IPOs have seen a tremendous run in the last few months, and keeping the trend going is the latest Active pharmaceutical ingredients (API) manufacturer Glenmark Life Sciences IPO – Rs. 1514 crore IPO, which was fully subscribed within one hour of opening today.
On the first day of subscription, Retail Investors led the rally and the portion reserved for the retail investors were fully subscribed within the first hour of the opening of the IPO.
The Indian pharmaceutical company headquartered in Mumbai and founded in 1977 went public in 1999 and used some of the proceeds towards building its first research facility.
The company saw much success, and by 2008, Glenmark was the 5th largest pharmaceutical company in India. By 2011, the company’s founder achieved the title of one of the richest men in India. Glenmark had worldwide sales of $778 million; the growth was driven by the entry of the company in the US and the European generics market.
Glenmark Pharma holds a 100% stake in Glenmark Life Sciences, and for the year ended March 31, the company reported a revenue of Rs. 1537 crore and a net profit of Rs. 314 crore.
Glenmark Life Sciences is a leader in developing and manufacturing select high value, non – commodative Active Pharmaceutical Ingredients ( APIs) in chronic therapeutic areas.
Cut to 2021 IPO, Glenmark Pharmaceuticals Ltd is selling shares at Rs. 695- 720 apiece. Thus giving it a market value of Rs. 8822 crore at the upper end of the price band.
The offer comprises of the fresh issue of Rs. 1060 crore and offer – for – sale worth Rs. 453.6 crore by the parent company.
Before the IPO, the company had also raised Rs. 454 crore by allotting 63 lakh shares to 19 anchor investors.
Plans of the Company following the IPO
The company plans to use Rs. 800 crore from the IPO proceeds to pay the parent company for the acquisition of the active pharmaceutical ingredient business in 2018.
It plans to use Rs. 155 crore for brownfield capital investment at its Dahej facility to increase the total installed capacity by 200 kilolitres. The remaining it intends to use for additional facilities and general corporate purposes.
Most analysts are optimistic about the company’s future prospects and had thus suggested subscribing to the issue since the analysts believe that the spin-off of Glenmark Pharmaceuticals is well placed in the Active Pharmaceutical Ingredient business.
The company has a good performance execution and also boasts of clean regulatory track record. Besides, the company is also a leading developer and manufacturer of select high value, non – commoditised APIs in chronic therapies; the growth momentum also mirrors the global API industry growth in recent times.
Some of the anchor investors include – Reliance General Insurance Company, HSBC Global Investments Funds, Oaktree Emerging Markets Equity Fund LP, Government Pension Fund Global, Kubar India Fund and more.
Future Trends for the Pharma Sector
the pharma sector saw a revival as the pandemic led to a vaccine race; however, despite the recent good run that this segment has seen, analysts feel that the pharma sector will see a few deterrents that may affect its growth prospects.
For one, the cost of new medicines is rising, and it is becoming harder and more expensive to produce new medicine.
If we were to compare the cost of drug development, it is clear that the costs rose every year by 10%.
Secondly, the medicines are becoming expensive, which has made it more difficult for people in the low and middle-income segment to buy them. On the other hand, there is a significant betterment when it comes to accessing healthcare systems and low-cost technologies to the general public at large.
Hence, the pharmaceutical companies will have to come up with a plan to become more cost-conscious and focus on bringing prices down to support demand.
Many are also struggling with the loss of exclusivity as there is a rise of applications for biosimilars in the US and Europe. These medical products have no clinically meaningful differences from already-approved biomedicine, and thus, they are cheaper to develop and obtain approval for, resulting in costing less than branded drugs.
Since 2013, Biosimilar development has increased substantially, leading to a peak in loss of exclusivity rate in 2019. Hence most predict that this rise will result in a $30 billion negative impact on the US pharmaceutical industry by the end of 2021. Only a few handful of the top 20 pharma products may be without an alternative in a few years.
So what is in store for the pharma sector?
- Developed Countries show steady growth in spending on medicine in 2021; the increase is primarily owed to new products and innovative technologies in leading pharmaceutical markets like China and the US, and this trend is likely to continue way into 2023 despite how things pan out despite the ongoing pandemics.
- Beyond – the – pill – services – digital pills, wearable trackers, sensors and apps designed to provide real-time information and gamify treatment have and are seeing momentum in 2021 and is expected to gain even more momentum in the coming years.
- CDMO Market Growth, i.e. contract development and manufacturing organisations, will rise as well, mirroring the outsourcing model’s increasing popularity. The CDMO market is set to grow from $90 billion in 2019 to $117.3 billion in 2023. Hence the CDMO is expected to become the most significant pharma outsourcing trend in the coming years.
The Covid -19 pandemics, contrary to popular belief, did not reshape or boost the entire pharma sector; what it did is to power the development of pre-existing trends, although it did lead to a sudden surge in wealth for some individuals and families because of the expected rush in the stocks of some of the diagnostic and research medicine.
Which other pharma companies are coming out with IPOs?
1. Supriya Lifesciences IPO – a bulk medicines company has filed a draft herring prospectus (DHRP) with SEBI to raise Rs. 1200 crore through an IPO.
The firm plans to use the raised funds for expanding its existing manufacturing facilities in Lote, Maharashtra. It also plans to invest in existing manufacturing technology to support production of its active pharmaceutical ingredient portfolio (APIs).
2. Windlass Biotech IPO – Windlas Biotech Ltd has filed preliminary papers with the Securities and Exchange Board of India (Sebi) for an initial public offering (IPO) that includes a fresh Rs 165 crore issue
The company would use a total of Rs. 47.56 crore to meet additional working capital requirements and Rs. 20 crores to settle certain debt. Its total outstanding borrowings were Rs32.16 crore as of March 2021.
3. Emcure Pharma – The IPO will include new shares as well as an offer for sale from the business’s promoter Satish Mehta and investor Bain Capital, who bought a 13% stake in the company in 2014. While the corporation is aiming to sell up to a 20% share, it is unclear whether Bain will sell the entire company.
4. Veeda Clinical Research – Veeda Clinical Research, which is backed by CX Partners, is planning an IPO of Rs 500 crore, with JM Financial and SBI Caps as advisors. The paperwork have yet to be filed with Sebi.