Glenmark’s Q4 shows decent progress, but managing cash flows critical

Stock Market

MUMBAI: Its decent set of figures for the fourth quarter exhibited a marked enchancment in Glenmark Pharmaceuticals Ltd’s enterprise. But whereas a few of that progress stemmed from pre-stocking, notably in Europe, slower progress within the coming quarters may boring the bounce. Shares of Glenmark inched up about 1% in commerce on Monday.

The firm’s fourth-quarter income grew about 8% year-on-year, surging as a result of enchancment in its home market and in Europe. The agency may capitalise on progress alternatives in Europe because the covid-19 disruptions impacted gross sales of opponents. Some of its elevated gross sales could possibly be attributed to pre-stocking.

Its India enterprise has proven traction, which is nice. Its home revenues elevated by about 14.5%, significantly better than the Indian Pharma Market’s progress of about 9.6% progress. Another constructive is that it improved its market place in some home classes.

Its US enterprise, nevertheless, is weak, with revenues sliding 1% y-o-y. Strong pricing stress continues within the US markets. In dermatology, costs have contracted about 20%. Glenmark had deliberate a variety of filings this 12 months each from its US vegetation and from India. It has about 44 functions pending with the US FDA.

Revenues from different areas (Africa, Asia and the CIS) rose about 12.7% through the quarter, which is sort of wholesome. Its Latin American enterprise grew nicely on the launches of respiratory merchandise.

Glenmark is conducting research on fairly a couple of molecules. One of those lately concluded a Phase-I examine. Of course, the deal with new molecules tends to maintain analysis and growth bills excessive. In the fourth quarter, R&D bills have been about 12.6% of revenues, a lot greater than a few of its Indian counterparts.

Higher prices, nevertheless, are a fear. In the convention name, the administration stated it’s heading in the right direction to scale back capital expenditure from the earlier 12 months, which ought to assist improve cash-flows. But the tempo of execution must be watched.

“The firm is speaking about reducing debt as they’re working in direction of lowering R&D, lowering capital expenditures, and divesting non-core property, which is incrementally constructive,” stated Anshuman Gupta, pharma analyst, Investec Securities Ltd.

The current Favipiravir launch, which may assist in early-stage covid-19 therapy, buoyed the inventory worth significantly. In addition, the upbeat investor sentiment to pharma shares additional propped its shares. But even because the Street will likely be watching cash-flow administration, the current run-up appears to have outpriced the inventory in comparison with its progress.

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