Glenmark Pharmaceuticals plans to raise funds by selling a stake in its drug discovery subsidiary, Ichnos Sciences, in the second half of fiscal 2021 and has engaged an investment banker for the purpose, the drugmaker has said.
Glenmark, which in June became the first Indian company to launch Fabiflu, the generic version of anti-viral favipiravir for treating mild to moderate Covid-19 patients, is battling a huge debt burden. Covid-19 is the respiratory illness caused by the coronavirus.
"…I think, with the capital raise, it will unlock a lot of value and actually ascribe a value for Ichnos, and whatever investments we've made in that entity," Glenmark Chairman and Managing Director Glenn Saldanha told analysts during an earnings call on August 17.
The Indian drugmaker had in October 2019 hived off its innovative research and development division into a separate firm, Ichnos Sciences, to explore divestment or to licence out its pipeline to fund growth plans.
Raising funds is critical for Glenmark as it has accumulated debts due to its high spending on drug development and investment on capex. Its US business, which accounts for a third of its revenue, remains muted due to price erosion.
The company’s debt was at 3,602 crore as on June 30, 2020, compared to Rs 3,758 crore as on March 31, 2020. In constant currency, net debt was down by Rs 180 crore as compared to March 31, 2020.
Ichnos is also exploring “out-licensing” deals for its molecules to help the company generate cash and continue to invest in research.
The New-York based company has four molecules in various stages of development. Two of them are possible cancer drugs, one is for autoimmune disease and the other for pain relief.
Pharma companies typically look for partners to give licences for drugs that are in various stages of development, hence the word molecule.
The licensing partner not just pays for the molecule but also for the so-called milestone achievements, which include three phases of clinical trials, and royalties on sales if the drug makes it to the market. Such deals are agreed only after the drug in making shows some promise.
In the near term, Glenmark will remain the majority shareholder in Ichnos to get exposure to its innovative platform and R&D pipeline, Saldanha said.
Ichnos is led by Alessandro Riva, a former executive of US drug firm Gilead Sciences. The US drug regulator in May cleared Gilead Sciences’ remdesivir for emergency used for Covid.
Debt reduction
Glenmark is counting on Fabiflu to do well though at least 10 other Indian drugmakers have since launched their version of favipiravir.
On August 19, Hyderabad-based Dr Reddy’s Laboratories came out with Avigan.
To take on the competition, Glenmark has also launched a 400-mg tablet to reduce the pill burden. As of now, a Covid-19 patient has to take 122 200-mg tablets for 14 days.
While the domestic formulation business has been firing for the company with antidiabetic drug remogliflozin and favipiravir ramp-up, the US business has been disappointed.
In Q1FY21, the US business grew at 1.61 percent year-on-year to Rs 742.6 crore for the quarter ended June 30.
The company is looking forward to the launch of anti-allergy nasal spray Ryaltris in the US market but the approval is expected in the second half of 2021.
The company said it has no plans to raise capital from Glenmark Life Sciences, its demerged API division.
"That's been on the back burner and will continue to stay in the back burner," Saldanha said, adding the focus would be on controlling costs.
"Glenmark expects FY21 margins to be around 19-20 percent vs 16-17 percent guided earlier (our estimates 17.4 percent). Debt reduction of Rs 1.8 billion QoQ, though marginal, was led by proceeds of Vwash sale to HUL," said Praful Bohra of Emkay Global in his latest report.
Any meaningful debt reduction and value unlocking in the innovative business (Ichnos) were key to stock rerating, the report said.
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