Sputnik V manufacturing pact adds another feather to Gland Pharma’s cap
- Strong domain expertise, robust growth prospects, sturdy and consistent earnings track record, and healthy return ratios make Gland an ideal long-term investment pick, said analysts at Sharekhan
Gland Pharma Ltd, with its prowess in injectables manufacturing, has now become part of the global supply chain for covid-19 vaccines. The company entering into an agreement with the Russian Direct Investment Fund (RDIF) to supply up to 252 million doses of RDIF’s Sputnik V vaccine will boost Street confidence further. The stock, after gaining about 14% since the start of December, is currently trading around 26 times FY23 earnings estimates
Recently, Lancet had said Sputnik-V recorded 92% efficacy against covid-19. This too had been a big confidence booster. On the pricing of the vaccine, which is below $10 (less than ₹730), analysts at Haitong Securities India Private Ltd said it brings the total opportunity size in the range of ₹800- ₹1700 crore depending on the price ( ₹350-700 per dose). However, they believe this size could shrink to ₹400 crore if the procurement cost would be at ₹150-175 per dose like in India.
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While the same will be watched out for, the company expects production to commence from 3QCY21, while delivery could start from 4QCY21. Gland, however, has not specified the countries to which it would distribute the vaccine and the timeline for executing the contract.
Though the agreement is positive, analysts are also watchful on available vacant capacities for vaccine manufacturing by Gland Pharma, The agreement included drug substance manufacturing, which brings uncertainty to the commercial aspect of this deal, said analysts. "The company is yet to disclose capex requirements as it has only 40million vials capacity vacant as mentioned by management during the 3QFY21 investors call,” said analysts at Haitong. They have kept their earnings estimates unchanged until future clarification from the company on this front.
However, apart from the vaccine opportunity, analysts have maintained a positive outlook on the company’s prospects. Its unique B2B business model, enables it to grow its market share while maintaining cost leadership through economies of scale. The company’s facilities comply with good manufacturing practices norms set by the US FDA.
Strong domain expertise, robust growth prospects, sturdy and consistent earnings track record, and healthy return ratios make Gland an ideal long-term investment pick, said analysts at Sharekhan. They expect topline and net profit to register 23.7% and 25.7% annual growth over FY20-23.
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