After API subsidiary sale, Glenmark aims to check R&D spends, expand margins

Glenmark Pharma's R&D expenditure will come down to 7-7.5 percent of sales after the disinvestment in subsidiary

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26 Aug, 2025 12:21

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Unpleasant experiences induce caution. After being forced to shed assets to reduce debt, Glenmark Pharma is reorienting its business strategy and plans to control costs.

Glenmark Pharmaceuticals’ R&D spending will come down post its stake sale in Glenmark Lifesciences, the company management said addressing reporters during the press meet on the disinvestment on September 21.

“Currently, the company spends around 8-8.5 percent of its sales (income) on R&D. This will come down to 7-7.5 percent after the transaction,” CMD Glen Saldhana said during the press meet, and added that Glenmark Pharma's margins will expand due to lower R&D spends.

High R&D spends and capital expenditure in the past are partly responsible for Glenmark's high debt and pressure on cash flows. The company has decided to sell 75 percent stake in its API unit Glenmark Lifesciences for Rs 5,652 crore, which will strengthen its balance sheet.

Also read: Nirma makes big pharma push; acquires 75% in Glenmark Life Sciences for Rs 5,651 cr

Analysts at ICICI Securities expect R&D expenditure to be calibrated going forward. “The divestment will clear the current debt pile, but in the long run the company will continue to require cash to fund its R&D budget of Rs. 1,300-1,400 crore, the marketing cost of Ryaltris, and an ailing US generic business,” noting that the disinvestment is a short-term solution for the issues faced by Glenmark Pharma.

The company has a history of heavy R&D spends. It had spent around Rs 1,262.23 crore in FY 17 on R&D, which was 14.20 percent of its sales, according to Bloomberg adjusted numbers. Few companies had this level of R&D expenditure. Dr. Reddy's came close with a 13.9 percent expenditure in that period with Rs 19,55.1 crore.

The company spent Rs 12,50.4 1,250.4 crore on R&D in FY 22-23, or 9.8 percent of sales, similar to the level of its peers. According to Bloomberg data, industry leader (by market capitalisation) Sun Pharmaceuticals spent almost 9.9 percent of its revenue on R&D in FY 22-23, while Dr. Reddy’s spent 7.90 percent. However, it must be noted that Dr. Reddy’s had a revenue of Rs 24,587.9 crore and Sun Pharma had a revenue of Rs 43,278.87 crore in FY 22-23. Glenmark had a revenue of Rs. 12,725.43 crore that year.

Consolidated R&D expenditure for other Indian pharma companies

"We can’t say that R&D expenses have reduced. Rather, they have flattened out (in absolute monies)," said Abdulkader Puranwala, Assistant Vice President of ICICI Securities. "One reason for the reduction of overall expenses would be the commercialisation of Ryaltris. Earlier, they had to bear the expenses of clinical trials for this product. But now they are not running any large trials and hence spends on clinical products have reduced comparatively," he added.

Ryaltris as in is a combination of a steroid and an antihistamine administered intranasally for the treatment of seasonal allergic rhinitis. Sold in 15 markets, analysts cite this product as a reason for the company’s sales momentum in the EU.

Also read: Glenmark Life Sciences deal to reduce parent’s debt, make it net cash positive: CMD

Currently, Glenmark Pharma has three molecules in its speciality/ innovative pipeline, according to its Q1 FY 23-24 earnings presentation. Its fully owned subsidiary Ichnos has seven molecules in the innovative biologics pipeline. Biologics are medicines that have been created using living cells or organisms, among other things.

“Currently, 50 percent of their R&D expenditure is in generics and the other 50 percent is on NCE (New Chemical Entity). They intend to bring down the R&D expenses in NCE,” said Param Desai, Senior Research Analyst at Prabhudas Lilladher. They could also be planning a stake sale in Ichnos – the NCE subsidiary, he noted. An NCE is a drug in the early stages of development that's yet to be approved.

Desai also added that the drop in R&D expenses will have a positive effect on the company’s margins. The EBITDA margin of Glenmark Pharmaceuticals for Q1 FY 23-24 was 18.6 percent, while Glenmark Lifesciences had a margin of 33.7 percent.