Glenmark Pharmaceuticals : Q4FY 2023-24

"Glenmark Pharmaceuticals Limited Q4FY24 Earnings

Conference Call"

May 27, 2024

MANAGEMENT: MR. GLENN SALDANHA - CHAIRMAN & MANAGING

DIRECTOR, GLENMARK PHARMACEUTICALS LIMITED

MR. V. S. MANI - EXECUTIVE DIRECTOR & GLOBAL

CHIEF FINANCIAL OFFICER, GLENMARK

PHARMACEUTICALS LIMITED

MR. ASHISH MUKKIRWAR - GROUP VICE PRESIDENT &

HEAD, STRATEGY, GLENMARK PHARMACEUTICALS

LIMITED

MR. UTKARSH GANDHI - GENERAL MANAGER,

INVESTORRELATIONS,GLENMARK

PHARMACEUTICALS LIMITED

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	Glenmark Pharmaceuticals Limited
	May 27, 2024
Moderator:	Good Morning, Ladies and Gentlemen. Welcome to the Q4 FY'24 Earnings Conference Call of
	Glenmark Pharmaceuticals Limited.
	As a reminder, all participant lines will be in the listen-only mode and there will be an
	opportunity for you to ask questions after the presentation concludes. Should you need assistance
	during the conference call, please signal an operator by pressing "*" then "0" on your touchtone
	phone. Please note that this conference is being recorded.
	I now hand the conference over to Mr. Utkarsh Gandhi - General Manager, Investor Relations
	for Glenmark Pharmaceuticals. Thank you. And over to you, sir.
Utkarsh Gandhi:	Good Morning, Everyone. Welcome to the Q4 FY'24 Results Conference Call of Glenmark
	Pharmaceuticals Limited.
	Before we start the Q&A, "We will review the Overall Performance for the Company for the 4th
	Quarter and the Full Year 2024."
	For the 4th Quarter of FY'24, Glenmark's consolidated revenue from operations was at
	Rs.30,630 million as against Rs.30,005 million in the corresponding quarter last year, recording
	an overall year-on-year growth of 2.1%.
	For the 12 months of FY'24 Glenmark's consolidated revenue was at 1,18,131 million as against
	Rs.1,15,832 million, recording a YoY growth of 2%.
	In terms of key highlights for the Fiscal Year '24, so across businesses, there were some key
	highlights. In the 4th Quarter, Glenmark gained two positions to be now ranked as the third
	largest Company in the cardiac segment of the Indian pharma market as per IQVIA March Data.
	Glenmark's Europe business registered a strong growth of 33.7% for the full year and the RoW
	business also recorded a robust growth of 16.1%.
	RYALTRIS was launched in seven additional markets across the globe, either on our own or
	through a commercial partner, and as of March 2024, RYALTRIS has now been launched in 34
	markets across the world.
	The Company also enhances global branded portfolio through the in-licensing of Envafolimab
	for India and RoW markets and WinLevi for some European Markets, UK and South Africa.
	Ichnos Sciences announced the worldwide out-licensing agreement for its OX40 portfolio,
	including ISB 830 with Astria Therapeutics.

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Glenmark and Ichnos entered into an alliance -- Ichnos Glenmark Innovation to accelerate new drug development in cancer. And Glenmark completed the divestment of 75% of its stake in Glenmark Life Sciences to Nirma Limited.

In terms of our performance across regions starting with India, so sales for the formulations business in India for the 4th Quarter of FY'24 were Rs.9,391 million as against Rs.8,316 million in the corresponding quarter last year, recording a growth of 12.9%.

In terms of secondary sales, Glenmark's India business continue to outperform the overall industry in terms of growth as per IQVIA March 2024 Data. Glenmark's India Formulation business recorded a growth of 11.4% in the 4th Quarter and about 10% growth as of mat March '24. In comparison, the IPM grew at 5.6% in the 4th Quarter and about 7.5% as of MAT March '24.

Glenmark continues to outperform the market in terms of its key therapeutic areas of cardiac, respiratory dermatology. We have provided a table in terms of our Q4 and MAT growth in the MDA.

Glenmark's India business continues to be ranked 14th with a market share of 2.16%. The Company continues to have nine brands in the IPM Top 300. And in terms of key therapeutic areas, Glenmark is ranked second in both in dermatology and respiratory segments. As mentioned before, Glenmark is now ranked third in the cardiac segment and is ranked 17th in the diabetes segment.

As noted in the MDA, Glenmark has also improved its market share across some of the key therapy areas.

