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Sunday, May 19, 2013

Glenmark sees sales growth slowing to 20%

This story first appeared in DNA Money edition on Thursday, May 9, 2013.

Glenmark Pharma sees its overall sales growing at a slower 20% this fiscal from the 38% pace logged in the last fiscal on account slowdown in India and delay in US drug approvals.

Glenn Saldanha, chairman and managing director, Glenmark, said the guidance for India business, too, is 18-20%.

“There is a slowdown in the India business and the IMF data for the last 4-5 months is very bad for the industry as a whole. In this environment we think an 18-20% growth number is doable because we are also adding OTC (over-the-counter), generic components and anti-diabetes drugs (Zita and Zita-Met) to these numbers, which will be significant contributors,” Saldanha on an earnings call.

Analysts said the growth guidance is in line with the projections.

Manoj Garg, pharma analyst, Edelweiss Securities, said, “If the company is anticipating 18-20% growth despite high research and development (R&D) expenditure, it’s a reasonably fair guidance. The current over 35% growth is not sustainable given the base is likely to increase coupled with slowdown in the market.”

The company said that its R&D expenditure this fiscal would be about 8.5% of net sales. While innovative R&D will see normal increase, the increase in absolute R&D spend is primarily towards the US business. The management has also earmarked capex of Rs 250 crore for the current fiscal.

Glenmark’s operating profit, excluding out-licensing income, is expected to be Rs 1,225 crore. The company expects net debt-to-Ebitda ratio to improve further this fiscal from the current 2.12. Its net debt currently stands at around Rs 2,000 crore.

The focus, the company said, will be to reduce debt from free cash with more significant merger and acquisition plans this financial year.

“We are very confident about bringing down the absolute debt number this year onwards. Free cash generation should start to be pretty substantial, going forward,” said Saldanha.

For the US business, Glenmark is expecting a more or less similar growth of 18% this fiscal, citing poor visibility and timing of US Food and Drug Administration (FDA) approvals.

“The next few years should be much better because of the filing grade and the product pipeline.

We should see better growth in the subsequent two years wherein we can expect over 25% CAGR from the US business,” Saldanha said.

Terrance Coughlin, CEO, Glenmark Generics Inc, US, said the industry as a whole is seeing a slowdown in approvals.

“For fiscal 2014, we anticipate 8-12 approvals in oral contraceptives, dermatology products and immediate release products.

Glenmark’s US pipeline comprises 53 abbrievated new drug applications (Anda) that fall into a less competitive landscape and the company is targeting to file another 20 this fiscal. “Of the total filings, 50-75% are in the niche category. We continue to focus on dermatology (derma) and oral contraceptive,” Coughlin said.

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