines and three API facilities. In 2017, Shanghai based Fosun Pharma had acquired a 74% stake in the company for US$1.09 billion.

Investment Rationale

Robust complex injectable product pipeline

Gland has one of the strongest pipelines in high entry barrier injectables segment. Its 267 ANDA filings comprise 191 ANDA filings for sterile injectables, 50 for oncology and 26 for ophthalmic related products. The company is also expanding development and manufacturing capabilities in complex injectables like peptides, long-acting injectables, suspensions and hormonal products as well as new delivery systems such as pens and cartridges. Gland continues to enhance its product portfolio to offer a diverse suite of products to cater to the growing demand for injectables.

Integrated model with strong regulatory track record

Gland has three API facilities that provide in-house manufacturing capabilities for critical APIs. Owing to backwards integration, it can develop products that other companies may not focus on due to uncertainty of their API supply. Vertical integration also helps achieve greater control over manufacturing processes to meet required standards, increase operating efficiencies, accelerate product development, strengthen product quality control and improve supply chain efficiencies. On compliance front, it had never received warning letters from USFDA since inception of each facility.

Priced at P/E of 31.7x FY20 (post issue) on upper band

With benefits of being an an out and out integrated injectable/ophthal manufacturer and B2B functionary combined, Gland offers a compelling proposition with its unblemished regulatory track record and customer stickiness besides long-standing manufacturing pedigree, justifying premium valuation. We have a SUBSCRIBE recommendation on the stock. At | 1500, the stock is available at 31.7x FY20.

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