Only better product mix, new approvals can up margin:Glenmark Pharma

A story I wrote a few days back for the news organisation I work for currently.

Only better product mix, new approvals can up margin:Glenmark Pharma

Oct 28, 2016

    NEW DELHI - Glenmark Pharmaceuticals Ltd's top management today expressed difficulties in shoring up the operating margin in the core generic business in the next two years beyond the current levels of 20-21%.

    The company, however, expects to meet the 23% margin guidance for 2018-19.

    The company had guided for a 23% margin level from 2018-19 onwards on the back of cash flow from new launches, particularly the forthcoming launch of Ezetimibe, or generic Zetia as it is known by brand name, in the US market with a 180 day exclusivity sale period.

    Glenmark's operating margin in Apr-Sep stood at 19.7%, with Apr-Jun at 19.3% and Jul-Sep at 20.2%.

    Glenn Saldanha, Chairman and Managing Director, said in a post July-Sep results conference call today, that in the core business has been under some margin pressure by virtue of being in generics which has seen price erosion in the US market. The company declared its Jul-Sep earnings on Thursday.

    "We have a good pipeline of products and a lot depends on the kind of approvals we get in next two years and the product mix," said Saldanha.

    Company intends to repay $180 mln worth of foreign currency debt in the second half of 2016-17 and bring down the overall debt level, said Glenmark's MD.

    As of Sep 30, the company had gross debt of 46.88 bln rupees, of which 13.13 bln rupees were in foreign currency convertible bonds. On Mar 31, total debt was 24.87 bln rupees with zero foreign currency debt.

    The company-targeted $180 mln debt repayment would result in total debt coming down by around 12 bln rupees at the end of March '17.

    The company will use its cash and cash equivalent balance of 20.29 bln rupees as of Sep 30 to repay debt. Cash balance was 8.62 bln rupees as of Mar 31.

    The company officials said in the conference call that the first half of 2016-17 saw research and development expenditure of 4.33 bln rupees with 2.35 bln rupees worth of expenditure taking place in Jul-Sep.

    The research and development expenditure amounted to 10.25% of the total income in the first half of 2016-17.

    On the capital expenditure front, the company maintained its 2016-17 target of 2.61 bln rupees of which 480 mln rupees was investment in intangibles.