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UBS Investment Research
Glenmark Pharmaceuticals
Q3FY11: Inline but margins below est.
Q3FY11 Sales: Rs 7.5bn (+21%YoY, 4% QoQ) inline with UBS-e
Q3 revenue was driven by strong performance of the speciality business which
grew 34% YoY. Speciality business recorded strong growth across regions of Latin
America (+88% YoY), India (+30% YoY), Europe (+27% YoY), and ROW (+27%
YoY). U.S. business had sales of Rs 2.0bn (-9% QoQ, +8% YoY). During the
quarter company received final approval for 5 ANDAs and tentative approval for
2. The company launched 6 products in U.S. during the quarter.
Q3FY11 EBITDA: Rs 1.7bn (+19% yoy); PAT: Rs 1.1bn (+16%yoy)
The EBITDA margin came in at 22.7% and was below UBS-e of 25.1%. Material
cost increased by 23% YoY and employee cost increased by 30% YoY. The R&D
expense for the quarter was Rs 35cr and company guided for Rs 130 cr for the
year. Other income for the quarter was Rs 266mn which included forex gains of Rs
180mn-Rs190mn. The net profit was Rs 1.1 bn (+16% YoY).
U.S. business momentum remains weak
US revenues declined 6%qoq to US$45mn impacted partly by withdrawal from the
Nitroglycerin mkt due to regulatory reasons. Mgmt. expects new launches to ramp
up further in Q4FY11. However, we believe potential Tarka withdrawal will mute
sequential ramp up in US. Co. expects 25%YoY growth in FY12 in US.
Valuation: Rating, PT, and estimates Under Review
We will revisit our rating, PT, and estimates for the stock. We derive our current
price target of Rs370 from a DCF-based methodology and explicitly forecast longterm
valuation drivers using UBS’s VCAM tool.
Glenmark Pharmaceuticals
Glenmark Pharmaceuticals (Glenmark), incorporated in 1977, is focused on the
manufacture and global marketing of finished dosages and API. Glenmark is
among few Indian companies investing in new drug discovery research.
Melogliptin, a DPP IV inhibitor has completed Phase IIb trials. Glenmark's
revenue in FY10 was Rs23.9bn. The global API business contributed 11% of
sales. It main markets are in India, the US and Latin America. The company is
increasing its presence in EU and semi-regulated markets.
Statement of Risk
We believe risks include regulatory risks, FDA approval, timing of approvals,
competition from rival drug therapies, litigation (including the appeal process),
accounting/disclosure, and product pricing risk from generics competition.
Pricing pressure in the US market because of increased competition may
continue. Glenmark is increasing its focus on the US business. Risks relating to
the generic pharma sector in US become increasingly applicable now. Continued
rupee appreciation is likely to put further pressure on operating margins going
forward. Glenmark has outlicensed 1 NCE molecule on which it will get
milestone payments as well as royalties in case of a successful launch. Failure of
one or more of these molecules represents a potential risk.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Glenmark Pharmaceuticals
Q3FY11: Inline but margins below est.
Q3FY11 Sales: Rs 7.5bn (+21%YoY, 4% QoQ) inline with UBS-e
Q3 revenue was driven by strong performance of the speciality business which
grew 34% YoY. Speciality business recorded strong growth across regions of Latin
America (+88% YoY), India (+30% YoY), Europe (+27% YoY), and ROW (+27%
YoY). U.S. business had sales of Rs 2.0bn (-9% QoQ, +8% YoY). During the
quarter company received final approval for 5 ANDAs and tentative approval for
2. The company launched 6 products in U.S. during the quarter.
Q3FY11 EBITDA: Rs 1.7bn (+19% yoy); PAT: Rs 1.1bn (+16%yoy)
The EBITDA margin came in at 22.7% and was below UBS-e of 25.1%. Material
cost increased by 23% YoY and employee cost increased by 30% YoY. The R&D
expense for the quarter was Rs 35cr and company guided for Rs 130 cr for the
year. Other income for the quarter was Rs 266mn which included forex gains of Rs
180mn-Rs190mn. The net profit was Rs 1.1 bn (+16% YoY).
U.S. business momentum remains weak
US revenues declined 6%qoq to US$45mn impacted partly by withdrawal from the
Nitroglycerin mkt due to regulatory reasons. Mgmt. expects new launches to ramp
up further in Q4FY11. However, we believe potential Tarka withdrawal will mute
sequential ramp up in US. Co. expects 25%YoY growth in FY12 in US.
Valuation: Rating, PT, and estimates Under Review
We will revisit our rating, PT, and estimates for the stock. We derive our current
price target of Rs370 from a DCF-based methodology and explicitly forecast longterm
valuation drivers using UBS’s VCAM tool.
Glenmark Pharmaceuticals
Glenmark Pharmaceuticals (Glenmark), incorporated in 1977, is focused on the
manufacture and global marketing of finished dosages and API. Glenmark is
among few Indian companies investing in new drug discovery research.
Melogliptin, a DPP IV inhibitor has completed Phase IIb trials. Glenmark's
revenue in FY10 was Rs23.9bn. The global API business contributed 11% of
sales. It main markets are in India, the US and Latin America. The company is
increasing its presence in EU and semi-regulated markets.
Statement of Risk
We believe risks include regulatory risks, FDA approval, timing of approvals,
competition from rival drug therapies, litigation (including the appeal process),
accounting/disclosure, and product pricing risk from generics competition.
Pricing pressure in the US market because of increased competition may
continue. Glenmark is increasing its focus on the US business. Risks relating to
the generic pharma sector in US become increasingly applicable now. Continued
rupee appreciation is likely to put further pressure on operating margins going
forward. Glenmark has outlicensed 1 NCE molecule on which it will get
milestone payments as well as royalties in case of a successful launch. Failure of
one or more of these molecules represents a potential risk.
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