In Jan '24, Glenmark and Pfizer joined hands to launch JABRYUS, which is Abrocitinib, which is the first of its kind oral advanced systemic treatment for moderate-to-severe atopic dermatitis in India. Developed by Pfizer, JABRYUS has received marketing authorization from the CDSCO in India and is also approved by the USFDA, the EMA and other regulatory agencies. So, Abrocitinib which is the molecule is being co-marketed by Glenmark under the brand name, JABRYUS and CIBINCO and by Pfizer respectively.

In terms of our consumer care business in India, the primary sales in Q4 were about Rs.673 million, with a growth of 3% for the full year. The GCC business recorded a growth of Rs.2,570 million with a growth of 14%. The Company's flagship brand delivered growth of 15% for the full year, Candid Powder and La Shield portfolio delivered a YoY revenue growth of 8% while Scalpe grew by 23% in full year FY'24.

During the year, various line extensions were launched and performed well, particularly a couple for La Shield and Scalpe.

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The North America business registered revenue from the sale of finished dosage formulations of Rs.7,557 million which is about US$91 million for the 4th Quarter of FY'24 as against Rs.8,628 million which was Rs.105 million for the 4th Quarter of FY'23 and Rs.7,629 million, which is about Rs.91.6 million for the third quarter FY'24. This translates into a YoY decline of 12.4% and a QoQ decline of about 0.9%. The overall business remains challenging on account of lack of any meaningful product launches and delay in scale up of some recent launches.

In FY'24, Glenmark was granted final approval on three ANDAs, Saxagliptin Apremilast and Tacrolimus 0.03%. In the 4th Quarter, Glenmark launched Levocetirizine Dihydrochloride.

Glenmark also launched several products under the licensing agreements, including some of the injectable products as mentioned in the last call.

The Company filed six ANDAs with the FDA throughout the year, and two ANDAs in the 4th Quarter.

Glenmark also leveraged its strong capabilities in the respiratory area to build a portfolio for the US market. As mentioned in the Q3 call, Glenmark has filed two ANDAs for the generic nasal sprays and is awaiting approval for the same.

In addition, happy to report that the Company has filed the ANDA for generic gFlovent 44mcg PMDI in May 2024. Glenmark also plans to file another generic respiratory PMDI for the US in FY'25 and will continue filing momentum beyond that.

In terms of another updates, there's a change in leadership for the North America business; Marc T. Kikuchi will be joining the Company as President and Business Head, North America, effective 28th of May. Marc joins us from Dr. Reddy's Laboratories, where he was CEO of the North America business since 2019. Overall, he has more than three decades of experience across the pharmaceutical industry.

Moving on to Europe, Glenmark's Europe operations revenue for the 4th Quarter of FY'24 was Rs.6118 million as against Rs.6,118 million as against Rs.6,078 million in Q4 FY'23, recording a YoY growth of about 0.9%.

The European operations continued to remain strong in terms of overall business performance. The branded market has performed well. The growth in the 4th Quarter was impacted due to some softness in the tender markets. Key branded markets across the CEE such as Poland, Slovakia recorded double-digit growth.

The respiratory portfolio that we have launched in Europe continues to do well. So, key brands like RYALTRIS and SALMEX continue to sustain their 15%-plus market share across some of the markets, both in terms of value and volume. The Company is continuing to focus on

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sustaining the increasing contribution from the branded markets in Europe. It is awaiting approval of four respiratory products which were filed in the 4th Quarter of FY'23 and we are also planning to launch WINLEVI which we licensed in this year in some markets of Europe starting FY'26.

Moving on to the ROW region, for the 4th Quarter of FY'24, revenue from the ROW region was Rs.7,528 million as against Rs.6,864 million for the corresponding quarter last year, recording a YoY growth of almost 10%.

As per the IQVIA data, Glenmark Russia business continues to perform well both in terms of Q4 as well as MAT March Data.

In terms of our key therapeutic areas, Glenmark continues to record strong growth and we are ranked 9th in the Dermatology market of Russia and in the Respiratory Expectorants market, we have grown in line with the overall market and continue to be ranked second as per the IQVIA MAT March Data.

RYALTRIS continues to gain market share in the allergic rhinitis market in Russia.

Latin America witnessed strong growth in Q4. Respiratory portfolio doing well. Glenmark Brazil achieved high single-digit growth in the covered market and the Company maintained its ranked amongst the top ten companies in the covered market of the Chronic Respiratory Segment.

Glenmark launched the First Generic Salmeterol + Fluticasone MDI in in Brazilian market in Q4 FY'24.

