Glenmark Pharma's Mega Deal With AbbVie Has Brokerages Mixed

Glenmark Pharmaceuticals Ltd. cracked an out-licensing deal for its subsidiary Ichnos Sciences' cancer drug ISB 2001 with AbbVie. The move has garnered mixed reactions from brokerage firms.

Nuvama maintained a 'neutral' rating with a target price of Rs 1,500, while HSBC Global Research has a 'buy' rating with a target price of Rs 2,275. Axis Capital also recommends 'buy' with the price target set at Rs 2,300.

The deal involves an upfront payment of $700 million, with potential milestone payments up to $1.225 billion, along with tiered double-digit royalties on net sales, marking a substantial financial boost for Glenmark.

While all three brokerages acknowledge the strategic importance and financial benefits of the AbbVie deal, HSBC and Axis Capital are more bullish on its transformative impact and future growth prospects for Glenmark. Nuvama, however, maintains a more cautious outlook.

Nuvama highlighted the AbbVie deal as the largest licensing deal by any Indian pharma company, and views the deal value as ahead of expectations. They acknowledge the significant financial inflow and the potential for ISB 2001.

However, it maintained a 'neutral' rating, suggesting that while the deal is positive, it might already be factored into the current valuation or that other factors might temper the overall upside.

The brokerage emphasised that AbbVie, being a large innovator, will develop, manufacture, and commercialise the asset globally, while Glenmark retained rights for India and other emerging markets.

HSBC views the AbbVie deal as "transformative," reiterating its 'buy' rating and significantly raising its target price to Rs 2,275 from Rs 1,720. The brokerage estimated a potential Net Present Value of Rs 320 per share for the ISB 2001 deal alone.

They support their 'buy' call by highlighting that Glenmark will use the deal proceeds to support R&D spend for two more assets in IGI's platform, reduce debt, and increase dividend payouts.

HSBC also notes the strong efficacy and safety data from the active doses of the Phase 1 dose-escalation studies, further validating the potential of ISB 2001. They expect Glenmark to deliver better sales growth for the India segment and improved profitability, with Ebitda margins expected to expand by over 23% by fiscal 2027.

Axis Capital also maintains a 'buy' rating on Glenmark, with a target price of Rs 2,300, terming the deal an "ISB-2001 jackpot". They say that ISB 2001's unique mechanism of action, its best-in-class efficacy backed by superior safety profile, and its potential to unlock $4 billion in cumulative cashflow.

The brokerage views the upfront payment and milestone payments as a significant upside driver. Their price target implies a 21% potential upside from the current price.

Nuvama noted that Glenmark is performing sustainably having delivered three partnerships including ISB 2001, which will provide visible cashflow and reduce debt problems.