R&D spend will continue to be around 12% of revenue, says Glenmark CMD

A bigger chunk of our R&D investment is towards our innovative and specialty pipeline, said CMD

Even after posting a good set of numbers in the September quarter, analysts have largely remained cautious about Glenmark, given its high debt levels and the pricing pressure in the US. In an emailed interview with Business Standard, Glenn Saldanha, chairman and managing director of Glenmark, said he is not concerned about debt levels as the company was generating cash at an operating level. The high spend on research and development (R&D) has been a reason behind Glenmark’s debt. Saldanha said the R&D spend would remain stable at 12 per cent of revenue next year. Excerpts:

What is your outlook for the US business? 

We remain optimistic about the US market as we have some exciting product launches in the pipeline. We’ve got some interesting, limited-competition product approvals earlier this year like the generic Vagifem and the generic Welchol, which will continue to play out. Other approvals are expected in the coming months. 

We expect the US market growth will be better in the second half. In the next financial year, we expect to launch our first specialty product, Ryaltris that will give further impetus to our US business, while growth in generic drugs is likely to be in single digits. Overall, we believe the ramp-up in the specialty business and launches on the generic side will fuel growth in the US market in the next two to five years. 

Do you see the pricing pressure on the US business easing in the coming quarters? 

Market dynamics for generic drugs in the US have become challenging, with buyers’ consolidation and increased competitive intensity. Price erosion has eased somewhat, but, on the whole, I think the pricing pressure on generic drugs will persist in the next few quarters. Our focus, therefore, has been on developing a pipeline of limited-competition, differentiated generic products as well as specialty and innovative assets to ensure long-term growth. 

Will you be selective in filing abbreviated new drug application?

For our US generic drugs pipeline, we have consciously focused on opportunities where we are among the first wave of launches as opposed to being part of the crowd. This strategy will continue in the future. We have a pipeline of products where we would be among the first ones to launch the product in the next one to three years. 

Do you plan to rationalise R&D spend?

R&D, as a percentage of revenue, will continue to be around 12 per cent this year as well as next year. But we keep overhauling the portfolio, based on the competitive landscape and at what stage we are in the development process, particularly on the generics side. On the innovation front, we currently have an R&D pipeline of seven novel molecules and two specialty products in the areas of oncology, immunology, respiratory, and pain management. A bigger chunk of our R&D investment is towards our innovative and specialty pipeline. 

With focus on speciality and limited-competition products, will you be adding people in the US front-end?

We are currently in process of evaluating our strategy for specialty products in the US - whether we will take the products to the market on our own or through a contract sales force or both. 

Will growth come from the European Union (EU) and rest of the world (RoW)/emerging markets in the next few years? Where do you see their contribution to your revenue rise in two-three years hence?

In the second quarter of this fiscal year, we registered strong growth across key markets globally. In India, we are focused in the areas of dermatology, respiratory, cardiovascular, and diabetes, and we anticipate strong growth in India next year because of a couple of major product launches. We have a product coming up in the diabetes space and our over-the-counter segment is also witnessing growth of over 25 per cent. 

Overall, we will outperform in the India business. In Europe, the launch of generic Seretide Accuhaler in the Nordic region has benefited the business and we have multiple product launches lined up in the coming quarters in several European countries, which is why I believe growth in the EU will remain strong. 

Similarly, we have a number of product launches expected in RoW markets like Russia, Asia, and Africa, which will keep the growth momentum going in these markets and add to the consolidated growth of the company. 

Glenmark’s net debt stood at Rs 34.9 billion as of September. By how much do you plan to reduce this? 

We have been taking measures to reduce debt. Between now and the end of the year, we will see a decline in debt levels. Overall, I do not see debt as a major concern as we are generating cash at the operating level. We recently announced transfer of our Active Pharmaceutical Ingredient (API) business into a wholly-owned subsidiary in a bid to enhance focus on the API business, build capabilities in R&D, manufacturing, and marketing to accelerate growth. 

Are you planning to divest your non-core assets? 

We have no such plans right now. 

How soon you think you can finalise an out-licensing deal on a few of the novel molecules that you have?

We have GBR 830 now in Phase 2b for atopic dermatitis and we have got some great data there. The oncology products GBR 1302 for HER2 positive cancers and 1342 for multiple myeloma remain very exciting and then we have got two pain assets, 27864 and 17536. We have proof of concept for 17536, while 27864 is in Phase 2b. For these five products, we have lot of discussion on going for out-licensing opportunities. We already did a deal with China’s Harbour Biomed last quarter for GBR 1302. Our strategy around out-licensing is that we are exploring regional as well as global partnerships for these innovative assets and I think we can see some of these discussions materialise over the next 12-18 months.