Near-term upsides from deal with AbbVie may be priced in Glenmark's stock

Glenmark's $700 million deal with AbbVie for ISB-2001 could unlock significant upside, though analysts note the potential is already priced in, with stock surging post-announcement

Glenmark Pharma (GNP) has just signed an exclusive licensing deal with AbbVie through its subsidiary, Ichnos Glenmark Innovation (IGI), for its lead investigational asset, ISB-2001.

 

The deal could be transformative as it leverages IGI’s BEAT protein platform for oncology and auto-immune diseases.

 

It also has the potential of ISB-2001 to treat relapsed and refractory multiple myelomas and underlines the commercial viability of ISB-2001 following successful clinical trials.

 

AbbVie is considered a diversified biopharma leader.

 

In oncology, it has built a robust presence anchored by cornerstone therapies. This has improved the treatment for chronic lymphocytic leukaemia and other B-cell malignancies, generating multi-billion dollar revenues.

 

This agreement ranks as the fourth-largest worldwide in terms of upfront payment and adds a substantial value to Glenmark Pharma. Notably, nine of the top 10 licensing deals over the past seven years have been in oncology. 

 

Glenmark has also reduced its financial leverage and strengthened its abbreviated new drug application (ANDA) pipeline for the US market and reorganised its domestic business.

 

The company should be able to maintain double-digit compound annual growth rate (CAGR) over the next two years in terms of revenues. Also, it should maintain high-teen earnings before interest, taxes, depreciation and amortisation (Ebitda) growth and early 20 per cent earnings growth.

 

Under the agreement, AbbVie will receive exclusive rights to develop, manufacture, and commercialise ISB-2001 across markets like North America, Europe, Japan, and Greater China.

 

 

 

Glenmark retains the right to develop, manufacture, and sell in other markets, including the rest of Asia, Latin America, Russia & CIS, the Middle East, Africa, Australia, New Zealand, and South Korea. Glenmark keeps ownership of its BEAT platform.

 

IGI will receive an upfront payment of $700 million from AbbVie, contingent on regulatory approvals. Additionally, the company is eligible to earn up to $1.2 billion through development, regulatory and commercial milestone payments.

 

IGI will also receive tiered, double-digit royalties on sales by AbbVie for ISB-2001 which is currently in Phase 1 clinical trials for relapsed/refractory multiple myeloma (RRMM).

 

Notably, the number of patients diagnosed with multiple myeloma has increased to 0.9 per cent of the global cancer patient population. Annually, about 160,000-180,000 new cases of multiple myeloma are diagnosed worldwide. 

 

The overall response rate achieved so far with ISB-2001 is the highest among approved treatments. ISB-2001 has also demonstrated a favourable safety profile.

 

The business prospects of commercialised drugs to treat RRMM are significant, with Darzalex and Jannsen recording the maximum annual sales of $9 billion for multiple myeloma and AL amyloidosis.

 

Many drugs commercialised during CY2020-23 continue to scale up in terms of revenue.

 

AbbVie’s oncology portfolio includes four major products, with cumulative sales of $8 billion. The portfolio includes established blockbuster drugs, and multiple investigational cancer therapies. ISB-2001 is said to hold a strong potential to emerge as a blockbuster drug in the RRMM space.

 

There would be substantial net present value (NPV) per share from the deal, though analysts differ on the numbers. It depends on their assessment of how long it will take for the milestone-oriented payments of $1.22 billion to come in.

 

Apart from this, there are the proceeds from Glenmark’s own sales of ISB-2001. Glenmark may use the proceeds to support research and development (R&D) spends and reduce debt.

 

Glenmark management earlier guided for Ebitda margins of over 23 per cent by FY27 and this will be led by lower R&D burden. Glenmark’s business in India, European Union (EU) and rest of the world was strong and this should lead to a big upgrade in valuations.

 

According to Bloomberg, five of the seven analysts (polled mostly over Thursday & Friday) are positive on the stock, while one each is neutral and bearish.

 

Their average one-year target price is ₹1,850.77. Following the ISB-2001 deal announced on Thursday post market hours, the stock jumped 14.5 per cent on Friday to close at ₹2,181.55 on the BSE.