Glenmark Pharmaceuticals Ltd.|Q2FY15 First Cut Analysis | Muted US sales and higher employee cost adversely affected earnings for the quarter-:: IndiaNivesh

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Adjusted PAT and sales at Rs1.7bn and Rs16.8bn, grew at similar rate of 15.8% y-y
for 2Q FY15: Sales growth was muted due to decline in US sales and moderate
growth of 15% in domestic formulation (DF) segment. The subdued performance
in US and DF was offset to some extent by better performance in Latin America,
Europe and API segment. Though the gross margin improved by 85bps y-y to 67.3%,
higher employee cost led to 97bps y-y decline in EBITDA margin to 19.9% for the
quarter. Though EBITDA grew at moderate rate of 6% y-y, lower tax led to 16% y-y
growth in adjusted PAT for the quarter.
Fewer launches led to y-y contraction in US generics sales: US generics revenue at
US$84mn was down 8% y-y. US generics revenue contracted for the first time on
y-y basis in past 13 quarters. The muted performance has been due to less number
of new product launches during the quarter. The lesser approvals has been in line
with its peers for the quarter. GNP has filed one ANDA and 11 ANDA in 2Q FY15 and
2HFY15, respectively. The cumulative filing of ANDAs stands at 166, with 72 ANDAs
pending for approval. Out of 72, 30 are para IV applications. We expect sales to
improve once approval process picks up going forward.
Though DF sales were lower than expectiation, it continue to outperform industry
growth: DF sales came in at Rs4.8bn, up 15% y-y. The growth in DF segment was
driven by increased market share in key therapeutic categories like cardiac,
respiratory, anti-infective, anti-diabetic, gynaecology and derma segment. As per
IMS MAT September 2014, GNP exhibited value growth of 19.3% against IPM growth
of 11.6%.
Better sale in UK and Poland drives Europe sales: Europe sales at US$21mn grew
by 23% y-y, largely driven by higher UK sales. UK region registered ~50% y-y growth
on account of increasing sales portfolio and effective account management despite
lesser launches and price cuts. Poland subsidiary in Eastern Europe also aided for
better growth in Europe sales.
Superior performance in Mexico and Venezuela led to 146% y-y growth in sales in
Latin America: Latin America showed maximum growth amongst the region, with
growth of 146% y-y to US$38.2mn. Strong performance by Mexico and Venezuela
subsidiary led to robust performance in Latin America. GNP launched two new
products in Mexico. The Venezuela subsidiary received three new approvals in the
quarter.

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