Debt-laden Glenmark counts on assets sales, spinoffs to dig it out

Glenmark Pharmaceuticals’ makeover is painfully loaded with slow revenue growth and high capital spend simultaneously. In hopes of reducing debt, the Indian drugmaker now plans to sell some noncore assets after spinning off its API and innovation businesses.

Glenmark chief executive Glenn Saldanha has said his company will cast off unimportant drugs so that it can continue investing back into its focus areas of dermatology, respiratory and oncology. During a conference call with investors on Wednesday, he put a number on the sale: up to Rs. 800 crore ($110 million) this year.

“We’re still in discussions for a minority investor in API,” he said. “But the way to look at it is we also have a backup plan here. We are divesting a number of noncore assets.”

He wouldn’t give a list of potential for-sale products but said they’re spread across multiple geographies and lie in therapeutic areas for which Glenmark doesn't have a pipeline to support future growth and is operating at a loss.

Toward that goal, Glenmark already penned a deal last year, selling its orthopedic and pain management assets in India and Nepal, valued at Rs. 635 crore, to investment shop True North.

At the beginning of 2019, Glenmark spun off its API business into a subsidiary called Glenmark Life Sciences and put in place ex-Mylan exec Yasir Rawjee as its CEO. The plan is to introduce a minority investor so that the proceedings can help Glenmark pay down debt. That segment of Glenmark's business grew sales by 12.1% in the fiscal year ended March.

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The second spinoff came just a month later when the Indian generics firm stripped its innovation R&D projects into a U.S.-based biotech with a pipeline in immunology, oncology and pain. In May, it tapped former Gilead exec Alessandro Riva to run the show.

For now, Glenmark is still pouring money into the unit, socking in around $27 million during the quarter ended in June, a similar annualized level compared to the $113 million or so it put into the novel drug division in the previous fiscal year. But the new company would “initiate the process to raise capital” (translation: IPO) in the U.S. early next year to fund its own operation, Saldanha said on the call.

Glenmark, like its Indian peers, is suffering from a slower U.S. market. In the quarter ended June 30, Glenmark’s revenue from selling finished dosage drugs to the U.S. was Rs. 731 crore ($103 million), an increase of just 3.86% over the same period last year.

“The overall performance was impacted due to moderate performance in the U.S. and subdued performance in [Latin America],” Saldanha said in a statement Tuesday.

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The weak performance made it even harder to fund the company’s pivot to innovative therapies—rather than low-cost generics—which could take a long time to turn cash-positive. The difficulties Glenmark could face were evident in a recent FDA rejection for Glenmark's anti-allergy nasal spray Ryaltris.

As Glenmark’s money-raising has yet to take shape, its net debt as of June 30 reached Rs. 3,545 crore ($500 million), up from Rs. 3,427 crore ($481 million) at the end of March, according to Saldanha. Shares of Glenmark hit a new eight-year low on Friday after analysts cut their price target for the company on weak Q1 performance and growing debt, MoneyControl reported.