Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Glenmark Pharmaceuticals - US generics to hold the key…
Glenmark Pharmaceuticals’ Q3FY11 numbers were in line with our
expectation. The sales grew 17% YoY to | 750.8 crore in line with our
expectation of | 740 crore driven by strong growth in the domestic
formulation and Latin America business (speciality business). EBITDA
margins witnessed de-growth of 330 bps YoY to 23.2% due to lower
realisation (appreciation of rupee). Thanks to forex gain of | 18 crore,
net profit grew 16% to | 109.5 crore. With US generics expected to get
momentum in due course, we maintain our STRONG BUY rating.
ƒ Highlights of the quarter
Sales from the domestic formulation business increased 29.7% YoY to |
239.0 crore. This was higher compared to the industry growth rate of
~17% in the quarter. New product launches and increase in market share
of dermatology, anti-infective, cardiac, respiratory and gynaecology
segments drove sales growth. On the flip side, the US business witnessed
marginal growth of 8% to | 204.1 crore as the company stopped selling
Nitroglycerine (anti-angina) in the US market on instructions from the
USFDA. It launched six new products in the US market. It also launched
Oxycodone 5 mg capsules and 20 mg/ml oral solution in the US market
after receiving approval for its NDA at the fag end of Q3.
Valuation
Glenmark is targeting small niche opportunities in the US market via Para
IVs and FTFs instead of chasing blockbusters. Aggressive filings in the US
augur well as monetisation will take place in the next two years and pump
up US growth. Glenmark has already established a strong franchise in the
domestic market as well as in emerging markets. We expect the strain on
the balance sheet to ease further on account of overall improvement in
financials. The stock is trading at 12.4x FY13E EPS of | 23.3. We expect
the gap of 35-40% vis-à-vis large peers to get squeezed further on
account of consistency in the performance. We value Glenmark at | 396
based on 17x FY13E EPS of | 23.3 and maintain our STRONG BUY rating.
ƒ Strong growth in domestic formulation business drives sales
Glenmark Pharmaceuticals’ sales grew 17% YoY to | 750.8 crore in line
with our expectation of | 740 crore driven by strong growth in the
domestic formulations and Latin America business (speciality business).
Overall, the speciality business increased 25% to | 452.1 crore. Excluding
out-licensing income in Q3FY10, it grew 34% YoY.
Sales from the domestic formulation business increased 29.7% YoY to |
239 crore. This was higher compared to the industry growth rate of ~17%
in the quarter. The expansion of market share in dermatology, antiinfective, cardiac, respiratory and gynaecology segments and new
product launches drove the sales growth. It launched six new products
taking the total launches to 20 products in the first nine months.
In Latin American and Caribbean markets, the sales witnessed robust
growth of 88% to | 52.8 crore on a lower base. Sales in the new markets
i.e. Venezuela, Peru and Ecuador have started picking up. It filed 10
product dossiers and received approval for nine products during the
quarter.
On the flip side, the US business witnessed marginal growth of 8% to |
204.1 crore as it had stopped selling of Nitroglycerine (anti-angina) in the
US on instructions from the USFDA. The company continues to market atrisk launched product Tarka (anti-hypertensive) in the US market despite a
US jury decision going against it. The company is awaiting a final decision
from the US district court. During the quarter, it received final approval for
five ANDAs from the USFDA and launched six products in the US market.
Glenmark Generics, the wholly-owned subsidiary of Glenmark
Pharmaceutical, and US-based Lehigh Valley Technologies jointly
received final approval from the USFDA for its two new drug applications
of pain reliever Oxycodone Hydrochloride 5 mg capsule and 100 mg/5ml
oral solution. The drug belongs to pain management. Both companies
have signed a new supply and marketing agreement among themselves.
Under the terms of the exclusive supply and marketing agreement
between LVT and Glenmark, LVT will be responsible for the
manufacturing of the Oxycodone product line for Glenmark’s exclusive
marketing and distribution in the generic form. LVT will retain exclusive
marketing rights to the branded version of the Oxycodone product line.
Annual sales of the drug in respective strengths and forms are around
US$13 million. As both companies received approval for NDA, the current
generic players marketing these drugs are expected to exit the market.
The company has started supplying at the fag end of the quarter.
The company settled a patent litigation with GlaxoSmithKline for the drug
of Malarone (anti-malarial). It will be launching the drug in the second
quarter of FY12 and will most likely enjoy 180 day exclusivity for the drug.
ƒ EBITDA margin dips 330 bps
EBITDA margins witnessed de-growth of 330 bps YoY to 23.2% due to
lower realisation (appreciation of rupee) and inventory adjustments. The
raw materials cost spurted 160 bps to 33.1% (as percentage of sales) and
employee cost rose by 160 bps to 15.9%, respectively. R&D cost for the
quarter was | 35 crore. Thus, EBITDA, in value terms, increased by only
2.3% YoY to | 174.10 crore.
ƒ Net profit up 16%
Despite marginal growth in EBITDA, net profit increased by 16% to |
109.54 crore on the back of higher other income. Other income increased
from | 1.31 crore in Q3FY10 to | 26.6 crore during the quarter. This
includes forex gain of | 18 crore.
