Glenmark Pharmaceuticals Ltd benefited from good growth in key markets such as the US and India. While the rupee depreciation bumped up overseas sales growth, mark-to-market (MTM) losses and the absence of licensing income have affected reported numbers. The firm’s consolidated revenue in the June quarter rose 19.8% year-on-year (y-o-y) to Rs.1,041 crore and net profit declined 61.7% to Rs.80.3 crore.
It had earned a licensing income of Rs.111.2 crore in the June 2011 quarter, which was absent in the current period. It also reported forex-related MTM losses of Rs.55 crore, compared with a gain in the year-ago quarter. These have distorted the reported numbers, and after adjusting them, net sales rose by a healthier 37.4% y-o-y, and operating profit rose 18.6%.
The firm’s operating profit margins have still declined y-o-y, chiefly due to the presence of a one-off component in its US market revenue in the June 2011 quarter. On a sequential basis, margins have improved, which may be more indicative of the trend. But some credit for that should go to the rupee’s weakness, as Glenmark’s average rupee-dollar conversion rate considered for the June quarter was up 20.5% y-o-y and 12.6% quarter-on-quarter. The company’s speciality drugs business contributes to 48.6% of total sales, and India contributes to 55% of this business, with the rest coming from the overseas markets. Its generics business contributes to 51% of revenue (with others making up for the balance), and the US market contributes to three-fourths of that. Thus, a weaker rupee can make a significant difference to its revenue and margins as well (to the extent its costs are denominated in rupees).
Almost all its geographical regions did well. Sales in India rose 24.1% and other markets did well, too, except for Latin America, to contribute to 22.9% overall growth for the speciality business. The generics business saw US market revenue rise 56.2%, and in dollar terms by 29.6%, which is also quite healthy. Other markets did well, too, and overall generics sales grew 57.7%. Glenmark’s earnings show sales growth continues to be healthy, even after adjusting for currency-related translation gains. The kinks in its results will be visible in the September quarter, too, as it earned licensing income of Rs.118 crore in September 2011. Sequential comparisons will give a better picture. A key near-term trigger could be the arbitration panel’s final decision on the disputed collaboration pact for crofelemer, an anti-diarrhoea drug in-licensed by Glenmark. A favourable decision for the firm will be seen as a positive development. Glenmark’s share has done well, rising 28% since April, and this quarter’s performance shows its core business continues to be in good health.