And across the other big market, Mexico secondary sales growth continued to be strong. RYALTRIS has been approved in Mexico and will be launched soon.

In Middle East and Africa region, Company achieved secondary sales growth in some of the key markets like Kenya, South Africa. RYALTRIS continues to be the leading nasal spray in the allergic rhinitis market for South Africa, and the product was launched in markets like Kenya and Saudi Arabia in FY'24. It is also expected to be launched in other key Middle Eastern markets such as the UAE in the forthcoming quarters.

The Asia region recorded slightly subdued growth in terms of secondary sales across its key markets due to some macroeconomic challenges in some countries. Top contributing brands across the key therapeutic areas have continued to do well and Glenmark has received some good approvals in the region, mainly in the dermatology, respiratory and oncology segment and RYALTRIS again continues to do well across the Asian region.

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Glenmark Pharmaceuticals Limited

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In terms of our endeavor to create global brands starting with RYALTRIS, as of March 2024, marketing applications for RYALTRIS have been submitted in more than 80 markets. Product has been commercialized in 34 markets.

Glenmark's commercial partner in the US, Hikma recorded substantial increase in the last quarter performance on a QoQ basis. This is backed by strong demand and increasing coverage across major pharmacy chains.

Menarini, Glenmark's partner in the EU witnessed steady increase in market share across markets,

Glenmark's partner in Mainland China, Grand Pharma has received acceptance of the NDA in February 2024. The Company expects approval to be received in. Sometime in FY'26. And in the MDA, we have provided the market share across the top 15-markets in terms of IQVIA December 2023 Data.

Moving on to Envafolimab, in Jan 2024, Glenmark announced the signing of the license agreement with Jiangsu Alphambab Biopharmaceuticals and 3D Medicines, Beijing for Envafolimab for India and ROW markets. Envafolimab under the brand name ENWEIDA has been approved in China by the Chinese NMPA in November 2021, as the global-first subcutaneous injection PD-L1 inhibitor for the treatment of adult patients with previously treated MSI-H or Deficient MMR advanced solid tumors. 30,000 patients have already benefited from this innovative treatment in China, where it has officially been included in the list of breakthrough medicines. Envafolimab is also being currently developed in the USA by Tracon Pharma in a pivotal trial in soft tissue sarcoma subtypes, including some specific subtypes, and Glenmark plans to file Envafolimab in more than 30 markets in FY'25. And the first market launch is expected in FY'26.

Lastly, WINLEVI in Q2 of FY'24 Glenmark and Cosmo Pharmaceuticals announced the signing of signing of distribution and license agreements for WINLEVI, which is Clascoterone cream 1% in 15 European markets as well as the UK and South Africa. Glenmark plans to launch WINLEVI in its licensed markets starting FY'26.

Glenmark Life Sciences in September 2023, Glenmark had announced that it had entered into a definitive agreement with Nirma Limited to diverse 75% stake in its subsidiary Glenmark Life Sciences. Subject to closing adjustments, the consideration was Rs.56,515 million. In March 2024, the Company completed the closing formalities of the divestment and Glenmark continues to now own 7.84% in GLS after the divestment.

Ichnos Glenmark Innovation, the Company had recently announced the launch of their alliance with its subsidiary, Ichnos Sciences, called Ichnos Glenmark Innovation or IGI to accelerate new drug discovery in cancer. This combined Glenmark's R&D proficiency in small molecules with

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those of Ichnos in novel biologics to continue to develop cutting edge therapy solutions for hematological malignancies and solid tumors.

Going forward, all of Glenmark's group's investments on innovative assets will be channelized through IGI. Idea is to in autoimmune acids that have been outlicensed to leading companies. And apart from that, we have a robust pipeline of three innovative oncology molecules, targeting multiple myeloma and acute myeloid leukemia and solid tumors. These are all undergoing clinical trials. We have some further updates on the IGI pipeline on the website.

In terms of our key objectives for FY'25, consolidated revenue target is Rs.1,35,000 to 1,40,000 million. R&D investment for FY'25 is targeted to be around 7-7.25% of the total revenue. EBITDA margin target is close to 19% for full year FY'25.

Consolidated capital investment would be Rs.7,000 million for FY'25 and we are targeting double-digit PAT margin for the full year FY'25.

