Glenmark Pharmaceuticals (Q2 FY13)

India Infoline News Service | Mumbai |

Glenmark recorded revenue growth of 19% yoy to Rs12.5bn, 4% ahead of our estimate while core sales (excl one-offs) were up 32% yoy to Rs12.2b.

CMP Rs428, Target Rs472, Upside 10.3%
  • Glenmark recorded revenue growth of 19% yoy to Rs12.5bn, 4% ahead of our estimate while core sales (excl one-offs) were up 32% yoy to Rs12.2b. The overall growth in generic business was 45% yoy where in US (+43.5%) and Europe (+109%) contributed the most. Specialty business grew by 30.5% yoy, amongst geographies in specialty segment, India grew by 35.5%, RoW was positive 31.2%, Latin America clocked revenue growth of 26.9% and Europe was flat. API also reported strong growth of 36% yoy to Rs1bn.

  • Glenamrk’s 75% of the revenue is dollar dominated; hence, the part of the growth is led by better realisation due to rupee depreciation. US sales grew by 43.5% yoy in rupee term whereas in dollar terms revenue grew by 19% yoy. We believe US business to remain buoyant for next two years backed by company’s strong OC portfolio and exclusivities (continuous gain in market share in Malrone and Cutivate). In the US the company has commercialized all its approved OCs over the past few quarters with a gradual ramp-up expected in coming quarters. Glenmark targets to file 15-20 ANDAs for FY13. The Company currently has 43 applications pending in various stages of the approval process with the US FDA.

  • Domestic business witnessed strong growth of 35.5% yoy and 23% qoq to Rs3.4bn. As per ORG-IMS MAT Sep’12 data, the company registered value growth of 29.6 % v/s the industry growth of 12.6%. We expect the growth momentum to continue with the restructuring activity. But, we expect the growth to slow down on higher base. RoW region recorded growth of 31.5% yoy in revenues led by better realisation and volume growth. We expect robust growth to continue though on a lower base.

Revenue break-up
Particulars (Rsmn) Q2FY13 Q2FY12 %yoy Q1FY13 % qoq
Speciality Business 6,697 5,134 30.5 5,046 32.7
India 3,440 2,539 35.5 2,798 23.0
Rest of the World (ROW) 1,941 1,479 31.2 1,348 43.9
Latin America 937 738 26.9 631 48.6
Europe 379 378 0.5 270 40.7
Out-Licensing Revenue - 1,185 - - -
Generics Business 5,784 3,990 45.0 5,300 9.1
US 4,307 3,001 43.5 3,924 9.8
Europe 389 185 109.6 332 16.9
Latin America 54 41 30 39 36
API 1,035 763 36 1,005 3
Others 71 246 (71) 58 22
Total 12,552 10,554 19 10,404 21
Source: Company, India Infoline Research

  • Update on pipeline of NCE and NBE molecules: Revamilast (GRC 4039); Glenmark filed IND for Revamilast in the US and intends to initiate Phase III trials for at least one indication by end of FY14. GRC 15300 (granted to Sanofi); A PhIIa proof of concept study in neuropathic pain has been initiated in Q1 FY13. GBR 500 (licensed to Sanofi); An application has been successfully filed to initiate a PoC trial for Ulcerative Colitis in US and other countries. Crofelemer (in-licensed); successfully completed Phase 3 clinical testing for HIV associated diarrhoea. The trial was conducted by Salix Pharmaceuticals in the USA and the PDUFA date issued by USFDA was Sep 5, 2012- continues to be under US FDA review.

  • Glenmark recorded adjusted EBITDA margin (adjusted for forex gain Rs150mn) of 20.14% in far ahead of our expectation. Even after adjusting for forex gain the margin is better than expected led by better product mix (the current quarter has Rs150mn of forex gain at EBITDA level). Adj EBITDA margins (ex- forex loss) deteriorated by 73 bps qoq whereas improved substantially yoy by 270 bps. Adj PAT grew by 16.6% qoq to Rs1.4bn.

  • Glenmark continues to chase top-line along with continuous thrust at enhancing margins. We believe management’s robust guidance of 22-25% growth in top-line is impressive and quite achievable. The improvement in the balance sheet, mainly the working capital cycle is notable. We revise our 9-month SOTP target price to Rs472 and rate the stock BUY.

Result table
QUARTERLY -(Rs. mn.) Q2FY13 Q2FY12 %yoy Q1FY13 % qoq
Net Sales 12,556 10,557 18.9 10,407 20.7
(Inc)/Decrese in stock (309) 703 (144.0) (102) 202.1
Material consumption (3,522) (1,911) 84.3 (3,173) 11.0
Purchase of Traded Goods (1,213) (721) 68.3 (593) 104.7
Staff Cost (2,016) (1,575) 27.9 (1,656) 21.7
Other Expenditure (3,401) (2,622) 29.7 (3,437) (1.0)
Operating Profit 2,713 3,025 (10.3) 1,651 64.3
Adj Operating Profit 2,563 1,871 37.0 2,201 16.5
OPM (%) 20.4 17.7 269 bps 21.1 (73) bps
Depreciation (321) (247) 29.8 (275) 16.8
Interest (384) (291) 32.1 (380) 0.9
Other Income 66 (81) (181.1) 26 149.9
PBT 2,074 2,406 (13.8) 1,022 103.0
Income Tax (477) 238
 

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