Fitch affirms Glenmark Pharmaceuticals at BB with a stable outlook

Fitch Ratings has affirmed Glenmark Pharmaceuticals Ltd's long-term issuer default rating at BB with a stable outlook.

It said Glenmark's geographic diversification and satisfactory record of regulatory compliance mitigate the business risk arising from its small size and support its rating relative to larger global-generic drug makers.

The affirmation also factors in the company's adequate product pipeline which combined with robust long-term growth prospects in India limits the impact on profitability from continued pricing pressure in the US generic pharmaceutical market.

Glenmark's de-risking strategies in its novel drug development programme will preserve its financial flexibility from the inherent risks, said Fitch.

The stable outlook reflects Fitch's expectation that Glenmark will retain its comfortable leverage headroom following an improvement in the financial year ending March 2021 (FY21) despite the coronavirus pandemic.

This is even after considering normalisation in costs that will result in a lower EBITDA margin after a strong performance in FY21.

Glenmark's formulation business ranks 14th in the country with a revenue share of 2.3 per cent in March. Nonetheless, stronger shares in dermatology (8.6 per cent), respiratory (5 per cent) and cardiovascular (4.7 per cent) underpin its position in the fragmented and physician-driven market.

The company captured 20 per cent market share in antivirals with its Covid-19 drug and its domestic revenue rose by 10.4 per cent in FY21, beating the 5.9 per cent market growth.

Fitch said the pharmaceutical demand in India has healthy long-term prospects due to the government's focus on boosting mass access to healthcare.