Some notes to the results before we open the. Q&A. Other income primarily includes the mark- to-market value of 7.84% stake in GLS. Exceptional item in the consolidated and the full year result is a loss of Rs.446.78 crores and a loss of Rs.900.95 crores on account of a few items which are listed in the P&L, R&D expenditure in Q4 FY'24 was around 265 crores. Consolidated total asset addition in the quarter was Rs.280 crores, of which tangible was around 159 crores and intangible asset addition was about 121 crores. Gross debt for the period ended March 31st, 2024 was at Rs.990.6 crores and net cash for the period ended March 31st, 2024 was at Rs.667.7 crores. In terms of our working capital, at the end of March '24, inventory was at Rs.2,513 crores. Receivables was at Rs.1,858 crores and payables was at Rs.2,535 crores.

We have the management of Glenmark pharmaceuticals on the call today, Mr. Glenn Saldanha

• Chairman and Managing Director. Mr. V. S. Mani - Executive Director and Global Chief Financial Officer, and Mr. Ashish Mukkirwar - Group Vice President and Head of Strategy.

The Management will be presenting its long-term vision and outlook during the upcoming Investor Day. So, today's call will be more focused on the Q4 Results.

With that, we can open the floor for Q&A.

Moderator:Ladies and gentlemen, we will now begin with the question-and-answer session. The first question is from the line of Saion Mukherjee from Nomura. Please go ahead.

Saion Mukherjee:So, my first question would be on the exceptional items that you have. So, firstly on this write- off that we had for Rs.2,180 crores, if you can give some color what is this related to?

V. S. Mani:

So, you're talking about this write-off that we have given in our notes for the US, right?

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	Glenmark Pharmaceuticals Limited
	May 27, 2024
Saion Mukherjee:	Yes.
V. S. Mani:	So, one was the impairment of assets in Monroe and the balance was basically the working
	capital rationalization that we did in terms of some provisioning for rebates, etc., and also
	inventory write-down.
Saion Mukherjee:	So, this is mainly working capital and -
V. S. Mani:	No, it's mainly impairment of assets in Monroe. As you knew that we had three lines there, right;
	we had the nebulizer, we had the oral solids and lastly, we had the injectable. So, now we decided
	we are working only on the injectables as we have given also in the note and the other two lines
	we wrote down. That is the major one or more than 50% of that, the balance is basically on
	inventory write-down and some rationalization of provisioning, etc.,
Saion Mukherjee:	But sir, this number is $263 million. If I recollect the total CAPEX that Monroe was at a lower
	number, right, this appears much higher.
V. S. Mani:	So, about almost 127 million is basically the Monroe part of it what assets that we wrote off, the
	balance about 130 million is basically inventory and provisioning both of them put together
	under bids.
Saion Mukherjee:	And sir, I also notice that the receivable number has come down significantly by almost 1,800
	crores. So, is that part of this write-off and then we should see this number higher going in the
	next quarter?
V. S. Mani:	So, as you know, in the balance sheet, there is a reduction of almost 1,800 crores. So, there is a
	cash flow impact also, almost about 970 crores. So, basically this is on account of two reasons,
	Saion. One is obviously as you know third quarter also we did some work on the India piece
	which gave us some benefit. So, that would be closer to 600-plus crores. Obviously, there are
	two more reasons, like in this quarter there was not so much growth, but going forward we
	expected to be about 3,400 to 3,500 per quarter sales. So, automatically debtors would go up and
	therefore you would see it stabilized by about 10-12 days more, it could stabilize by about 70-
	72 days in the medium-term.
Saion Mukherjee:	The other one is intangible, which is $133 million. Again, if you can talk about what led to this
	intangible number, write-off, what is the -?
V. S. Mani:	Just to give a little color, as we went about this GLS transaction, we decided to have a good look
	at some of our businesses across especially the key ones. So one, I just spoke to you earlier about
	the US piece. The second was obviously intangible that we have. So, over the years we have
	been in-licensing products, etc., So, obviously we felt some of those which probably are not
	looking that good. So, we decided that will impair them. So, those are the reasons. We used to

