BackGlenmark off to a good start in new fiscal year
The US FDA gave the company final approvals to launch two generic products, which have a combined market size of $146 million
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June has started off on a good note for Glenmark Pharmaceuticals Ltd. The US Food and Drug Administration (FDA) gave it final approvals to launch two generic products, which have a combined market size of $146 million. Glenmark plans an immediate launch of the products, though how much they will add to revenue depends on the share they take from others.
For FY16, Glenmark has got seven approvals for launch, while approval for an eighth product is pursuant to a settlement and slated for launch at a future date. These approvals can help Glenmark in meeting its sales growth target of 18-20% in FY16. The US market is crucial for its growth and had disappointed in FY15, with a growth of only 0.6%. It contributed 31% to sales, down from 34% in the previous year.
In its post-earning conference call with investors, the firm said it is budgeting to get 10-12 US generic approvals in the current fiscal. Good sales growth in the US also helps profitability. In FY15, its margins had slipped by 3.4 percentage points to 18.4%. It is targeting a higher Ebitda (earnings before interest, taxes, depreciation and amortization) margin in FY16.
In the March quarter, sales grew 5.7%, pulled down by slow growth in the US, while markets such as India, Europe and Latin America did well. Sales in the “rest of the world" category declined, too, mainly due to currency volatility in CIS (Commonwealth of Independent States) countries.
Profit was also affected by foreign currency translation losses and one-time costs associated with the merger of subsidiaries. The combined effect of slower growth, these one-off items and an exceptional item related to the settlement of a legal case pulled down profit to ₹ 10.6 crore versus ₹ 43.1 crore a year ago. Its share price did decline after its results, but recovered quickly. The US market will be in focus, with investors hoping that the firm gets the approval to launch a product or two, with first-to-file status. That could accelerate sales. Glenmark also expects to benefit from a more stable currency situation in emerging markets in FY16. The risk is if these events do not play out as expected.
In a post-results research note, IDFC Research said Glenmark could generate significant licensing revenue from its research programme as key milestones are expected in 18 months. But failing to achieve these, as the outcomes of these programmes are unpredictable, is a risk as well.
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