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Glenmark Pharma Ltd.

BSE: 532296 | NSE: GLENMARK |

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Series: EQ | ISIN: INE935A01035 | SECTOR: Pharmaceuticals

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Annual Report

For Year :
2018 2017 2015 2014 2013 2011 2010 2009 2008

Chairman's Speech

Dear Shareholders,

The year gone by was challenging on multiple fronts. In the US market, pricing pressure from heightened competition and changing regulatory environment, combined with the expiry of marketing exclusivity on a large number of generic products, impacted growth. In India, implementation of the Goods and Services Tax (GST) and the period of adjustment that followed took their toll on the industry and Glenmark was no exception. The changing margin profile of a rapidly commoditising generics business in the US also hurt our profits, especially since we did not pare investments in research and development (R&D) that are the key to longterm growth and profitability. However, a strong performance in regions such as Europe and some Rest-of-the-World (ROW) markets helped mitigate the impact. Total revenues in 2017-18 remained flat.

We do not expect these challenges to go away in a hurry. As we foresaw, to survive and thrive in the pharmaceutical business, companies need a long-term vision and a clear pathway to execution. And it is for precisely this reason that Glenmark, in its fortieth year, feels prepared to weather the storm better than most others.

In 2017-18, we made progress in the execution of our strategic blueprint for the next decade that I shared with you last year. This lays out the path for Glenmark to transform into an innovation-led global pharmaceutical company with an optimal mix of generics, specialty and research-driven novel products. It also envisions blending our own skills with those of our partners to achieve our goals.

In India, after the initial hit from GST implementation, the base business recovered steadily and was supported with new launches of exciting products such as Aprezo. Being the first to launch, we were able to garner significant market share. We also launched an in-licensed dermatology product, Nourkrin® Woman, a scientifically-proven formula for hair loss. The Indian market, while an exciting opportunity, faces more governmental action on a range of issues such as pricing and access. Our focus, therefore, is to build a resilient business that dominates the therapy areas that we operate in by launching differentiated products.

We will continue to enrich our pipeline with our own and partner-sourced products in our focus therapy areas of Respiratory, Dermatology and Oncology.

The Indian consumer care business, launched few years ago, continues to grow rapidly and clocked over USD 23.29 Mn in revenues.

In a short period of time, it has created a successful and valuable over-the-counter franchise for Glenmark in the Indian market with three power brands: Candid Dusting Powder, VWash Plus and Scalpe . VWash Plus created the female intimate hygiene category in India and has moved closer towards owning the intimate hygiene space with the launch of VWash Wow Sanitary Napkins.

In the US, revenues declined primarily on account of the anticipated conclusion of marketing exclusivity for generic Zetia®. However, we expect performance to improve in the current year spurred by more product launches such as the two high-potential generics — skin ointment Tacrolimus and cholesterol drug Colesevelam — approved in the first quarter of FY19. We filed 16 generic drug applications and received 21 product approvals in FY18.

We plan to counter commodisation of the US generics by developing complex, differentiated products with higher barriers to entry than vanilla generics. In parallel, we are turning more cost-efficient and prioritising product selection during development and after commercialisation to maximise returns from each product launch. Our new production facility in Monroe in the US, where we have made substantial investments, recently completed an FDA inspection.

We expect to ship products from the Monroe facility in the second half of FY19 starting with oral solids followed by nebulizers and injectables. This facility reinforces our commitment to the US market.

The European business grew strongly at 27% led by the launch of Salmex, a generic version of Seretide® Accuhaler® in the Nordic region. This is our first inhaled respiratory product approval in that region. In Denmark, our generic secured substitutability, paving the way for faster and more efficient uptake and saving costs for the healthcare system. Generic Seretide® is a huge opportunity for us with a market size of USD 700 Mn in the European countries where we operate.

We marked our foray into the OTC segment in the UK with the launch of the anti-malarial Maloff Protect for citizens who visit countries where malaria is prevalent. The licence from the UK drugs regulatory agency makes Maloff Protect a non-prescription product, available to consumers in consultation with an in-store pharmacist. We will continue to explore the OTC segment in this region. We expect the European business to continue its strong growth trajectory in the current year too, with focus on improving profitability through the right product mix and strengthening the supply chain.

Latin America continued to be a work-in-progress, showing a slight decline in revenues. However, markets such as Brazil and Mexico, while difficult, also have a significant branded pharmaceuticals business. We will stay the course here and expect a turnaround with the launch of our proprietary products over time.

Among Rest-of-the-World (ROW) markets, Asia and Africa performed well, but the Russian business was impacted by weakness in sales of our leading brands such as the cough syrup Ascoril on account of a poor flu season. In Russia, Glenmark is among the Top 10 companies in dermatology therapy, while in the cough/cold market, Ascoril is the leading brand. We have stepped up marketing activities to strengthen our key brands and are expanding our portfolio through new launches. The Russian business has picked up pace in FY19.

