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Glenmark Pharmaceuticals Ltd’s March quarter performance was led by growth in domestic formulations and API (active pharma ingredient) sales. The India business grew 7.7 % year-on-year (y-o-y), while API sales also saw a 26.7% growth.

However, growth in the rest of the geographies was nothing to write home about. The US business grew 5.2% and Latin America sales declined. Besides, European sales growth was tepid and the rest of the world sales were flat, thanks to which overall revenue growth was restricted to just 3.3% y-o-y.

Glenmark’s superior product mix, nevertheless, helped gross margin expansion. Ebitda margins at 18.3% was an improvement over 16.8% in Q4FY20, even though they were slightly lower on a sequential basis.

Improving prospects
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Improving prospects

Looking ahead, domestic formulations, which contribute almost third to overall revenues, continue to see strong growth prospects. Growth in Q1 is expected to be driven by robust sales of covid drugs. Besides, the company’s extensive dermatology and other speciality portfolios and product range remain supportive of growth.

The US business that contributes slightly more than a fourth to overall sales is seeing stable price erosion. Hence helped by new launches, growth may catch pace. The product pipeline remains supportive with 41 ANDAs pending approval at the end of FY21. Additionally, it plans to file 18-20 ANDAs, including four-five from the Monroe facility.

There are niche product launches lined up for Europe. The expected approval for Tiotropium DPI (dry powder inhaler), which is a $450 million product, can drive European sales meaningfully. The company has guided for 10-12% sales growth in FY22 and US sales growth of 10%.

Analysts at Elara Securities (India) Pvt. Ltd expect a 15% net profit CAGR over FY21-23, given a healthy outlook in Glenmark’s domestic business (33% of total sales) and that the current US run rate is sustainable with a gradual pick-up.

However, all eyes are on the debt reduction plans. High debt has remained an overhang for long. Glenmark’s net debt at 3,549 crore at the end of FY21, though lower than the 3,758 crore debt at the end of FY20, remains high. It expects to generate 400 crore free cash flows in FY22. In addition, it is planning an IPO for Glenmark Life Sciences. Both the measures can lead to 1,000-1,200 crore debt reduction and can be a trigger for a re-rating.

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