Gland Pharma: A Compounder for long-term

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Incorporated in 1987, Gland Pharma Limited is large-cap pharma stock with Rs 52000 cr market cap. This company is one of the fastest-growing Generic Injectable co in the world.

GLAND stands out in the pharma universe with a solid track record of developing and commercializing complex products in the injectables space supported by R&D and regulatory capabilities.

GLAND is progressing well on building a complex product pipeline, backward integration, and gaining market share in commercialized limited-competition products.

GLAND has generated Superior return ratios (5 yr avg ROCE: 29%) at minimum leverage and has been steadily growing Asset Turns leading to value unlocking.

The gradual shift from solid oral inhalation to injections/infusions is also a growth generator for the sector hence the company.  Gland grew at a CAGR of ~ 38% from 2014 to 2019.

The company generates most of its revenue from outside India as its Key market is the USA & Canada.

More about injectable market dynamics is detailed in this video:

It was the fastest-growing small-molecule generic injectables company in its core market i.e. United States market.

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Key Triggers for Gland Pharma Growth are:

  • Tailwinds of Unmet Demands: The company is riding tailwinds of unmet demand due to a shortage of injectables in its Key market -the USA. As it is well-placed to benefit from products under shortage list: The US market has seen the shortage of 125+ products every year over CY14–19. There are at least 12 products in Gland’s existing, filed, and tentative product portfolios in shortage in the US, with addressable market size of USD450m+
  • US Market Share: The overall US forms a strong base; ROW to build further momentum and China is a lever which will be played with the help of the promoter (Fosun – A Chinese Pharma major) in the coming 2 -3 years
  • Backward Integration: In addition to 4 formulations plants, Gland has 3 API plants located in Hyderabad and Visakhapatnam. The API plants have received approvals from USFDA (US), & Drug authorities of UK, Brazil, Australia, Germany)
  • Impeccable compliance track record with no EIR/ observations from USFDA  indicating low regulatory risk
  • Covid Triggers: Gland is one good example of an Antifragile business model as:

Gland Pharma has ramped up remdesivir injection supply for the Indian market. It entered into Take-of-Pay manufacturing contract for over 252 mn doses supply with RDIF (Russian Direct  Investment Fund)  for SputnikV  (The Russian Covid-19 Vaccine)

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The stock is currently available at 52 close to its peer  (Divi’s Lab) valuation multiple of 56, however, the growth driver for this company is long as it has much room to grow.

The company is in a similar stage where Divi’s lab was before 2 years (May 2019). But if we compare the 3 year Profit growth rate then Gland with 46% is well ahead of 31% of Divi’s Lab.

It is expected to generate a 15-20% of return over the medium term considering the triggers and tailwinds.

Further Reading:

What’s Wrong with Fine Organics?

Is Copper the New Gold?

Gland Pharma Fundamental Analysis and Valuation:

Disclaimer: Stocks mentioned are not a recommendation! These are only for educational purposes.

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Amitabh Vatsya

Amitabh Vatsya

Amitabh Vatsya is an active Investment Vlogger (http://youtube.com/c/Sadhansimplified) | Loves to share his ideas at http://wealthsutra.wordpress.com | Follow him @amitabhvatsya
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