Sanofi deal creates buzz for Glenmark; re-rating likely

[caption id=“attachment_11060” align=“alignleft” width=“380” caption=“Glenmark Pharma is the top pick by broking house Macquarie Capital Securities. Photo by Ano Lobb”]  [/caption]

Glenmark inked an outlicensing pact with Sanofi-Aventis for the development and commercialisation of GBR 500, a novel first in class therapeutic monoclonal antibody for the treatment of inflammatory conditions. Following is the analyst report abstract of Macquarie Capital Securities. Glenmark Pharmaceuticals is the top pick of Macquarie in the pharmaceutical space.

Rating- BUY

Current Price - Rs 302

Target Price - Rs 465 (revised upwards)

• GBR 500 is the first novel biologic outlicensed by an Indian company

• Glenmark to receive an upfront payment of $50 million in two tranches:

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(1) $25 million paid on closing of the transaction

(2) $25 million to be paid upon Sanofi’s positive assessment of certain data to be provided by Glenmark.

• Combined upfront and potential development, regulatory and commercial milestone payments could total $613 million in addition to tiered double-digit royalties on sales.

• Sanofi has developed market rights and will co-market the drug in Russia, Brazil, Australia and New Zealand. Glenmark retains rights in India and a few other markets in the rest of the world.

• Outlicensing of TRPV3 to Sanofi (in 2010) and GBR 500 (in 2011) reinforces the confidence in the company’s ability to discover and outlicense promising lead compounds.

• Because of a few setbacks in the past, the market is not assigning any upside to Glenmark’s innovation franchise.

• GBR 500 is valued at Rs 20 per share (assuming 10% probability of launch and peak global sale estimate of $1.5 billion.