Glenmark Pharmaceuticals Ltd Q1 FY2025 Concall Summary

Key Takeaways

• India and Europe carried the quarter: India formulations grew 11.9% YoY (secondary sales +16.9%) and Europe surged 21.4% YoY, offsetting a still-challenged U.S. business that posted only 3.3% QoQ growth.
• U.S. recovery is a second-half bet: Management expects a significant recovery once respiratory products are approved, with the Monroe facility restart also contingent on a September FDA meeting.
• Europe could match the U.S. by year-end: Strong branded respiratory performance and a return to growth in Western European generics have management projecting the European business could be almost as large as the U.S. business by the end of this year.
• IGI partnership is the FY26 catalyst: The goal this year is proof-of-concept for lead asset 2001, with clinical data at ASH in December; a partnership is targeted for sometime next year, which would substantially reduce R&D spend.
• What to watch next quarter: Whether respiratory product approvals materialize to unlock the promised H2 U.S. recovery, and any update from the September FDA meeting on Monroe.

India Business: The Growth Engine

• Broad-based outperformance: India formulation business grew 11.9% YoY while secondary sales grew 16.9% against an IPM growth of 8.7%, with growth almost doubling in cardiac and dermatology versus the market.
• Consumer care momentum: Primary sales reached ₹87 cr, up 11.3%. Candid Powder delivered 22% revenue growth and hit its highest monthly market share of 58.8%, while La Shield grew secondary sales 12.1% YoY.
• Full-year expectation: Management expects 10% to 15% India growth on a full-year basis.
• Liraglutide tailwind: The company expects to continue gaining market share in the second half, though management noted the GLP-1 market remains under-penetrated and a shift toward semaglutide is likely post-2026 when that molecule goes off patent.

Glenn Saldanha: "But I think keep in mind that semaglutide goes on patent in '26. So there will be some shift, which will happen between lira, sema and some of the other anti-diabetic treatments, right, post '26."

U.S. Business: Waiting on Respiratory

• Challenging quarter: North America revenue was ₹780.8 cr, growing only 3.3% QoQ. The business remains challenging and the recovery narrative is pinned entirely to the second half.
• Respiratory approvals are the unlock: Management expects a significant recovery once respiratory products are approved. Key filings include two ANDAs for generic nasal sprays and an ANDA for generic Flovent 44 mcg (pMDI), with work ongoing on the other two Flovent strengths.
• Monroe facility restart: The FDA has granted a meeting in September; management is hoping the facility will restart, which would add injectables capacity to the U.S. pipeline.
• Medium-term pipeline: Beyond respiratory and injectables, the company has sole first-to-file opportunities on Gabapentin Enacarbil, Beta, Calci foam, and a unique position on Axitinib, though management declined to give specific launch timelines beyond "H2 broadly."
• Baddi site deprioritized: For the time being, the focus for the U.S. market from the Baddi site is reduced and not significant.

Glenn Saldanha: "The U.S. business continues to remain challenging. But I think the second half of this year, right, once we get our respiratory products approved, right, I think that's when you'll really see the recovery, right?"

Europe: The Rising Counterweight

• Strong double-digit growth: Europe grew 21.4% YoY, with CEE markets like Czech Republic and Poland recording high double-digit growth aided by the branded respiratory portfolio including Ryaltris and new product launches.
• Western Europe generics returned to growth: The generic and tender business in Western Europe turned around and contributed to the quarter.
• Converging with the U.S.: Management stated the European business could be almost as big as the U.S. business by the end of this year, marking a significant shift in the company's revenue mix.
• Respiratory pipeline in Europe: Four additional respiratory products filed in Q4 FY23 are awaiting approval, which would add further momentum.

Glenn Saldanha: "And given the European performance, right, we are thinking that the European business could be as big as -- almost as big as the U.S. business by the end of this year. So there is a big shift in the overall revenues for the company if you look at the overall picture."

Ryaltris & Partnered Assets: Global Rollout Underway

• Ryaltris market share gains: The product holds high double-digit market share in Australia, Czech Republic, South Africa, Italy, and Poland. Hikma, the U.S. partner, recorded better YoY performance backed by strong demand and increasing coverage, while Menarini, the EU partner, witnessed steady market share increases.
• Launch pipeline: Ryaltris will be launched in 10 to 11 additional markets over the next year. It was recently approved in Mexico and launched in Kenya and Saudi Arabia. China's NDA was accepted in February 2024 with approval expected sometime in FY26.
• WINLEVI launch timeline: The distribution licensing agreement covers 15 European markets, the U.K., and South Africa. Plans are to launch in select markets in FY26, though some markets could see a launch by the end of this year.
• Envafolimab filing push: Plans are to file in more than 20 markets in FY25, with the first market launch expected in FY26. The asset, licensed from Jiangsu Alphamab and 3D Med, is the first subcutaneous PD-L1 inhibitor and has treated over 30,000 patients in China.
• BeiGene oncology agreement: In May 2024, Glenmark entered into an agreement for marketing and distribution of Tislelizumab and Zanubrutinib in India, marking the company's second differentiated oncology product after Akynzeo IV.

Ichnos Glenmark Innovation: The FY26 Catalyst

• Lead asset 2001 progressing to PoC: The goal this year is to reach proof-of-concept, with clinical data to be presented at the ASH conference in December. Management reports seeing very good data.
• Partnership targeted for next year: If a partnership materializes around asset 2001, IGI R&D spend, which is approximately ₹5.5 cr for the full year this year, would reduce substantially in FY26.
• Pipeline prioritization: Asset 1442 is taking longer to get to PoC and will follow 2001. Asset 1342 is not receiving further clinical work and is actively being shopped for partnerships.

Glenn Saldanha: "This year, our goal with IGI is to get to PoC, and we are seeing some very good data on 2001, which we'll present at ASH. And next year, you should see some partnership activity, right? I mean that's the road map for IGI."

Margins & Financial Levers

• Gross margin range-bound: QoQ gross margin was lower despite higher India and Europe sales. Management stated the normal range is 65% to 67%, plus or minus 1% depending on product mix and yield, and expects it to stay close to that band.
• Full-year EBITDA margin guided to ~19%: Key contributors include high-margin India business, Ryaltris at approximately \$80M in sales, respiratory product approvals and launches in Europe, and lower R&D expenses. H2 is typically better due to the respiratory seasonal uptick.
• Depreciation and tax tailwinds: Depreciation was lower due to prior-year write-downs and limited block additions, and is expected to remain consistent through the year. The tax rate was lower because Ryaltris and other profitable entities are based in lower-tax European jurisdictions, with a full-year range of 25% to 27%.
• Working capital: Expected at 70 to 75 days, with some uptick possible as the business grows, especially on the receivables side.

Guidance & Commitments

Key Metrics