Glenmark Pharmaceutical (updated - 17 Feb 2010)
Glenmark Pharmaceuticals’ performance for the December 2009 quarter was unimpressive, even as its consolidated net profits rose 15.5 per cent yearon-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-onyear 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 HIVassociated 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 $3540 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.
source - BS
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Glenmark Pharmaceutical (updated - 16 April 2010)
Glenmark Pharmaceuticals’ out-of-court settlement with GlaxoSmithKline LLC (GSK) over the launch of a generic version of anti-malarial drug brand Malarone, though positive, may not add significantly to its financials. The company has a Para-IV on Malarone (Atovaquone and Proguanil Hydrochloride 250 mg/100 mg tablets with sales of $56 million in 2009), which gives it a180-day exclusivity prior to the patent’s expiry in 2014. With this settlement, Glenmark will now be able to start selling it earlier than scheduled.
According to the settlement agreement, subject to review by the Federal Trade Commission and Department of Justice, Glenmark will be able to sell its generic tablets under a royalty-bearing licence from GSK from the third quarter of 2011, or earlier under certain circumstances.
Analysts say since Glenmark is the only generic filer for the drug, even if a new player files for an abbreviated new drug application (Anda), it will take at least 30 months for it to enter the market. Hence, Glenmark will face limited or no competition for at least a year beginning the September 2011 quarter.
“With Glenmark and GSK being the only two players marketing the product, there can be 25 per cent price erosion. With a 50 per cent market share, 10 per cent sales royalty payment to GSK, and a50 per cent profit after tax (PAT) margin, we expect this drug to add revenues of $14.2 million, PAT of $7.1 million in 2011-12 and earnings per share of Rs 1.1 to Glenmark’s 2011-12 earnings,” says Vikas Sonawale, analyst, Religare Institutional Research.
“The conclusion of an outlicencing deal would reaffirm strength in the new chemical entity pipeline and could thus spring a positive surprise,” states a Sharekhan report.
Over a two year period, analysts expect Glenmark’s revenues and net profit to grow at a compounded annual growth rate of 18 per cent and 29 per cent, respectively, on account of balance sheet restructuring, cost containment and management of working capital cycle.
While the counter had seen steady gains since end March 2010, it is down by 3.4 per cent (including Thursday’s 1 per cent gain) post the announcement on April 12. At Rs 269.30, it trades at a P/E of 16.5 times 2010-11 estimated base business earnings.
source - business standard