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	Glenmark Pharmaceuticals Limited
	May 27, 2024
	have a book almost of 2,000 plus crores of intangibles. We reduced by about 133 million. These
	are all non-cashwrite-off.
Saion Mukherjee:	This gross margins is very high in the 4th Quarter, so material cost to sales I see is around 32%-
	odd. What's the steady sustainable number we should see on a gross margin going forward?
V. S. Mani:	On going forward, it should be around by these levels give and take plus/minus 1%, Saion,
	because obviously this quarter we had the benefit of India being a little higher. But in the coming
	year also, if I look at it with RYALTRIS is expected to sort of grow substantially or almost double
	up from where we are, it should automatically help us to do better.
Saion Mukherjee:	So, there is no one-off in this number?
V. S. Mani:	See, mix also keeps changing, no, sometimes the sales mix also changes, but on a broad basis,
	we will be very close to these numbers, as I said, give and take plus/minus 1%.
Moderator:	The next question is from the line of Gaurang Sakare from HSBC. Please go ahead.
Gaurang Sakare:	I had a couple of questions. Firstly is on Monroe. What is the status update from US FDA? When
	can we expect reinspection and how is our remediation going?
Glenn Saldanha:	So, on Monroe, we are pretty much done with all the remediation, right, and we're requesting
	FDA for a meeting and a possible inspection. So, we are hoping that in the first quarter they will
	come in the next couple of months I am guessing. So, all of these we are now taking batches of
	product and some exhibit batches for the rest of the year.
Gaurang Sakare:	And second one, actually, at the start I missed the comment on this other income being higher.
	So, can you please repeat what you said?
V. S. Mani:	So, we still continue to have a 7.84% stake in Glenmark Life Sciences. The mark-to-market of
	that was almost 750 crores.
Moderator:	The next question is from the line of Kunal Randeria from Axis Capital. Please go ahead.
Kunal Randeria:	Sir, I just want to reconcile this net cash number. So, H1 you are on 3,300 crores and today you
	are on 700 crores net cash. From the cash flow statement, it seems that you've got around 5,450
	crores and then there was some tax of 900 crores. But your working capital also was 1,600-odd
	crores and incremented CAPEX is 500 crores. So, I am just wondering, I would have thought
	maybe the net cash now would have been slightly higher. If you? Can just run us through how
	you arrive with this number?
V. S. Mani:	Sure. I will try to be as helpful as possible. So, obviously we got about 5,450 net of the
	transaction cost. The tax is about 17.5%. So, we get about 4,500 crores, you're right. At the end

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	Glenmark Pharmaceuticals Limited
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	of December, we had about 3,960 plus as you can see now our cash has also increased by 500
	crores. That kind of balances each other. On the other side, if you look at my business, we had
	an EBITDA of almost 1,195 crores and we had a cash interest of about 517 crores. The cash tax
	there is less because most of the taxes this year were for this. So, if you take 80, 90 crores tax
	also, still we get about 580 crores or so. But if you take the other side, there is assets acquired,
	there is dividend, there are some other exceptional items in terms of the litigation and
	remediation cost what you have there. But the big piece is the litigation that we paid on the Zetia
	piece, almost 498 crores. I think that could probably be the difference that you're looking for.
Kunal Randeria:	But is my understanding wrong that you're working to also improve around 1,500 crores, sir?
V. S. Mani:	As you can see even in my cash flow statement, improved by about a little less than 800 crores,
	796 crores.
Kunal Randeria:	I am just looking at H1 numbers your receivables and inventories was around 800-odd crores
	higher than what you have given in the presentation now. So, now your inventory is around 1,200
	crores, it was around 3,300 crores if I am not wrong.
V. S. Mani:	No, I will explain to you that in the receivable piece, as we explained in the previous question,
	there is a write-down of almost Rs.837 crores. So, that's the piece. There's some rebate
	provisioning across most geographies, especially the US. So, that could be a difference.
Kunal Randeria:	Secondly, on generic Flovent so since you have filed it, I am just wondering when do we expect
	approval and what is future in the years because I believe GSK had discontinued the product and
	now there is only AG in the market. So, your thoughts on this product?
Glenn Saldanha:	We believe that we are the first filer on this product. I mean it's launch on approval basically,
	right? And since we filed now, so sometime next year, we are hoping we can launch the product
	in FY'26, right. It's a big product, about $400-plus million in sales, just this one SKU as per
	IQVIA and we're working on the subsequent SKUs, right, which is the 110 and 220 crores. So,
	I think collectively it's a $1.6 billion drug with just the AG out there. GSK has launched an AG,
	right?
Kunal Randeria:	Lastly, is on RYALTRIS. See, in a lot of markets you have reached double-digit share. So, I am
	wondering now from FY'24 to let's say FY'26, which are the markets where you expect the
	growth from?
Glenn Saldanha:	We have just started the launch phase of RYALTRIS. So, RYALTRIS we think I mean our peak
	sales now will look more like $200 million to $300 million over the next three to five years. And
	if you look at the markets, we have just started launching as Utkarsh mentioned, Mexico, we
	just got approvals, so we're launching. There are some very big markets where we still don't have
	a presence, right. Mexico is one. Brazil, we are hoping to get approval either this year or next

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