The Active Pharmaceutical Ingredients (API) business is poised to make the most of an unfolding opportunity created by the raising of emission standards for the API industry in China, the leader in API production. Also, as China moves up the value chain, more API production is likely to shift to India, thus creating an opportunity for those prepared to deliver. Glenmark’s over 15-year old API vertical is now a large business based on strong product selection, focused on key regulated markets, with high levels of operational efficiency and a strong culture of compliance. It has built robust R&D capabilities to develop a cost-efficient and attractive pipeline to overcome the challenges of the market. We expect this business to substantially better its growth rate and are readying the ground to maximise its potential.

For over a decade, we have proactively invested in innovation, including when revenues and profits have been under pressure, as was the case in FY18. It is my pleasure to report that this commitment is bearing fruit. We have crossed a significant milestone in the filing for marketing approval of Ryaltris™, our first branded, specialty product with the US FDA. Ryaltris™, a novel fixed dose combination of two drugs in a nasal spray format for seasonal allergic rhinitis, is a product of Glenmark’s proprietary R&D and a validation of its capabilities.

We expect a launch towards the second half of CY19.

Another promising product is GBR 310, a biosimilar of XOLAIR® for asthma and Chronic Idiopathic Urticaria, which completed Phase 1 in FY18 and is likely to enter Phase 3 in FY19. It has the potential to be the first biosimilar of XOLAIR® on market. Products such as Ryaltris™ and generic XOLAIR® will help the Company move beyond the competitive generics landscape in the US on a sustainable basis.

In parallel, our new drug candidates, based on our breakthrough bispecific antibody (bsAb) production platform BEAT®, are making steady progress in the clinic. The bsAb technology shows promise for its ability to aim at not one but two targets in the body implicated in cancer, potentially improving effectiveness over other therapies. Our bsAbs have also shown immunological activity in addition to tumour cell killing, thus opening another flank in battling the disease while also ensuring a favourable safety profile.

The lead molecule from this technology, GBR 1302, is moving to late Phase 1 where we are dosing against different types of HER2 positive cancers. We are also looking to commercialise the asset across HER2 cancers in certain markets through partnerships such as the one recently announced with China’s HarbourBioMed. GBR 1342, indicated for multiple myeloma, is in Phase 1 of clinical studies. We have presented data from studies on both these molecules at prestigious, international forums such as ASCO and ESMO.

Among our NBE pipeline candidates, the OX40 antagonist, GBR 830, is currently being studied as a treatment for atopic dermatitis with a Phase 2b study initiated in Europe and the US. Data from Phase 2a of clinical studies suggests it has the potential to be a broad, anti-inflammatory drug for autoimmune diseases across indications.

It is being evaluated in other immunology indications too.

From a compliance perspective, we completed 132 regulatory and customer audits. Our quality team is doing a phenomenal job instilling a culture of quality across the organisation. This will continue to be a priority for the Company.

In response to the challenging global environment, we are running several organisation-wide cost-efficiency initiatives. As you are aware, the pharmaceutical industry is currently facing several headwinds and it is imperative for us to take relevant measures to maintain growth momentum and achieve our ambitions. For this, we must optimise our internal processes to capture all available synergies and improve operational efficiencies, particularly in the area of indirect expenses. It is also vital that day-to-day operations are not impacted while we realise these synergies. This will continue to remain our thrust area for the next several years.

As a responsible business, we are cognizant of the need to conserve precious natural resources. We track several key environmental indicators to assess the performance of all our facilities. Ensuring health and safety of all our people is another critical operational priority where we invest significantly in technology, processes, programmes and training. Our state-of-the-art manufacturing units and research centres worldwide hold various certifications, including ISO 14001:2015 and ISO 18001:2007.

We have positively impacted one million lives across the globe through our Corporate Social Responsibility initiatives, including programmes on child health. It is a matter pride for Glenmark that these social causes are whole-heartedly embraced and championed by our people as part of Glenmark’s annual festival of philanthropy, the Global Joy of Giving.

As mentioned earlier, Glenmark has been laying the groundwork to continue winning in a more competitive environment. Our priorities in FY19 include improving our profitability and differentiating our business with complex, specialty and innovative products through a combination of in-house development and partnering. We will continue to focus on our key therapy areas of Respiratory, Dermatology and Oncology where we are acquiring formidable R&D, manufacturing and marketing skills and experience.

For the Indian pharmaceutical industry the environment is fraught with seemingly insurmountable difficulties, whether from the standpoint of business, policy or regulation. Many in the sector are now struggling to reinvent themselves and to some of them, the future might well appear bleak. Glenmark, however, is on the cusp of a transition. The difficulties endured in the short term are lightened by the prospect of a transformation that is within sight. This is being made possible by key decisions taken with foresight at different points of time in our 40 years of existence. With the launch of Ryaltris™ in the foreseeable future, we mark the first major milestone in our strategic roadmap that envisages specialty and innovative products contributing 30% of our revenues by 2025.

None of this would have been possible without the hard work, dedication and ingenuity of our employees and the support of our investors over the last four decades of our existence. We look forward to continued support from both.

Yours Sincerely,

Glenn Saldanha

Chairman & Managing Director