Key highlights from Glenmark Pharmaceuticals Limited (GLENMARK) Q4 FY23 Earnings Concall
Q&A Highlights:
- [00:27:19] Tushar Manudhane at Motilal Oswal asked about the INR220 crores and INR91 crores remediation cost in terms of infrastructure investment and quality. V. S. Mani Global CFO said 12 people worked at sites in India and the U.S. costing INR12 million for a year. U.S. expenses were INR22 million and India expenses were INR46 crores for the quarter with additional expenses expected next quarter.
- [00:29:01] Tushar Manudhane of Motilal Oswal asked about Ryaltris sale across markets in FY23. Glenn Saldanha MD said the revenue was around INR20-25 million last year, and expect it to increase to approximately INR40-45 million this year.
- [00:29:26] Amit Khetan with Laburnum Capital enquired what is driving the increase in net debt and the plan to be net debt free by FY26 including intermediate targets and the role of divestment. V. S. Mani Global CFO replied that the increase in net debt is primarily due to an increase in the working capital cycle, with changes in debtors and inventory. The FY26 guidance is still held with expected growth and cash flows to pay off debts and reach a positive net debt level.
- [00:32:29] Amit Khetan with Laburnum Capital enquired how much of the INR3,000 crores debt is dependent on divestment of GLS or other non-core brands. Glenn Saldanha MD answered that the GLS divestment of at least 7% is important to meet net debt guidance. The U.S. settlement for Zetia makes it critical to include GLS divestment to achieve net debt zero.
- [00:34:44] Amit Khetan with Laburnum Capital asked to quantify the impact of price revisions, return of COVID phase and divested brand on the decline in the India business. Glenn Saldanha MD clarified that in-market growth in India is strong for the entire franchise. Changes in the business model in segments like Oncology and Institutions were made to maintain margins. India continues to be a strong business.
- [00:36:39] Amit Khetan with Laburnum Capital queried how confident is GLENMARK on keeping Ichnos spending contained to the $60 million target for FY24 and is there any revision to the guidance. V. S. Mani Global CFO answered that there were severance costs in the current quarter due to rightsizing. Going forward, spending is expected to be around $60 million for the year or $15-20 million per quarter.
- [00:37:37] Nitin Agarwal from DAM Capital asked where does GLENMARK see the working capital days settling on a sustainable basis in the next 1.5 years after increasing from mid-80s to 130 days over the last two years. V. S. Mani Global CFO said working capital days increased due to changes in inventory management and sales geography mix. Debtors are expected to decrease by 15 days in the next couple of quarters, bringing working capital days closer to 100 and that being a sustainable number.
- [00:42:35] Nitin Agarwal at DAM Capital asked what kind of growth can be assumed for the India business on an adjusted base with the impact of divestments next year. Brendan O’Grady CEO Global Formulations said the Indian business is outgrowing the market by 1.3 times with continued launches and expected growth in the high-single digits of 8-9% this year.
- [00:51:47] Prakash Agarwal of Axis Capital asked what is playing out in the U.S. without any large products and its outlook. Brendan O’Grady CEO Global Formulations said the U.S. saw quarter-over-quarter growth due to improved service levels, new product launches, market disruption, and improved execution. Growth is expected to continue in the 4-6% range.
- [00:53:01] Prakash Agarwal of Axis Capital enquired about the status of the three plants and has the FDA been invited for inspection and the expected expenses for this year. Glenn Saldanha MD said remediation at Monroe is done and batches will start in 2Q with expected FDA inspection and commercial sales in 2H24. Remediation at Goa and Baddi will be completed in 1Q and the FDA will be invited.
- [00:56:37] Shyam Srinivasan from Goldman Sachs queried about the sustainable run rate for the Europe business after seeing good Q-o-Q growth. Brendan O’Grady CEO Global Formulations replied that the European business grew over 20% last year and is expected to continue with strong growth in both generic and specialty segments, particularly in the respiratory business. Expansion into Italy and pricing disruption are driving growth.