Replies to post #43195 on Biotech Values

[DewDiligence]

>Does anyone here know anything about Glenmark or any of its programs?<

Glenmark has a relationship with FRX dating to 2004 for asthma/COPD:

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/09-23-2004/0002257343&...

Dew

[DewDiligence]

As Indian Drug Firms Join Push to Create, Glenmark Is a Leader

http://online.wsj.com/article/SB120767470359398329.html

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By RUMMAN AHMED
April 9, 2008

BANGALORE, India -- After years of making generic drugs, some Indian pharmaceutical companies are trying their hand at developing new ones -- a risky, expensive strategy that pits them against global giants such as Merck and Pfizer.

India's biggest drug makers have joined the rush to create products, typically under licensing deals with foreign pharmaceutical companies that help finance costly, lengthy research.

Industry heavyweights like Dr. Reddy's Laboratories and Ranbaxy Laboratories have entered the R&D fray, but some analysts contend that Mumbai-based Glenmark Pharmaceuticals may be best-placed to cash in on the trend.

The new strategy reflects big changes in the business environment. For one thing, established Indian drug makers face slimmer profits from their traditional focus on copying popular drugs, as more local and foreign competitors join the global generic market and governments aim to lower health-care costs.

At the same time, India's adoption of product patents in 2005 has boosted the incentive for innovation by local companies that, in the past, simply tweaked the way foreign-patented drugs were made and sold cheaper generic versions.

Enhanced by the prospects of earnings from R&D business, Indian pharmaceutical stocks could be a good defensive bet in current uncertain market conditions, analysts say. When listed drug concerns this month start reporting fourth-quarter and annual results for the year ended March 31, their earnings are expected to rise 25% on average. The pharmaceutical sector has also been much less volatile than banking, power and metals since India's stock market turned bearish this year.

And -- with growing worries over the global economy – Indian drug companies also stand to gain from outsourcing contracts, thanks to manufacturing costs 30% to 40% lower than most Western drug makers.

Drug development in India is still in its relative infancy. And there is no guarantee of success -- years of effort often end in failure. Indeed, no company has yet released an original drug, a process experts say can take 10 years and cost about $1 billion.

Most Indian companies still lack the financial muscle to bear such expenses, so they have turned to licensing deals with foreign concerns that cushion them from the cost of clinical or human trials -- the most expensive part of the process.

Even so, industry analysts are increasingly rating Indian drug concerns on their R&D activities. With almost 60 new drugs in various stages of development in the local industry, analysts are evaluating companies on the number of compounds, or drug molecules, they have in trial and whether research results are rewarded by their foreign licensing partners with so-called milestone payments.

"In today's market, one needs to look at stocks that have a slightly differentiated story," said Vikas Sonawale, an analyst at Mumbai-based Religare Securities. "A retail investor does not have a thorough knowledge of the drug R&D business. So, when Glenmark receives milestone payments from a global pharma company, it helps value the company's R&D efforts."

That is why Mr. Sonawale and some other analysts like Glenmark, India's fourth-largest drug maker by market capitalization after Sun Pharmaceutical Industries, Cipla and Ranbaxy.

Like its peers, Glenmark develops drugs until they are ready for human testing and licenses further development to global concerns for a fee, ensuring a steady flow of cash on top of its older generics business. In the nine months ended Dec. 31, Glenmark's licensing revenue rose 29% to 1.79 billion rupees ($44.9 million) from a year earlier, contributing about 13% of total revenue.

"Glenmark stands out because it has a successful track record" in clinching licensing deals to develop new drugs, Mr. Sonawale says.

Glenmark already receives fees from companies such as New York-based Forest Laboratories, which bought the U.S. development and marketing rights for an asthma drug in 2004 [#msg-17985629]. The same drug is being tested in Japan by Teijin Pharma, which signed a licensing deal with Glenmark in 2005 [#msg-6152499].

