Drops Savings and Investments

Many drops make an ocean!

Posts Tagged ‘Buy’

Investment in Glenmark Pharma

March 15th, 2010

Glenmark Pharma looks attractive for investment with an expectation of 45% return in 2-3 years. I added Glenmark Pharma to my portfolio buying a few shares today at Rs. 239.40 per share. It is third company in my portfolio from pharma sector, other two being Piramal Healthcare and Biocon. With this investment, pharma sector constitutes 10% of my total Indian equity portfolio at current market price.

Reasoning for investment

While first three quarters of the financial year 2009-10 has seen a lukewarm performance reported by the company, the scenario is expected to improve fourth quarter onwards as the businesses begin to pick up. Glenmark Pharma is expected to report strong growth going forward as its generics business in the US, Latin America, Europe and semi-regulated markets scales up. Management’s ability to strike out-licensing deals for its molecules and a strong R&D pipeline at present with potential going forward makes Glenmark’s prospects bright.

Recently the company got final approval from US Food & Drug Administration for Ropinirole Hydrochloride tablets in multiple strengths. Ropinirole Hydrochloride tablet is the generic version of GlaxoSmithKline’s Requip tablets. The drug is used for treating signs and symptoms of idiopathic Parkinson’s disease. The annual sales of the drug in the US is about $500 million.

As in any business, there are risk factors too to be considered when investing in Glenmarks Pharma’s shares. The high debts position, realisation from R&D front, increased competition and price erosion in the US generic markets are some of the risk factors going forward. Due to the global financial crisis and its impact on companies, revenues from the out-licensing deals may not be as forthcoming for some time as they once were. This will have an impact on Glenmark’s margins.

The company continues to be in talks with global pharma majors to garner some out-licensing deals. The fact that the company was able to bag such a deal with Medicis Pharmaceuticals USA is an encouraging sign.

Company is already working towards reducing the debt burden. The cash generated from the improved performance of its business will go towards paying off this debt. Besides this, the company has filed a draft prospectus with the SEBI for listing Glenmark Generics and part of the proceeds from this listing will also be used to retire debt.

About Glenmark Pharma

Glenmark Pharmaceuticals Limited was incorporated in the year 1977. Glenmark Pharma is a mid-sized Indian pharma company with focus on niche therapeutic areas of dermatology, gynaecology, paediatrics and diabetics. The domestic formulations business contributed about 29% to the company’s revenue in FY09. On the international front, while exports to the semi-regulated markets have been growing at a strong pace, the company is also strengthening its presence in the US and European generics market on its own and through the partnership route. The company is also focusing on R&D.

Glenmark is a leading player in the discovery of new molecules both new chemical entity and new biological entity with eight molecules in various stages of clinical development. The company has a significant presence in branded generics markets across emerging economies including India. Its subsidiary, Glenmark Generics Limited has a fast growing and robust US generics business. The subsidiary also markets APIs to regulated and semi-regulated countries. Glenmark employs nearly 6000 people in over 80 countries. It has twelve manufacturing facilities in four countries and has five R&D centres.

1 comment »

Posted in Indian Shares

Tags: Buy Equity Return Glenmark Pharma Recommendation

Bought Biocon Limited

February 23rd, 2010

I bought Biocon Limited at 270.75 today. Pharmaceutical sector is a good defensive sector to be included in one’s equity portfolio. At present I have only two companies from pharma sector and with this buy, pharma constitute 7% of my total equity portfolio.

Biocon is a fully integrated biopharmaceutical company with expertise in the fields of biopharmaceuticals, custom research and clinical research. The company is a bulk drug supplier and has a market share of about 40% in the European market in bulk statins a drug class used for treatment of cardio-vascular diseases. Biocon is the largest Indian company in the biotechnology space and has a strong product portfolio.

The biopharmaceutical segment contributes 75% to the Indian biotech industry’s revenues and has been the key growth driver. The Indian biotech industry is expected to generate US$ 5 bn in revenues by 2010 and create more than one million biotech jobs over the next five years. On a global basis too, the biopharmaceutical market has undergone rapid expansion since its emergence 30 years ago.

The positive points for Biocon are healthy operating margin, long term earning growth, decent return on capital invested, consistent dividend payout history, larger promoter holding, lower FII holding, high liquidity, reasonable current ratio and low leverage.

In the global scale, while the fundamental factors driving the industry remain strong, the same is bogged down by intense competition and severe price erosion. The Indian domestic pharma industry is expected to grow at a CAGR of 16% over the next five years, however company’s success is highly depended on R&D efforts, and industry is fragmented and highly competitive. Thus the risk is that whether the company will be able to withstand these industry risks.

Recently Equitymaster recommended Buy with a target price of 360.00 with a two-three year perspective in their paid research service. HDFC Securities has recommended buy rating on the stock of Biocon with a target of Rs 327, in its February 11, 2010 research report. IndiaInfoline recommended buy rating on the stock with a target of Rs 320, in its anuary 14, 2010 research report.