Glenmark’s US revenue has stagnated at $80-85 million for past eight quarters due to lack of new products (7 each in FY13 and FY14). Consequently, Ebitda margin remained flat over FY13-14 despite sharp depreciation of the rupee. GNP’s quarterly US revenue is set to move to >$90 million led by recent launches (gVanos and g Micardis) and would get a boost FY16 onwards with busy launch schedule. This, coupled with sustained growth in Emerging Markets (EMs), would drive 30% core earnings CAGR over FY14-16.
At CMP, adjusting for R&D pipeline/Zetia launch, the stock trades at 15x FY16E core-EPS of R43; 25% discount to larger peers like Cadila. We raise our target PE to 17x (from 15x earlier) to factor in strengthening US franchise. Maintain Buy with revised TP of R800 (17x FY16E EPS + R70 for R&D/Zetia launch) versus R688 earlier.
We expect US revenue to grow 23% (in USD terms) in FY16 led by potential launches — Finacea, Micardis HCT, Yaz, Yasmin, and Ortho-Tri Cyclen. Further, Zetia (180-day exclusivity; launch in December 2016) and oncology injectables would drive FY17 growth. GNP, over past 2-3 years, has focused on niche filings in areas like complex injectables, oncology injectables, immunosuppresants, apart from strengthening its derma and oral contraceptive basket. We believe the benefits of these would accrue with a lag of 2-3 years (FY17 onwards), thus providing visibility to US growth.