The fiscal year has started on a good note for Glenmark Pharmaceuticals Ltd, with sales in important markets such as India and the US showing significant growth.

Consolidated revenue during the quarter rose by about 27% to 868 crore from a year earlier, and operating profit margin improved by a quarter of a percentage point, which is good considering margins are relatively high at about 34%.

Glenmark divides its business into speciality products, which make up 45% of its revenue, generics contribute 39%, out-licensing income accounts for 13% and others make up for the rest. In the June quarter, the first three were in top form.

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In speciality products, Glenmark’s India business grew better than the market did, expanding by 20% compared with a year ago, with the company extracting more growth from its existing product range, as it introduced two new products. Europe was an underperformer, but was adequately compensated for higher growth in regions such as Africa, Latin America and Asia (ex-India).

A strong marketing push appears to be the main reason behind higher growth, especially in markets such as Russia that have slowed down, yet Glenmark’s sales are up sharply.

Glenmark’s successes in the out-licensing arena saw income rise by 24% from a year ago. But this income is volatile in nature, as it depends on new deals being struck and milestones being achieved in the existing ones, which is unpredictable. In 2010-11, the firm received final approvals from the US Food and Drug Administration to sell 18 generic products. The phased introduction of these products and the ramp-up in sales are reflecting in higher sales growth. Generic drug sales in the US rose by 37% during the June quarter. Glenmark plans to introduce seven new products during the current quarter to keep up the sales momentum.

The company’s net profit rose by about 23% compared with a year ago, despite operating profit increasing by about 28%, as lower growth in other income and a higher effective tax rate ate into profit. Still, its profit came above consensus estimates.

This week also saw the company announce that a key molecule had cleared the phase-I clinical trials and the receipt of a $15.6 million (around 70 crore today) payment for an in-licensed product. The stock rose 2.6% on Tuesday, while the BSE Healthcare Index fell 0.3%.

Glenmark’s June quarter results have set a high bar for the company for the rest of the year, as it is well ahead of its forecast. If growth slips in the subsequent quarters, investors will be disappointed.

Graphic by Yogesh Kumar/Mint

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