Glenmark Life Sciences slips below issue price as stock falls 5%

On Friday, August 6, 2021, the company had made a quiet debut on the bourses as the shares listed at Rs 751.10 on the BSE

Shares of Glenmark Life Sciences (GLS) slipped below its issue price of Rs 720 per share on the BSE in intra-day trade on Monday as the stock declined 5 per cent to Rs 713.85. With today’s decline, the stock of the pharmaceutical company has slipped 11 per cent from its listing day high of Rs 799.95.

On Friday, August 6, 2021, GLS had made a quiet debut on the bourses as the shares listed at Rs 751.10, a 4 per cent premium against issue price on the BSE.

GLS, a developer and manufacturer of active pharmaceutical ingredients (APIs), is a wholly-owned subsidiary of Glenmark Pharmaceuticals. The company on Friday informed the stock exchanges that the board of directors of the company is scheduled to meet on Friday, August 13, 2021, to consider and approve the unaudited financial results of the company for the first quarter ended June 30, 2021 (Q1FY22).

GLS is a leading developer, manufacturer of select high value, non- commoditised APIs in chronic therapeutic areas, including CVS, CNS and pain management, diabetes and continues to branch into other APIs. It has a strong market share in select specialised APIs like Telmisartan (anti-hypertensive), Atovaquone (anti-parasitic), Perindopril (anti-hypertensive), Teneligliptin (diabetes), Zonisamide (CNS) and Adapalene (dermatology).

However, the company’s five largest customers accounted for more than 50 per cent of FY21 revenues with the promoter being the biggest customer. GLS does not typically have exclusivity arrangements with customers, including key customers. Reliance on a select group of customers may also constrain the company’s ability to negotiate arrangements, the brokerages said in IPO note.

The company’s top 10 products accounted for around two-third of FY21 revenue. If market growth in key products declines or if profit margins on products sold in key products decline, results of operations could be adversely affected. The business is subject to extensive government regulation and if they fail to obtain, maintain or renew their statutory and regulatory licenses, permits and approvals required to operate their business, results of operations and cash flows may be adversely affected, the brokerages said.

GLS’s API portfolio comprises specialised products, including niche and technically complex molecules, which reflects its ability to branch into other high value products. Although product concentration remains a key risk where top 10 products contribute 66.36 per cent. GLS aims to reduce this dependence, with planned capex in FY22, the brokerage firm GEPL Capital said in IPO note.

GLS’ FY21 P&L reflects benefits from Favipiravir (EBITDA margin 31 per cent). Interestingly, in the past 6 months (Jan-Jun’21), exports have largely been towards EM and sales have seen a declining trend. Also, Glenmark’s contribution has been negligible during this period.

Analysts at Dolat Capital expect revenue contribution from newly commercialised products to increase over the next five years. In addition, they see the complex API business as a key growth opportunity where GLS could leverage expertise in synthetic chemistry and analytical characterization to expand its existing technology platforms and complex API portfolio in oncology, peptides and iron compounds, thereby expanding existing portfolio of API products. Profit share clause in the CDMO segment could add profit optionality to this business, it added.

At 11:30 am, GLS was trading 3 per cent lower at Rs 724.95 on the BSE, as compared to a 0.30 per cent rise in the S&P BSE Sensex. A combined 2.73 million equity shares had changed hands on the counter on the NSE and BSE so far.