Mumbai: Glenmark Pharmaceuticals Ltd’s profit declined 36% in the September quarter because of a one-time royalty-related payment and a mark-to-market loss on some foreign currency loans.
Net profit fell to Rs 55.80 crore in the three months ended September compared with Rs 86.17 crore a year earlier, the company said.
A file photo of a chemist shop
Total sales rose 46% to Rs 1,055.44 crore in the quarter after three of its business regions, including Latin America, contributed significantly to growth in the quarter.
“Despite a challenging global environment, all our businesses registered strong revenue growth for the second quarter. Sales growth for the quarter has been around 30% due to good performance by the US, Latin America and the India business,” chief executive and managing director Glenn Saldanha said in a statement on Wednesday.
Glenmark made a one-time payment of Rs 131.68 crore during the quarter, while exercising its purchase option with respect to a royalty agreement it had with the US-based venture fund firm Paul Capital Partners’ Royalty Fund, related to a dermatology business acquisition in 2005. With the exercise of this option, Glenmark has no further obligation to pay royalties to the seller.
Glenmark had also incurred a mark-to-market loss of about Rs 85 crore on some foreign currency loans.
While Glenmark’s net profit has taken a beating on the exceptional costs despite growth in overall sales, local rival Lupin Ltd has posted 24% growth in both sales and net profit during the September quarter. Lupin’s net profit during the quarter increased to Rs 266.9 crore compared with Rs 215 crore a year ago. Its sales grew at the same rate to Rs 1,741 crore.
Nilesh Gupta, group president and executive director, said all the regions including India, the US and Japan, where Lupin has a key market presence, have had an impressive contribution to the overall growth in profit and sales this quarter.
The company also saved on the raw material usage and personnel expenses. In addition, the hedging policy of the company helped to overcome the impact of the currency fluctuation, said Gupta on Wednesday. Sales grew 22% in India, while it was 14% in Japan, he said.
“This growth, especially the one that was contributed by the domestic business, however, seems under threat in the next two quarters as the government is likely to introduce the new pharmaceutical policy that will bring more drugs under the price-control regime,” said an industry analyst with a foreign brokerage, who spoke on condition of anonymity.
The dependence of Glenmark and Lupin in the local market is less than 30%. “But the price-controlled regime in the domestic market may have a larger impact in the long term,” the analyst said.
Lupin’s Gupta said the policy is definitely a negative development for the industry. But, it may not be as critical for his company since its focus will remain strong on the export markets.
Lupin, which is expanding into Europe, has several products for approval in the US and Japan.
Glenmark, which is also focused on drug discovery in a big way, expects income from this to rise.
“Our drug discovery pipeline continues to progress further,” Saldanha said.
Glenmark shares dropped 0.7% to close at Rs 318.9 on Wednesday on BSE and Lupin lost 1.22% to close at Rs 475. The benchmark Sensex shed 1.18% to 17,362.1 points.