Why you should buy ? Why you should sell ?US Market

18% CAGR US formulations growth in FY15-18E

The improved approval rate (8 in H1-FY16) should sustain regular growth while incrementally gZetia

USFDA approval for Glenmark generics has slowed from 18 in FY11 to 6 in FY15

37 plain filings are pending for approval for Glenmark

Indian Market With strong presence in Cardiac, Derma

and Respiratory, Glenmark has sustained an above industry growth

The company has grown faster than industry growth on the back of strong presence in three-four segments

Price controls and general slowdown in the industry

New product introductions in respiratory, diabetics and possibly oncology or complex injectables could sustain a 13% CAGR for India formulations in FY15-18E

Other Markets-European In-licensing from European

manufacturers for expansion in Europe will sustain the strong growth in Europe (CAGR 20% in FY15-18E)

Glenmark has tied up with Celon DPI for gSeretide for launch in 15 European markets, placing it amongst the earliest entrants

Glenmark is close to factoring a full year of Russian currency depreciation, uncertainty in Venezuela, dragging AACIS and Latam regions

Other Risk USA Market :- The existing basket of

products is also facing higher customer bargaining power in the form of channel consolidation amongst the large purchasers and the revenue growth slowed significantly

Further currency devaluation or approval rate. Product deflation faster than introduction. Increased customer bargaining power

USA Market :- Glenmark has 64 filings pending in various stages; of which 27 are para IV filings leaving 37 clear approvals pending

Venezuela has been in volatile environment making repatriation of currency and the exchange rate for the same volatile. We expect a cautious approach in the region will impact the growth in the region

We are conservative in our estimates of revenue and margins considering the approval rate in different geographies

Glenmark operated at a marginally higher level of debt and more importantly the forex volatility also impacted the profitability

In litigation process are gAlimta and gAzeliac acid; and another opportunity is uncertain on timing gWelchol

Key Risk which would be faced by Glenmark

Further currency devaluation: Glenmark operates in several different regions which involve one or two possible currency exchanges before they are reflected in the operational statements. With substantial movement in cross currency rates owing to significant movement in Quantitative Easing (QE) by central bankers of various regions, the currencies have been volatile

Slowdown in Approval rate: The Company has faced slowdown in approval rates for USA, Brazil and India. The company is dependent on improvement of the same for its revenue growth.

Product deflation faster than introduction: The focus on generics manufacturing has been increasing from higher number of suppliers increasing the bargaining power of the customers resulting in a faster than earlier deflation in generic prices.

Slowdown in Approval rateProduct deflation faster than introduction

Further currency devaluation

Looking at the Financials:-

Operating Profit gives an indication of the current operational profitability of the business and allows a comparison of profitability between different companies after removing out expenses that can obscure how the company is really performing.

The graph visually shows how the net profit of the company stand reduced due to the impact of Interest, Depreciation, and Tax

Total Assets is the sum of all assets, current and fixed. The asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. The higher the ratio indicates that the company is utilizing all its assets efficiently to generate sales. Companies with low profit margins tend to have high asset turnover.

Conclusion:-

"Glenmark Pharma is a short. Pharmaceutical seems to be breaking down. Pharmaceutical is not a buying opportunity, some stocks are actually short-term sells, some are complete avoids. Glenmark Pharma is a short-term sell.

As returns on market increase, Glenmark Pharmaceuticals returns are expected to increase less than the market. However during bear market, the loss on holding Glenmark Pharmaceuticals will be expected to be smaller as well.