Other highlights
• Capex spend during the first nine months of the current fiscal was
| 250 crore. The company intends to spend a further | 50 crore in
Q4FY11. Capex for FY12 would be | 300 crore
• The company is planning to add some medical representatives in
the next fiscal
Valuation
Glenmark is building up a strong pipeline for the US market. It has
received 19 product approvals in 2010, and expects to launch these
products in the next 12-15 months. We expect limited competition for
Oxycodone capsules (5 mg capsules and 20 mg/ml oral solution) and 180
days exclusivity for Malarone. We also expect the launch of Malarone in
the US market to be at the fag end of Q2FY12. The launch of Crofelemer
(HIV associated diarrhoea) in ROW markets and supplying of Crofelemer
API to Salix Pharmaceutical is also slated to start in the second half of
FY12.
As far Tarka is concerned, the company has not stopped the marketing
and is awaiting the final verdict of a US district court. Although the jury
has slapped ~| 70 crore of penalty payable to Abbott, we have not
factored that into our FY11 estimates. Even if the company provides the
same, it will not affect our FY12, FY13 estimates as we have not factored
much upside from Tarka after the exclusivity was over last year although
it will alter our FY11E EPS from | 18.2 to | 15.6. We believe the upsides
from Oxycodone, Malarone and other monetisation will make good
possible loss of revenues from Tarka.
In domestic formulations, Glenmark has the highest market share in
dermatology (~8%) in the domestic market. Apart from derma, it is
building up a healthy basket of products in anti-infective, cardiac and pain
management. The management has guided for ~25% growth in domestic
formulations.
Overall, we expect sales and profits to grow at a CAGR of 18.1% and
24.7%, respectively, between FY10 and FY13E. The company is targeting
small niche opportunities in the US market via Para IVs and FTFs instead
of chasing blockbusters. Aggressive filings in the US augur well as the
monetisation will take place in the next two years and will pump up US
growth. Glenmark has already established a strong franchise in the
domestic market as well as emerging markets. We expect the strain on
the balance sheet to ease further on account of overall improvement in
financials. As usual, we are not assigning any value to the R&D pipeline at
this stage. The stock is trading at 14.6x FY12E EPS of | 19.9 and 12.4x
FY13E EPS of | 23.3, respectively. We expect the gap of 35-40% vis-à-vis
large peers to get squeezed further on account of consistency in the
performance. We have valued Glenmark at | 396 based on 17x FY13E
EPS of | 23.3.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Glenmark Pharmaceuticals - US generics to hold the key…
Glenmark Pharmaceuticals’ Q3FY11 numbers were in line with our
expectation. The sales grew 17% YoY to | 750.8 crore in line with our
expectation of | 740 crore driven by strong growth in the domestic
formulation and Latin America business (speciality business). EBITDA
margins witnessed de-growth of 330 bps YoY to 23.2% due to lower
realisation (appreciation of rupee). Thanks to forex gain of | 18 crore,
net profit grew 16% to | 109.5 crore. With US generics expected to get
momentum in due course, we maintain our STRONG BUY rating.
ƒ Highlights of the quarter
Sales from the domestic formulation business increased 29.7% YoY to |
239.0 crore. This was higher compared to the industry growth rate of
~17% in the quarter. New product launches and increase in market share
of dermatology, anti-infective, cardiac, respiratory and gynaecology
segments drove sales growth. On the flip side, the US business witnessed
marginal growth of 8% to | 204.1 crore as the company stopped selling
Nitroglycerine (anti-angina) in the US market on instructions from the
USFDA. It launched six new products in the US market. It also launched
Oxycodone 5 mg capsules and 20 mg/ml oral solution in the US market
after receiving approval for its NDA at the fag end of Q3.
Valuation
Glenmark is targeting small niche opportunities in the US market via Para
IVs and FTFs instead of chasing blockbusters. Aggressive filings in the US
augur well as monetisation will take place in the next two years and pump
up US growth. Glenmark has already established a strong franchise in the
domestic market as well as in emerging markets. We expect the strain on
the balance sheet to ease further on account of overall improvement in
financials. The stock is trading at 12.4x FY13E EPS of | 23.3. We expect
the gap of 35-40% vis-à-vis large peers to get squeezed further on
account of consistency in the performance. We value Glenmark at | 396
based on 17x FY13E EPS of | 23.3 and maintain our STRONG BUY rating.
ƒ Strong growth in domestic formulation business drives sales
Glenmark Pharmaceuticals’ sales grew 17% YoY to | 750.8 crore in line
with our expectation of | 740 crore driven by strong growth in the
domestic formulations and Latin America business (speciality business).
Overall, the speciality business increased 25% to | 452.1 crore. Excluding
out-licensing income in Q3FY10, it grew 34% YoY.
Sales from the domestic formulation business increased 29.7% YoY to |
239 crore. This was higher compared to the industry growth rate of ~17%
in the quarter. The expansion of market share in dermatology, antiinfective, cardiac, respiratory and gynaecology segments and new
product launches drove the sales growth. It launched six new products
taking the total launches to 20 products in the first nine months.
