Glenmark continues to struggle in US

Analysts peg FY15 sales growth at 18-20%; prospects to improve in FY16 after cholesterol drug launch

Glenmark Pharmaceutical's 20 per cent sales growth in the June quarter suggests the company lacks any major growth trigger in FY15. Sales growth in the first quarter has been marred by anaemic growth in the US, as no new products have been launched. While Glenmark's consolidated sales grew 20 per cent year-on-year (y-o-y) to Rs 1,486 crore, US sales have expanded 9.33 per cent to $81.7 million (Rs 446 crore). A pick-up in sales in the US is expected only in FY16 and FY17, till when growth will remain tepid.

Analysts claim the firm has got no new launches lined up this year and as a result, US sales growth will continue to languish till FY16. Analysts believe sales in the US will pick up from FY16 when the company is scheduled to launch the blockbuster cholesterol-modifying drug Zetia. Glenmark had settled the patent litigation with Merck on the same drug in 2010 and is scheduled to launch the drug before April 2017, which is when the patent exclusivity expires.

The drug is estimated to generate sales of $1.4 billion and Glenmark would gain from a launch before the patent expiry.

Interestingly, other geographies have done well. While other pharmaceutical majors are struggling in India, Glenmark's India business has grown 21 per cent y-o-y in India to Rs 397 crore. The company's anti-diabetic drug Zitamed and Zita are doing exceedingly well and that has driven the India sales growth, believe analysts. Rest-of-the-world business grew 20.67 per cent to Rs 211 crore, while Europe formulations business swelled 34.53 per cent to Rs 97 crore.

Sales in Latin America also grew at a fast clip of 34 per cent to Rs 117 crore. Consolidated growth might not have impressed the Street, but the firm has managed to grow operating profit by 38 per cent y-o-y to Rs 342 crore. Operating margins have risen 301 basis points y-o-y to 23 per cent. Sequentially, margins were up 177 basis points. The sharp margin expansion helped Glenmark beat the Street's estimates on net profit, which grew 43.7 per cent to Rs 180 crore.

The stock is fairly valued at 18x FY16 earnings and analysts believe there are no major triggers this year. Bloomberg data shows of 42 analysts tracking the stock, 34 have a 'buy' rating, six have a hold rating and two have a 'sell' call.