May not see 35% growth in H1 sustaining in H2: Glenmark

May not see 35% growth in H1 sustaining in H2: Glenmark

Glenn Saldanha – Chairman & Managing Director, Glenmark Pharmaceuticals Ltd.

Glenn Saldanha, MD & CEO, Glenmark said the pharma major is growth at the rate of 30% in the Indian market and is confident of maintaining margins ahead.

Glenn Saldanha, MD & CEO, Glenmark said the pharma major is growth at the rate of 30% in the Indian market and is confident of maintaining margins ahead.

The drug maker clocked a net profit of Rs 156 crore for the second quarter ended September 30 compared with Rs 56 crore registered in the corresponding quarter last year. But the company’s performance in the quarter under review was not comparable with last year’s, Glenmark said, due to a Rs 118-crore out-licensing income that was received, a Rs 131-crore royalty paid to Paul Capital and Rs 85 crore mark-to-market loss recorded in the second quarter of the previous financial year.

Saldana said the growth in India business is not a “one-off” but he added that the company may not be able sustain the 35% growth rate in the second half of the year.

Glenmark expects to launch Crofelemer in second of half of FY14, Saldana told CNBC-TV18 in an interview.

Below is the transcript of his interview with CNBC-TV18

Q: Going by what has happened in the first half you should be on your way to beating Rs 900-925 crore EBITDA forecast by quite a margin. Are you thinking of upping those estimates?

A: We do not put out any official guidance. We live it up to the analyst and the street to decide as to where we will finish for the year. We continue to remain confident in terms of how the business is performing and where the margins are going. So, we do not see any factors that will deteriorate margins from here.

Q: But isn’t that Rs 900 – 925 crore for FY13 has come from you?

A: We had put that out when there was a lot of uncertainty in Q4, as we had a margin dip. This was just a broad guideline under which the analysts were working. Officially we do not guide to any specific numbers.

Q: Now that you have done 477 crore in the first half, the same analysts will tell you to do a 1,000 crore EBITDA this year?

A: Sure.

Q: What is going on with the India business? This quarter was 35 percent growth and that’s way above industry growth. Any exceptions for this quarter or is the business going at that kind of a cliff?

A: We have outperformed as far as India goes. We have been the fastest growing company in the Indian environment. As per IMS we are growing at 30 percent. So that is a very strong number. There have been no one-off in terms of India. However, we do not see the 35 percent number sustaining in the second half. If we finish the year at 22-25 percent, I think overall we would have done well as an organization.

Q: What categories are kicking in? Do you think that you can outperform the industry by a margin of 10-15 percent which you seem to be on track for?

A: Currently we are outperforming. We are growing in excess of 15 percent ahead of the overall Indian pharmaceutical industry. This is all on account of a restructuring exercise that we did last year where we increased the field force, we restructured the product mix. We increased the marketing spends. All that is now beginning to pay dividends as far as the India growth goes. So going forward we still continue to think, we will outperform the Indian pharmaceutical industry by at least 30-50 percent higher in terms of growth. But also one needs to keep in mind that our base is much lower than some of the peer group. So, there is a lot of headroom to continue to sustain growth.

Q: Can you give an update on Crofelemer?

A: Crofelemer continues to do well. We are waiting for the FDA to signoff. It should happen in January according to the date given. Once Crofelemer gets approved by the FDA, we continue our filings in our markets. So, we anticipate a potential launch date in the second half of FY14. And we will initiate launching in the emerging markets. But we continue to remain positive about Crofelemer being a significant opportunity for the company going forward.

Q: Where should one set expectations on the two molecules that have out-licensed to Sanofi in terms of milestones and developments from hereon?

A: Both the molecules that we have out-licensed to Sanofi GRC15300 and GBR500 are now in phase two development. We are currently dosing patients in phase two clinical trials. And we anticipate that we will have data coming out on these both molecules over the next 12 months, in terms of phase two results. If the results are positive that will trigger further milestones to the company going forward.

Q: What kind of licensing flows in terms of quantity and in terms of timeline should one be expecting for Sanofi?

A: I think overall as a company you should see a lot of activity on the NC or the new molecular entity (NME) side of thing over the next 12 months. Between the two Sanofi molecules–Revamilast, GRC 17536, and GBR 900–we have almost five molecules with seven data points likely to come up in the next 12-14 months. So that should trigger a lot of licensing activities over the next 12 months.

Q: Now that cash flows have improved significantly, any further thoughts on using this EBITDA to further pare down debt, from 1,800-1,900 crore where it stood at last count?

A: The plan is, the free cash that the business will generate over the next two-three years will all go towards paring down debt. So, debt should continue to come off, as we go forward on a much stronger EBITDA base. That’s the direction that we are taking as a firm.


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