In Latin American and Caribbean markets, the sales witnessed robust
growth of 88% to | 52.8 crore on a lower base. Sales in the new markets
i.e. Venezuela, Peru and Ecuador have started picking up. It filed 10
product dossiers and received approval for nine products during the
quarter.
On the flip side, the US business witnessed marginal growth of 8% to |
204.1 crore as it had stopped selling of Nitroglycerine (anti-angina) in the
US on instructions from the USFDA. The company continues to market atrisk launched product Tarka (anti-hypertensive) in the US market despite a
US jury decision going against it. The company is awaiting a final decision
from the US district court. During the quarter, it received final approval for
five ANDAs from the USFDA and launched six products in the US market.
Glenmark Generics, the wholly-owned subsidiary of Glenmark
Pharmaceutical, and US-based Lehigh Valley Technologies jointly
received final approval from the USFDA for its two new drug applications
of pain reliever Oxycodone Hydrochloride 5 mg capsule and 100 mg/5ml
oral solution. The drug belongs to pain management. Both companies
have signed a new supply and marketing agreement among themselves.
Under the terms of the exclusive supply and marketing agreement
between LVT and Glenmark, LVT will be responsible for the
manufacturing of the Oxycodone product line for Glenmark’s exclusive
marketing and distribution in the generic form. LVT will retain exclusive
marketing rights to the branded version of the Oxycodone product line.
Annual sales of the drug in respective strengths and forms are around
US$13 million. As both companies received approval for NDA, the current
generic players marketing these drugs are expected to exit the market.
The company has started supplying at the fag end of the quarter.
The company settled a patent litigation with GlaxoSmithKline for the drug
of Malarone (anti-malarial). It will be launching the drug in the second
quarter of FY12 and will most likely enjoy 180 day exclusivity for the drug.
ƒ EBITDA margin dips 330 bps
EBITDA margins witnessed de-growth of 330 bps YoY to 23.2% due to
lower realisation (appreciation of rupee) and inventory adjustments. The
raw materials cost spurted 160 bps to 33.1% (as percentage of sales) and
employee cost rose by 160 bps to 15.9%, respectively. R&D cost for the
quarter was | 35 crore. Thus, EBITDA, in value terms, increased by only
2.3% YoY to | 174.10 crore.
ƒ Net profit up 16%
Despite marginal growth in EBITDA, net profit increased by 16% to |
109.54 crore on the back of higher other income. Other income increased
from | 1.31 crore in Q3FY10 to | 26.6 crore during the quarter. This
includes forex gain of | 18 crore.
Other highlights
• Capex spend during the first nine months of the current fiscal was
| 250 crore. The company intends to spend a further | 50 crore in
Q4FY11. Capex for FY12 would be | 300 crore
• The company is planning to add some medical representatives in
the next fiscal
Valuation
Glenmark is building up a strong pipeline for the US market. It has
received 19 product approvals in 2010, and expects to launch these
products in the next 12-15 months. We expect limited competition for
Oxycodone capsules (5 mg capsules and 20 mg/ml oral solution) and 180
days exclusivity for Malarone. We also expect the launch of Malarone in
the US market to be at the fag end of Q2FY12. The launch of Crofelemer
(HIV associated diarrhoea) in ROW markets and supplying of Crofelemer
API to Salix Pharmaceutical is also slated to start in the second half of
FY12.
As far Tarka is concerned, the company has not stopped the marketing
and is awaiting the final verdict of a US district court. Although the jury
has slapped ~| 70 crore of penalty payable to Abbott, we have not
factored that into our FY11 estimates. Even if the company provides the
same, it will not affect our FY12, FY13 estimates as we have not factored
much upside from Tarka after the exclusivity was over last year although
it will alter our FY11E EPS from | 18.2 to | 15.6. We believe the upsides
from Oxycodone, Malarone and other monetisation will make good
possible loss of revenues from Tarka.
In domestic formulations, Glenmark has the highest market share in
dermatology (~8%) in the domestic market. Apart from derma, it is
building up a healthy basket of products in anti-infective, cardiac and pain
management. The management has guided for ~25% growth in domestic
formulations.
Overall, we expect sales and profits to grow at a CAGR of 18.1% and
24.7%, respectively, between FY10 and FY13E. The company is targeting
small niche opportunities in the US market via Para IVs and FTFs instead
of chasing blockbusters. Aggressive filings in the US augur well as the
monetisation will take place in the next two years and will pump up US
growth. Glenmark has already established a strong franchise in the
domestic market as well as emerging markets. We expect the strain on
the balance sheet to ease further on account of overall improvement in
financials. As usual, we are not assigning any value to the R&D pipeline at
this stage. The stock is trading at 14.6x FY12E EPS of | 19.9 and 12.4x
FY13E EPS of | 23.3, respectively. We expect the gap of 35-40% vis-à-vis
large peers to get squeezed further on account of consistency in the
performance. We have valued Glenmark at | 396 based on 17x FY13E
EPS of | 23.3.
No comments:
Post a Comment