BackGlenmark shares plunge 16% on weak Q4 numbers
Shares of Glenmark Pharma hit seven-year low on concerns of the company's inability to reduce debt and overhang of pricing pressure in the US
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Mumbai: Shares of Glenmark Pharmaceuticals Ltd plunged 16% to a seven-year low on Friday on concerns over the company’s inability to reduce debt and the overhang of pricing pressure in the US, its biggest market.
The stock shed 16.03% to close at Rs759.35 on BSE. During the day, it tumbled 16.78% to Rs752.60. Led by the sharp fall in its stock, the company’s market valuation dropped by Rs4,090.56 crore to Rs21,426.44 crore.
The drug maker’s profit in the March quarter, at Rs183.76 crore, was significantly below market expectations. A Bloomberg poll of 20 analysts had estimated consolidated net profit at Rs592.4 crore.
In addition to weak numbers, Glenmark’s management had guided that it will reduce its debt in 2016-17, banking on the opportunity presented by the exclusive marketing rights for generic cholesterol drug Zetia in the US. Instead, its debt increased and the management, during a post-earnings conference call with analysts, was unable to address concerns over high debt.
As on 31 March, Glenmark’s net debt was Rs3,667 crore, higher than the Rs3,278 crore a year ago.
Glenn Saldanha, chairman and managing director of Glenmark, said on the call that revenue from Zetia sales in the US is likely to be slightly lower than the $200-250 million guided, as the company has not been able to garner expected market share.
Lower-than-expected Zetia sales and price erosion of almost 15% in the base business in the US affected the company’s earnings.
While Glenmark is optimistic about its performance in 2017-18 and expects a 12-15% growth in revenue, sustaining a margin of around 23% with debt likely to reduce, analysts are sceptical, both on the growth projections and the ability to lower debt.
In 2016-17, the firm’s consolidated revenue rose 19.73% to Rs9,185.68 crore against Rs7,649.58 crore in 2015-16.
“Revenue guidance is really optimistic but debt reduction is a key monitorable for this year. We might trim our estimates on the company," said Amey Chalke, and analyst at HDFC Securities Ltd.
PTI contributed to this story.
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