Glenmark Pharmaceuticals (GNP) reported weak Q1FY19 numbers on muted expectations with revenue and PAT declining 9% and 30% year-on-year, respectively. US price erosion continued as sales fell 3% quarter-on-quarter in constant currency (cc) despite market share gains in top three launches \u2014 gProtopic, gWelchol and mupirocin ointment. Going forward, we see \u2014increase in R&D due to clinical trials for biosimilar Xolair, gAdvair and GBR 1372; double-digit price erosion in the US; and limited visibility on meaningful launches. However, GNP is banking on out-licensing GBR 830 and GRC 27864 molecules to offset these challenges. Maintain \u2018HOLD\u2019 with Rs 530 target price. US business declined 35% y-o-y as the base contained gZetia. Domestic, on the other hand, grew a mere 8% y-o-y as GNP did not have a favourable base. Sharp rupee depreciation affected performance: despite ~270bps q-o-q decline in R&D as % of sales, Ebitda margin expanded a mere ~170bps q-o-q despite an $ 11-million increase in net debt in cc; reported net debt jumped by Rs 2.6 billion; other income of Rs 1.4 billion included forex gain of Rs 1.25 billion. In FY19, management is targeting: a) debt reduction; b) Rs 8-9 billion capex; and c) positive free cash flow. In our view, earnings are likely to remain under pressure as GNP intends to start clinical trials for: i) biosimilar Xolair (Q4FY19); ii) GBR 1372; iii) gAdvair; and iv) GBR 830 in systemic lupus erythematosus (SLE) and ulcerative colitis (UC). With 8% of sales spent on R&D for speciality and innovation, costs are set to rise. Though management commented that pricing pressure has stabilised, we expect the US revenue growth to remain lacklustre in the absence of any meaningful launches. Additionally, unless GNP rationalises its cost structure, cash flows will remain under pressure and meaningful reduction in debt will be difficult.