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| Glenmark: Weak operational performance |
| Vishal Chhabria & Puneet Wadhwa / Mumbai Feb 17, 2010, 00:43 IST |
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Listing of its generics subsidiary and out-licensing deals are some triggers for the stock.
 Glenmark Pharmaceuticals’ performance for the December 2009 quarter was unimpressive, even as its consolidated net profits rose 15.5 per cent year-on-year to Rs 94 crore. That’s because the profit growth was aided by a lower tax outgo of Rs 4.4 crore (against Rs 53.5 crore in the December 2008 quarter) and secondly, operating profit margins fell 640 basis points to 26.3 per cent.
Consolidated revenues increased 11.3 per cent year-on-year to Rs 648.3 crore. The growth was helped by the specialty business (55 per cent of sales), which grew 11 per cent to Rs 338 crore. The generics business (45 per cent of sales), however, reported flat revenues at Rs 280 crore. In the specialty segment, domestic formulations continued to show momentum, rising 17 per cent year-on-year.
While Glenmark’s Latin America business remained under pressure on account of the ongoing restructuring at Brazil, the European Union and rest of the world markets reported a growth of 82 per cent (Rs 35 crore) and 9 per cent (Rs 90 crore), respectively, in the specialty business.
In September 2009, Glenmark raised Rs 413.56 crore through a Qualified Institutional Placement, which was utilised to lower debt levels to around Rs 1,700 crore. This helped keep a tab on interest costs which grew 7 per cent to Rs 36.8 crore in the December quarter (it was down nearly 20 per cent sequentially). The company plans to reduce debt levels to Rs 1,400 crore by March 2010, which should help contain interest costs.
On the R&D front, the company has a pipeline of seven new chemical entities and is developing a pipeline of new biological entity. It has in-licensed Crofelemer (for HIV-associated diarrhoea) which is progressing well in the Phase-III trials in the US.
Going ahead, the trigger for the stock should come from the listing of its generics subsidiary, Glenmark Generics, and the likely R&D out-licensing deal that could bring in milestone payments of $35-40 million. Restructuring of Latin American operations and lowering of debt burden are other triggers. At Rs 256.30, the stock trades at a P/E of 14.8 times its 2010-11 analysts’ consensus earnings estimates.
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