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Glenmark's GBR 500 licensing deal with Sanofi (we value it at Rs20/share) re-validates its
business model of investing in innovative R&D. Glenmark seems well poised to benefit from the
reviving interest in in-licensing from big pharma as we believe its NCE pipeline is not fully priced
in yet. Buy; TP up to Rs350.
We value Glenmark’s GBR 500 licensing deal with Sanofi at Rs20/share
We expect Glenmark’s out-licensing of GBR 500 to Sanofi Aventis, the first novel biologics outlicensing
deal by an Indian pharma company, to attract an upfront payment of US$50m subject to
customary conditions and sharing of data in the next two to three months (to be taxed 9-10%
under Swiss norms). Potential milestone receipts could total US$613m plus royalty payments and
rights to sell in a few markets (India, etc). Management expects commercialisation of this
molecule in 2017. We ascribe a value of Rs20/share after applying a 20% success probability
rate and building in a delay of three years in commercialisation.
NCE pipeline value stands validated; not fully priced, in our view
Despite initial setbacks in new chemical entities (NCEs), Glenmark’s R&D pipeline has started to
see some traction – Crofelemer nearing commercialisation, out-licensing of GRC 15300 and now
the out-licensing of GBR 500. We note that in-licensing interest from big pharma is reviving and
Glenmark could monetise US$70m over FY11-12F vs US$120m over FY05-08 from its NCE
pipeline (with its R&D spend of US$140m). Its focus is clearly on novel first-in-class opportunities
(monoclonal antibodies). Another two molecules (Revamilast and GRC 17536) are in clinical
trials, while two other novel biologic entities (NBEs) are yet to be out-licensed and so we have
ascribed no value to these so far.
We raise our target price to Rs350 (from Rs335); reiterate Buy
We incorporate the FY11 results and the impact of Glenmark’s transition to IFRS, which results in
a marginal 2% cut to our core FY12F EPS. We also incorporate the potential US$50m milestone
we expect this fiscal year, resulting in a 43% increase in our overall FY12F EPS. We continue to
value Glenmark’s base business at 18.2x FY12F PE (a 15% discount to its peers), which yields a
value of Rs293/share. To this we add Rs54/share for its NCE pipeline and Rs3.5/share for one-off
Para IV products, resulting in a 4% increase in our target price to Rs350 (from Rs335). Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Glenmark's GBR 500 licensing deal with Sanofi (we value it at Rs20/share) re-validates its
business model of investing in innovative R&D. Glenmark seems well poised to benefit from the
reviving interest in in-licensing from big pharma as we believe its NCE pipeline is not fully priced
in yet. Buy; TP up to Rs350.
We value Glenmark’s GBR 500 licensing deal with Sanofi at Rs20/share
We expect Glenmark’s out-licensing of GBR 500 to Sanofi Aventis, the first novel biologics outlicensing
deal by an Indian pharma company, to attract an upfront payment of US$50m subject to
customary conditions and sharing of data in the next two to three months (to be taxed 9-10%
under Swiss norms). Potential milestone receipts could total US$613m plus royalty payments and
rights to sell in a few markets (India, etc). Management expects commercialisation of this
molecule in 2017. We ascribe a value of Rs20/share after applying a 20% success probability
rate and building in a delay of three years in commercialisation.
NCE pipeline value stands validated; not fully priced, in our view
Despite initial setbacks in new chemical entities (NCEs), Glenmark’s R&D pipeline has started to
see some traction – Crofelemer nearing commercialisation, out-licensing of GRC 15300 and now
the out-licensing of GBR 500. We note that in-licensing interest from big pharma is reviving and
Glenmark could monetise US$70m over FY11-12F vs US$120m over FY05-08 from its NCE
pipeline (with its R&D spend of US$140m). Its focus is clearly on novel first-in-class opportunities
(monoclonal antibodies). Another two molecules (Revamilast and GRC 17536) are in clinical
trials, while two other novel biologic entities (NBEs) are yet to be out-licensed and so we have
ascribed no value to these so far.
We raise our target price to Rs350 (from Rs335); reiterate Buy
We incorporate the FY11 results and the impact of Glenmark’s transition to IFRS, which results in
a marginal 2% cut to our core FY12F EPS. We also incorporate the potential US$50m milestone
we expect this fiscal year, resulting in a 43% increase in our overall FY12F EPS. We continue to
value Glenmark’s base business at 18.2x FY12F PE (a 15% discount to its peers), which yields a
value of Rs293/share. To this we add Rs54/share for its NCE pipeline and Rs3.5/share for one-off
Para IV products, resulting in a 4% increase in our target price to Rs350 (from Rs335). Buy.
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