MOSL: GLENMARK PHARMA (Neutral)-Weak results-pick-up in US some time away
Glenmark Pharma: Weak results; pick-up in US some time away
(GNP IN, Mkt Cap USD2.4b, CMP INR535, TP INR550, 3% Upside, Neutral)
- Net sales fell ~12% YoY (-2% QoQ) to ~INR21.7b (est. of ~INR23.2b). Gross margin shrunk ~1,170bp YoY (primarily on higher price erosion in the US business) and ~220bp QoQ (largely on lower contribution of sales from India business at 27% in 3QFY18 v/s 32% in 2QFY18) to 64%. EBITDA margin shrunk ~360bp QoQ to 13.4%. This, along with a decline in other income to INR90 from INR866 in 3QFY17, led to a decline in PAT by 78% YoY to INR1b (est. of INR2.6b).
- US business to remain under pressure; rest of the market to lead growth: US sales declined ~38% YoY to USD114m v/s USD183m in 3QFY17, primarily due to contribution of gZetia in the previous year. GNP expects the US business to remain under pressure in the absence of fast product approvals. On licensing partnership, GNP is looking to out-license certain products, such as GBR830, GBR1302 and GSP301 (it plans to partner in the next 12-15 months). Xolair biosimilar is expected to enter phase-III by late-FY19. India business grew ~12% YoY to INR5.8b; expected to grow 15%+ in FY19. Other geographies also reported healthy growth (LatAm down 5%); expected to grow >15% in FY19.
- Earnings call highlights: 1) Net debt continues to go up; stood at INR36b v/s INR35b at end-2Q. 2) R&D as % of sales to stay at ~12%, of which ~8% is toward innovation and specialty products development. 3) Epiduo approval is delayed due to CRL. 4) GSP 301 filing is expected in next two months; approval expected by beginning of FY20. 5) Price erosion for GNP in US business was ~13%. 6) GNP expects strong growth in Russia led by five scheduled launches in FY19. 7) On Baddi facility 483s, GNP has provided response to US FDA and awaiting a reply.
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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