Buy Glenmark Pharmaceuticals; target of Rs 1200: ICICI Direct

US generics comprise 31% of total turnover and have grown at a CAGR of 24% in the last five years. Total USFDA filings as on date are 171. So far, the company has received approval for 110. From the 61 pending ANDAs, 23 are Para IV applications. Key therapies in the US are oral contraceptives, dermatology and CVS. The new focus areas in the US will be oncology and respiratory. We expect US sales to grow at a CAGR of 21% in FY16-19E to Rs 4277 crore on the back of new launches.

H1 revenues were boosted by strong growth in the US, India, Russia, and other emerging markets. US growth was commendable in the backdrop of persistent pricing pressure and channel consolidation as highlighted by most peers. Going ahead, the US franchisee looks promising with launches like gZetia, gCrestor and strong pipeline of 61 pending approvals (including 23 Para IVs). Domestic formulations continue to maintain a higher trajectory on the back of market share gain in key therapies. Europe and Russia continue to buck the trend on the back of new product launches and strong respiratory traction. We have not considered the NME pipeline in our valuation but expect some positive development on that front (seven products under development) in FY17- FY19E. High leverage and lumpiness in some geographies are, however, some legacy overhangs. We have ascribed a target price of Rs 1200 based on 20x FY19E EPS of Rs 60.1.