MOSL: GLENMARK PHARMA (Neutral)-Margin improvement crucial-key launches to drive US growth
Glenmark Pharma: Margin improvement crucial; key launches to drive US growth
(gnp IN, Mkt Cap USD2.3b, CMP INR524, TP INR535, 2% Upside, Neutral)
- GNP’s 4QFY18 revenue declined ~7% YoY to INR22.5b (our estimate: INR22.2b). US business declined ~30% YoY to INR6.99b, primarily due to contribution of gZetia sales in 4QFY17 which was entitled to 6 months exclusivity. Gross margin declined ~280bp YoY to 65.1%. EBITDA declined ~28% YoY to INR2.9b (our estimate: INR3.7b), with margin contracting to 13.1% from 17% in 4QFY17 and 13.4% in 3QFY18. PAT declined ~18% YoY to INR1.5b (our estimate: INR2.1b) on lower margins and high tax rate – at 31.8% v/s 27.2% in 4QFY17. For FY18, sales were flat at INR89.7b, EBITDA declined 18% to INR14.8b, and PAT declined 27% to INR8b.
- Ex-US business to drive growth in FY19; US business bottomed in 4Q: GNP expects revenue to grow 10-15% in FY19. Ex-US business should grow faster. Low base effect should help drive robust growth in domestic business. EU business growth should be driven by Seretide launch across key markets. US business would have one quarter of Zetia headwind in the base. The management believes that US business has bottomed in 4Q. Recent launches including Welchol and Clobetasol would drive growth. GNP expects 10-12 launches in the US in FY19, including 5-6 complex generic approvals. R&D is likely to be ~12% of sales in FY19 (similar to FY18E). GNP expects FCF generation in FY19. Licensing income through partnering would be a key focus area for GNP in FY19.
Glenmark Pharmaceuticals is engaged in the discovery of new molecules, both NCEs (new chemical entity) and NBEs (new biological entity), with seven molecules in various stages of clinical development & pre-clinical development. Co.'s Drug Discovery business primarily focuses in the areas of inflammation, metabolic disorders and pain. Co.'s Formulations business focuses on therapeutic areas such as dermatology, anti-infectives, respiratory, cardiac, diabetes, gynecology, CNS, and oncology. Co.'s Glenmark Generics Ltd. business focuses on developing, manufacturing, selling and the distribution of generics through wholesalers, retailers and pharmacy chains.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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