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Glenmark shares plunge 16% on weak Q4 numbers

LiveMint logoLiveMint 12-05-2017 Isha Trivedi

Mumbai: Shares of Glenmark Pharmaceuticals Ltd plunged 16% to a seven-year low on Friday on concerns over the company’s inability to reduce debt and overhang of pricing pressure in the US, its biggest market.

The stock hit a low of Rs760 earlier in the day. At 11:10am, Glenmark’s shares were down 13.6% at Rs781.60 on the BSE, while the benchmark Sensex index was down 0.1% at 30,211.59 points.

The drug maker’s profit in March quarter at Rs183.76 crore was significantly below market expectations. A Bloomberg poll of 20 analysts had estimated consolidated net profit at Rs592.4 crore.

In addition to weak numbers, Glenmark’s management had guided that it will reduce its debt in 2016-17 from a year ago banking on its opportunity of being the exclusive marketing company for the generic cholesterol drug Zetia in the US. Instead, its debt increased and the management, during a post-earnings conference call with analysts, was unable to address concerns over high debt.

As on 31 March, Glenmark’s net debt was Rs3,667 crore, higher than a year ago.

Glenn Saldanha, managing director of the company said on the call that revenue from Zetia generic sales in the US is likely to be slightly lower than $200 million as against the guided $200-250 million, as the company has not been able to garner expected market share.

Lower-than-expected Zetia generic sales and price erosion of almost 15% in the base business in the US affected earnings of the company.

While Glenmark is optimistic over its performance in 2017-18 and expects a 12-15% growth in revenue, while sustaining a margin at around 23% with debt likely to reduce, analysts are sceptical, both on the growth projections and the ability to lower debt.

In 2016-17, the company’s consolidated revenue rose 19.73% to Rs9,185.68 crore against Rs7,649.58 crore in 2015-16.

“Revenue guidance is really optimistic but debt reduction is a key monitorable for this year. We might trim our estimates on the company,” said Amey Chalke, analyst at HDFC Securities.

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