ENAM Securities neutral on Glenmark Pharma

Broking house, ENAM Securities has maintained neutral rating on Glenmark Pharma.

ENAM Securities report on Glenmark Pharma:

Robust US generics sales drive growth:

Glenmark’s reported numbers for Q4FY07 were above expectations, with net sales at Rs 2.7bn (up 65% YoY), EBIDTA at Rs 907mn (up 179% YoY) and PAT at Rs 626mn (up 150% YoY). EBIDTA margin at 33% was up by over 13%. Consolidated Q4 sales were Rs 3.4bn, with EBIDTA at Rs 1bn and PAT at Rs 632mn. Consolidated sales for FY07 were USD 281mn (up 64%) and PAT was USD 69mn (up 255%).

Q4FY07 Highlights:

The highlight of the quarter was a strong performance in the US generics market, where Glenmark registered sales of USD 18.2mn (up 149% YoY). Glenmark and its partners have 13 products in the US market (with ~25% market share in major products); they also have another 36 products awaiting FDA approval. The company recently filed a Para IV ANDA for ezetimibe (Schering’s Zetia), which has annual sales of USD 1.5bn.

Branded formulation exports to semi-regulated markets were up 68% YoY to Rs 454mn. Glenmark received 147 registrations and filed for another 62 in various export markets, during the quarter. With the commencement of operations in Turkmenistan and Cameroon during Q4, it has added nine new markets during FY07 and now has operations in 80 countries.

Glenmark’s Latam subsidiaries (Glenmark Farmaceutica Ltda, Brazil and Servycal S.A., Argentina) posted revenues of USD 15.3mn in Q4FY07 (up 73% YoY). In Q4, it filed four new dossiers with ANVISA, Brazil and three with ANMAT, Argentina, taking total filings across Latam to 40.

At CMP (Rs 677), it trades at 17.8x FY08E EPS of Rs 38 and 14.9x FY09E EPS of Rs 45. While these are not demanding valuations, they factor in large upsides from milestones, which should be assigned far higher risk weightages. We maintain our sector Neutral rating.