Glenmark Pharmaceuticals Ltd’s sales growth of 17% in the December quarter over the year-ago period appears a tad unimpressive compared with the September quarter’s 23% growth. Lower growth in its US generics segment was the main reason.

Also See | Global View ( PDF )

The company splits its revenue into speciality products, which contribute about 60%, and generics the rest. The US market, which contributes to nearly 70% of generics revenue, reported a relatively low 8% growth.

This was attributed to the discontinuation of a product—nitroglycerin—and a slower ramp-up of generic products for which it has approval.

In a conference call, Glenmark said it expects generic sales to rise faster in the March quarter and in fiscal 2012, as its newer products gain in scale.

There has been a fairly significant increase in inventories, which could indicate a build-up for sales in the current quarter.

Within generics, smaller contributors such as Europe did well, but Latin America reported a drastic fall.

The company has shifted focus in Argentina, and is using it as a production base. Active pharmaceutical ingredients, or the basic inputs used to make formulations, which contribute about 25% of generics revenue, saw sales decline by around 3%, both over the year-ago period and sequentially. This trend is visible in the performance of most pharmaceutical companies.

Its speciality division, which contributes to 40% of total revenue, was on a roll during the quarter. India accounts for half this division’s revenue, and sales were up by 30%, as the Indian market has been growing at relatively higher rates, and Glenmark also gained share in key therapeutic categories.

While the industry grew by around 16% in the April-December period, based on IMS Health Information and Consulting Services India Pvt. Ltd data, Glenmark grew by 25%.

The speciality division’s sales rose by 34% year-on-year (y-o-y) and by 14% on a sequential basis. Glenmark’s growth should improve, assuming its US generics business comes back on track. If its speciality business can keep up the growth, its revenue growth will be healthy.

Also, any upsides from its research and licensing programmes or litigation outcomes may add to revenue and profits.

Perhaps, that’s why, despite its operating profit margin falling by nearly 3 percentage points, and only a 16% increase in its net profit (2% fall on a sequential basis), its share price fell by about 2%.

Investors are treating this quarter as an aberration, giving the company a quarter more to prove them correct.

Ahmed Raza Khan/Mint

We welcome your comments at