Last October, Glenmark licensed a pain-treatment molecule it is developing to Indianapolis-based Eli Lilly. Glenmark is also developing a diabetes drug and is looking for a licensing partner.

"Glenmark will have eight drugs in clinical trials" by March 31, 2009, says Chief Executive Glenn Saldanha. "This is a very broad portfolio and improves our chances of success."

Dr. Reddy's, which began research and development operations in 1993, eight years ahead of Glenmark, has one molecule for the treatment of diabetes in the final stage of human testing and two other drugs in the initial stage.

Among the other companies, Ranbaxy is working on Arterolane, an antimalarial drug that is in the midstage of human trials. The company also has a tie-up with European drug giant GlaxoSmithKline to develop one molecule for asthma treatment. Ranbaxy has projected that its milestone payments could exceed $100 million.

But analysts say Glenmark holds the lead in the licensing sweepstakes. The company says that since 2004 it has received between $110 million and $115 million for the drugs so far licensed for development. It expects to receive payments of about $70 million for both the just-ended fiscal year and the one that ends in March 2009.

Glenmark is "one of the best innovative R&D plays in Indian pharmaceuticals," says Prashant Nair, a Mumbai-based analyst with Citigroup, who has a "buy" rating on the stock. He says its licensing deals have been a key driver of its stock price.

On Tuesday, shares of Glenmark soared 6.2% to 522.15 rupees. Citigroup has a 12-month price target of 592 rupees, 13% above the latest close.

At Tuesday's close, Glenmark is trading at 20.9 times one-year forward earnings, according to Citigroup. Based on its projections, Ranbaxy is trading at 21.6 times and Dr. Reddy's at 17.2 times.

Balaji Prasad, a Mumbai-based analyst with Goldman Sachs Group, has a 12-month target of 664 rupees for the stock. While Glenmark isn't slated to commercially launch its first drug until 2011, Mr. Prasad says he expects the company to report positive safety and efficacy data in the next six to nine months on some of the drugs now in the human testing stage. That could give Glenmark shares a boost, he says.

On April 28, Glenmark is expected to report results for the year ended March 31. Citigroup estimates Glenmark's net profit for the just-ended financial year almost doubled to 5.9 billion rupees, with sales rising 52% to 18.6 billion rupees.

Citigroup expects the listing of wholly owned subsidiary Glenmark Generics -- expected later in 2008 -- to benefit Glenmark stock. On April 1, Glenmark shifted its generics business to the subsidiary to streamline operations.
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[DewDiligence]

New Drugs, India-Style

[Forbes profiles Mumbai-based Glenmark Pharmaceuticals. Glenmark must have a good public relations department—this article repeats much of the material in a 2008 Glenmark profile in the WSJ (#msg-28312475).

This post should be read in conjunction with #msg-40906989 and #msg-38038167 :- )]

http://www.forbes.com/global/2009/1005/companies-glenmark-pharma-new-drugs-india-style.html

›by Megha Bahree
10.05.09

Big pharma is scrambling for deals as $40 billion worth of its products come off patent by 2014. It wants the promising work of smaller outfits and frequently will buy them outright. On the other side of the globe an Indian drug-discovery outfit has 7 of its 13 pipeline compounds in various stages of clinical trials. This rising star, Glenmark Pharmaceuticals, also offers the kind of cost structure only India can offer. It will license the discoveries but, sorry, Pfizer et al.: The company itself isn't for sale.

Pharma work in India is attractive because even after wage increases of recent years, it can be done for a quarter of the Western price. But unlike its domestic peers, which are focused on developing generics, Glenmark is innovating drugs that can target tough-to-treat asthma, diabetes, multiple sclerosis and arthritis, among other diseases. To be sure, it has enough of the legacy copycat business to keep the lights on: For its financial year ending in March, Glenmark netted $75 million on revenues of $450 million.

