Home >Markets >Mark To Market >Glenmark shows decent progress in Q4; managing cash flows is key

MUMBAI : Glenmark Pharmaceuticals Ltd exhibited decent growth in its fourth-quarter figures, although regional growth differed. Some of its growth was due to pre-covid-19 buying, but slower growth in the coming quarters still dulls the outlook. Shares of Glenmark were flat in trade on Monday.

The company’s fourth-quarter revenue grew about 8% year-on-year, surging due to an improvement in its domestic market and in Europe. The firm could capitalize on growth opportunities in Europe, as the covid-19 disruptions impact sales of competitors. Its India business has outpaced the Indian pharma market at a healthy pace, which is good. Domestic revenue rose by about 14.5%.

Glenmark has also improved its market position in some categories, which shows that India is a growth market. Its US business, however, has been weak. Revenue fell 1% on an annualized basis. Pricing pressure continues in the US markets. In dermatology, prices have contracted about 20%. That led to slow growth, and it seems the market will continue to be competitive in coming quarters.

Mixed bag
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Mixed bag

Glenmark has planned a number of filings this year both from its US plants and from India. It has about 44 applications pending with the US FDA. Expenses remain high, particularly on the research and development front. Glenmark is conducting studies on quite a few molecules.

One of them recently concluded a Phase-I study. In the fourth quarter, R&D expenses were about 12.6% of revenue, much higher than some of its Indian peers. In the conference call, the management said it is on course to reduce capital expenditure from the previous year, which should help boost cash flows.

But the pace of execution needs to be watched. “The company is talking about lowering debt as they are working towards reducing R&D, reducing capital expenditures, and divesting non-core assets, which is incrementally positive," said Anshuman Gupta, pharma analyst, Investec Securities Ltd. The recent favipiravir launch, which could help in early-stage covid treatment, buoyed the stock price considerably. In addition, upbeat investor sentiment towards pharma stocks propped up its shares. But even as the Street will be watching cash-flow management, the recent rally that drove the stock up 36% in the past month may have outpaced growth expectations.

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