Sell Glenmark Pharmaceuticals; target of Rs 1620: ICICI Securities

ICICI Securities research report on Glenmark Pharmaceuticals

Glenmark Pharmaceuticals’ (Glenmark) subsidiary Ichnos Glenmark Innovation (IGI) has out-licensed its oncology asset ISB 2001 to Abbvie in a deal valued at USD 1.925bn, including USD 700mn upfront, USD 1.225bn in milestones and tiered doubledigit royalty on net sales. Upfront payment from the deal is likely to fund IGI’s R&D needs for the next 2–3 years (USD 70mn cost p.a.) while a portion of it may be transferred to Glenmark, which would be utilised to reduce debt (INR 22bn) and fund its capex plans (INR 8bn p.a.). Near-term growth outlook for most of the businesses is maintained while management aspires to scale up EBITDA margins to ~23% in FY26.

Outlook

The stock is up 34% in last one month, on news of this deal, and its current valuation does not capture any potential risks arising in ISB 2001’s clinical trial and launch. We reduce our rating to SELL, raise our TP to INR 1,620, based on 18x FY27E EPS for the base business and NPV of INR 320/share for the deal.