India Q2 biz has outperformed; maintain guidance: Glenmark

Below is the verbatim transcript of Glenn Saldanha’s interview with CNBC-TV18\\'s Sonia Shenoy and Latha Venkatesh.

Latha: There were bit of worries that there will be slowing of business in US. First take us through the US business, among the things that impacted you quite clearly have been slower rate of approvals. Will we see that improve?

A: Overall as a business we grew the business top line 15 percent and as you rightly pointed out US was the drag on the overall business. There are two key elements that are happening in the US market which are influencing the US growth rates. One is the slowing of product approvals by the FDA and the second the consolidation of the channels which has actually ended up with pricing getting slightly worse off in the current quarters. Our view is that the US business will come back strongly over the next few quarters. We are expecting a bunch of product approvals. Some of them coming through in this quarter followed by fourth quarter and next year we should have a fairly good year in the US.

So despite the US business underperforming the good news is that emerging markets and the rest of the business has done pretty well to have a 20-21 percent EBITDA margin growth.

Sonia: So when you say that the US business will return strongly over the next few quarters what kind of a growth are you looking at because this time there was a growth of less than 4 percent on a quarter-on-quarter (Q-o-Q) basis from the US?

A: It is very hard to guide to a specific number because everything is dependent on these product approvals coming through and given the past the FDA approval process has been extremely slow and it is very hard to predict precisely when these product approvals will come through but as and when they do come through you will see that positive momentum kick in.

Latha: You have guidance of 16 to 18 percent top line growth. That looks tough when you look at the performance so far. What do you expect is going to change?

A: So far we are already at 17 percent in the first half. So we are very much at our guidance for the first half. So overall we are not changing any guidance. So we still believe that subject to some of these approvals coming through we should be able to get there.

Sonia: We have a question from one of our viewers Mr Rohan Shah for you who asks whether you will be able to maintain your FY15 revenue guidance of 16-18 percent and whether you will be able to maintain your EBITDA guidance of Rs 1,500 crore. What would your response be?

A: Clearly we continue to maintain our guidance. We are not changing anything but of course the key element here is getting those approvals in the US.

Sonia: Can you tell us a little bit about the India business specifically. What kind of trends are you noticing, what would the growth look like by the end of FY15 and in FY16 and what could the triggers be?

A: India has been clearly an outperformer for Glenmark. If you look at our secondary sales IMS reports us growing at about 19-20 percent top line. The month of September was a good month for the entire industry. So, all in all India we anticipate we will end up with 17-20 percent top line growth for the business which is clearly way ahead of the rest of the industry.

A lot of this growth is coming from our entry into or our consolidation into the therapeutic segments where we operate. Segments such as dermatology, respiratory, cardio vascular, diabetes, these are the segments which are driving a lot of the growth and our market share improvements.

Latha: You have taken approval yesterday for raising funds up to USD 300 million. Give us an idea as to how you plan to raise these funds, what will they be used for?

A: This is just a broad enabling resolution. We have no plans to go out and raise any capital at this point.

Latha: But then why would you take that enabling resolution? What are your capital expenditure (Capex) plans?

A: Clearly it was contemplated by the board and they felt it was important to have this just as an enabling resolution. So we have gone ahead and taken it.

Sonia: For the rest of FY15 can we expect any milestone payments or licensing income from Sanofi?

A: I wouldn’t specify Sanofi but there is a possibility that you could see further outlicensing of our pipeline which could bring in further revenue streams by way of upfront fees and milestones?

Latha: Is that for GRB17536, are you already in talks to outlicense that one?

A: We do have discussions around 17536 but also we have two monoclonal antibodies GBR900 and GBR830 which are in phase one clinical testing and we have got GBR1302 the oncology candidate which will enter the clinics this year. So between these four molecules you should see a lot of newsflow and outlicensing deals happen in the next 12-18 months at least.

Latha: What are the R&D costs this quarter? Can you give some guidance on that?

A: We spend about 10 percent of sales on R&D. The current quarter we had 9.7 percent of sales and we think we will continue to spend 10 percent or somewhere thereabouts clearly this year but also in the years to come.