Gland Pharma nosedives 9% on dismal Q1 earnings performance

Gland Pharma reported a decline in its Q1 net profit and EBITDA margin.

Shares of Gland Pharma dived around 9 percent in early trade on August 7 after the company reported dismal earnings for the fiscal first quarter.

At 10.43 am, shares of Gland Pharma were trading at Rs 1,040.05 on the NSE, recouping more than half of its losses from the day's low of Rs 1,911.05.

The drugmaker's net profit slipped 26 percent on-year to Rs 143.8 crore in the April-June quarter, largely due to lower milestone income. Along with that, Motilal Oswal Financial Services also believes the postponement of the off-take of products by European customers hit the company's Q1 FY25 performance to some extent.

Revenue rose 16 percent to Rs 1,401.7 crore as against Rs 1,208.7 crore in the year ago period. Despite that, Gland Pharma's operational performance took a hit.

Its EBITDA margin contracted 550 basis points on year to 18.9 percent, which Nomura believes was due to lower revenue growth and milestone income.

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The brokerage also highlighted the break in momentum for Gland Pharma in Q1 following the recovery seen in the past four quarters. Following a weak quarter, Nomura also downgraded Gland Pharma to 'reduce' with a price target of Rs 1,819, implying a downside potential of around 14 percent from the previous close.

In addition, Gland Pharma's wholly owned subsidiary, CDMO player Cenexi continued to make EBITDA losses post its acquisition in January 2023. Looking ahead to Q2 of FY25, Gland Pharma anticipates reduced activity levels, particularly for Cenexi, due to the European holiday season and planned summer maintenance shutdowns. This includes an extended three-week shutdown at the Fontenay plant for the installation of a new ampoule line.

Gland Pharma also expects a gradual ramp-up in Cenexi revenue in towards the last quarter of FY25, although FY26 should see normalisation of revenue back to the 50 million euro quarterly run-rate. Given that the ramp-up of Cenexi and its breakeven is still some quarters away, Incred Equities retained its 'reduce' call on the stock with a price target of Rs 1,768.

Despite these challenges, Gland Pharma is actively working to revive its biologics-based contract manufacturing business, build a robust product pipeline for the US market, and enhance the scale and profitability of Cenexi. Favourable regulatory developments at the industry level are also expected to boost the company's business prospects, MOFSL believes. Based on these efforts, MOFSL has maintained its 'buy' rating for the stock, with a target price of Rs 2,440.

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