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Home / Markets / Mark To Market /  Gland Pharma at fresh 52-week low as Q1 marred by multiple headwinds
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Gland Pharma Ltd. was plagued by various troubles in the June quarter (Q1FY23) such as supply constraints, shutdown of manufacturing lines and a slowdown in the India business which saw a 72% year-on-year drop in revenue. A shortage of syringes resulted in overall revenue loss of 165 crore across the US, India and rest of the world (RoW) markets in Q1, while the high base from last year made matters worse.

This meant Gland Pharma’s consolidated revenue in Q1 stood at 857 crore, down nearly 26% year-on-year (y-o-y), falling significantly short of analysts’ estimates. For perspective, Motilal Oswal Financial Services had estimated consolidated revenue at 994 crore.

Not surprisingly, investors are upset. Gland Pharma’s shares slumped nearly 12% on Thursday on the National Stock Exchange, pushing the stock to a fresh 52-week low of 2,180 apiece.

Even so, gross margin expanded 284 basis points (bps) to 56.3% due to better geography mix i.e., lower contribution from India and RoW. One basis point is 0.01%. But this was more than offset by negative operating leverage leading to a 631bps contraction in Ebitda (earnings before interest, tax, depreciation and amortization) margin to 31.5%.

Going ahead, elevated costs and absence of big launches in FY23 would restrict a significant rebound in margin. “While the near-term outlook is sluggish, the product pipeline (61 pending abbreviated new drug applications) and entry into new markets like China (first approval expected in H2FY23) provide medium term growth visibility. Even as we like the entry into the biologics CDMO space, the market is ignoring the high gestation period," said analysts at Kotak Institutional Equities in a report on 21 July. CDMO is short for contract development and manufacturing organisation.

On the bright side, the management has indicated that there is no slowdown in demand. “The trough for the company is behind with demand not being a factor of concern and supply challenges being transient," said analysts at Jefferies India in a report on 20 July.

The company expects syringe shortage to be resolved in Q2 while procurement hurdles for other components would persist for the next 4-5 months.

Accounting for lower sales in RoW, lower profit share in the US and higher costs, Kotak analysts have cut FY2023-25E earnings per share estimates by 11-13%.

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