Marksans Pharma, a Rs.890 crore plus pharma major related to Glenmark Pharmaceuticals, has failed to generate confidence among its investors. The slower space of integration of acquired company and volatile foreign exchange rates put pressure on bottomline. The UK MHRA conducted cGMP audit and raised certain observations regarding cGMP which also impacted the performance. The R&D expenditure is very low as compared to its business size and worked out to only 2.2 per cent of sales.
Recently, it received US FDA approval for loratadine liquid filled capsules 10 mg which is therapeutically equivalent to the reference listed drug Claritin Liqui-Gels capsules 10 mg of Bayer Healthcare LLC.
The Rs.1 face value scrip is moving in the range of Rs.40-50 on BSE for very long time. With recent US FDA approval, Marksans scrip went up sharply and crossed Rs.50 mark and its market capitalisation now worked out to Rs.2,170 crore. The scrip touched to its year peak level at Rs.113 during December 2015 and to its lowest level at Rs.33.45 during March 2016 due to poor financial performance. Currently, promoters are holding 48.25 per cent stake in the company, followed by foreign institutional 13.62 per cent, corporate bodies 4.65 per cent, public 24.61 per cent and others 8.87 per cent.
For the quarter ended June 2016, Marksans consolidated net profit declined to Rs.1.02 crore from Rs.31.47 crore in the corresponding period of last year as its consolidated net sales also declined by over 11 per cent to Rs.186.75 crore from Rs.210.16 crore due to depreciation of Pound against Dollar, competition and price erosion. The lower sales and profit put pressure on scrip movements.
Its US formulations sales, during the June ended quarter, increased to Rs.79.27 crore from Rs.43.16 crore due to acquisition of Time-Cap Laboratories Inc. However, its European sales declined by 42.9 per cent to Rs.76.10 crore from Rs.133.24 crore due to stiff competition, price erosion, channel consolidation and moderation in volumes off takes. Further, depreciation of Pound against Dollar also put pressure on working. Its sales in Australia and New Zealand increased to Rs.26.11 crore from Rs.19.16 crore, but that in Rest of World declined to Rs.5.28 crore from Rs.16.90 crore.
The company is now setting up a new R&D centre in Mumbai to undertake research in formulation development, NDDS, NDA for global markets, specifically for regulated markets. The centre will go on stream by December 2016. The company is entering into disease management space in the domestic market with a range of 40 brands comprising of dermatological, respiratory and CNS formulations.
Marksans is engaged in manufacturing of analgesics, expectorants, anti-diabetic, cardiovascular, central nervous system, gastrointestinal and oncologic drugs as well as antibiotics and anti-allergics with the help of three facilities at Goa, Southport, UK and Farmingadale, US. The company is selling its products in 15 countries and 97 per cent of its sales are coming from regulated markets. It has set up four subsidiaries, two in UK and one each in US and Australia.
For the year ended March 2016, Marksans' consolidated net sales for the year ended March 2016 increased by 12 per cent to Rs.893 crore from Rs.797 crore in the previous year. Despite lower interest and taxation burden, its net profit declined by 26.1 per cent to Rs.82.74 crore from Rs.111.96 crore. EBIDTA moved down by 22.8 per cent to Rs.145.13 crore from Rs.188.06 crore. The lower profit impacted its EPS and worked out to Rs.1.92 as against Rs.2.67 in the previous year for the face value of Rs.1 each. Its R&D expenditure declined to Rs.8.06 crore from Rs.17.41 crore in the previous year. The company declared equity dividend of 12 per cent to its shareholders.
The company management has successfully reduced its interest burden by 36.7 per cent to Rs.10.16 crore from Rs.16.05 crore and taxation provision declined sharply to Rs.24.11 crore from Rs.43.92 crore. There was no long term borrowings and its short term borrowings increased slightly to Rs.88 crore from Rs.82 crore. As against the equity capital of Rs.40.93 crore and preference capital of Rs.12.50 crore, its reserves and surplus amounted to Rs.400.89 crore as against Rs.326.33 crore, a growth of 22.8 per cent. Glenmark Pharmaceuticals is holding entire preference capital.
In the past it acquired three companies viz. Nova Pharmaceuticals Australasia Pty. Ltd, Bell, Sons & Co (Druggists) Ltd, and Relonchem Ltd, both in UK. During June 2015, it acquired profit making Time-Cap Laboratories in US, which is a debt-free company with US FDA approval plant for a consideration of US$ 28 million. The company has included amounts while consolidation of its subsidiaries viz. Marksans Pharma Inc, Nova Pharmaceuticals and Marksans Pharma (UK) Ltd.
The company is now planning to set up a new plant or looking out for an acquisition during the next year. With the help of R&D activities, it is planning to file 17 ANDAs with US FDA and launch 6 to 12 products by 2017 end. Further, it is expanding Goa facility by another 40 per cent by December 2017. Thus, based on first quarter financial performance, the immediate outlook is not looking promising one from investors point and the long term outlook depends resolving cGMP issues with UK authorities.
Financial highlights