Chief Executive Glenn Saldanha's strategy is to develop promising compounds into early clinical stage and then license the developing and marketing rights for the U.S., western Europe and Japan. He's keeping the rights for the emerging markets for his company. "There's a risk in developing these molecules, and we wanted to pass on this risk," says Saldanha, 39. "Plus we've always believed that the real growth is in emerging markets." [see #msg-40906989 and #msg-38038167].

The first-world licenses have added $118 million to the corporate kitty since 2004, although last year was dry for Glenmark as for much of the sector.

Glenmark did its first deal in 2004 when it licensed the North American rights for Oglemilast, for asthma and chronic lung disease, to Forest Laboratories for $190 million. [Oglemilast bombed in a phase-2 trial in COPD; I’m surprised the Forbes author does not mention this.] Forest, in its transformation from generic to new-drug maker, could be a model for Glenmark. Glenmark got $10 million up front, with the rest pouring in at specific milestones. This money is put back into research. That same year a $53 million deal was signed with Teijin Pharma to develop Oglemilast for Japan.

After last year's pause Glenmark has two promising drugs--one targeting pain and the other type 2 diabetes--eliciting interest. The one for pain, although still in phase 2 clinical trials, is more developed than any other drug in its class. The diabetes drug is poised to enter phase 3 and matches the best in its class, with arguably a couple of advantages.

The hiving off of licenses is not unusual, nor increasingly is selling out entirely. So far this year there have been 43 pharma and biotech deals, says Medtrack, which tracks both public and private biomedical companies. But Glenmark will remain independent. A Saldanha family trust controls 53%, and the clan is resolved to hold on.

After a career as a medical representative, Gracias Saldanha started the company in then-Bombay in 1978 with his pension money and named it after his two sons--Glenn, now 39, and his younger brother Mark. (He has two daughters as well. Mark left the company around 2000 and has set up his own small pharma company.) The family's Portuguese ancestors settled in Goa in western India generations ago. Gracias championed quality products affordable and relevant to the domestic market. His medicines to fight skin infections and expectorants for coughs also were exported to other poor markets including Africa, South East Asia and Sri Lanka.

Glenn trained as a pharmacist and then worked at the company for three years before pursuing an M.B.A. at New York University's Stern School of Business. Then he joined Eli Lily and a year later moved to PricewaterhouseCoopers as a pharmaceutical consultant. With a few years under his belt, he returned to India in 1998 to take over the business. Revenues at the time were $17 million. In 2000 he listed the company--the issue was oversubscribed 65 times--and used the cash to set up Glenmark's first R&D center in greater Mumbai.

During his time in the U.S., Saldanha could see that India was likely to join the World Trade Organization and that meant come 2005 it would have to respect patent laws: "Generics generate cash, but we needed innovation to take us into the future."

He hired a consulting firm to advise on how to switch into drug discovery. He and three directors met the consultants and were told it was a terrible idea as Glenmark was too small and India had no history of drug innovation. "The four of us were in an elevator, and we were shell-shocked," recalls A.S. Mohanty, director of formulations, who was in that meeting. "Glenn was calm, and he had a piece of paper in his hand on which he was scribbling." He was listing the consulting firm's reasons to avoid the path of R&D. That, he said, would be his cheat sheet, a list of precautions to take to enter the discovery business. "We were small, we were hungry, we were a driven bunch of individuals who wanted to succeed," Saldanha says.

Consultants weren't the only ones who thought it was a bad idea. "Investors were saying to us, what are you doing, you're burning all this cash," says Saldanha. On more than one occasion the non-trust core holders--fund managers and VCs--have shown up at the company's headquarters, demanding an explanation for what they saw as risky decisions. "We've had four successful deals, and yet it's the same thing every time."

Glenmark had to move beyond other Indian conventions. Saldanha tapped his network in the U.S., took out ads in scientific journals and hired recruiters to bring in talent from overseas. He offered scientists stock options, opportunities to publish and attend conferences, and a library of scientific literature, keen attributes in the scientific world but historically not easily available in India.

In January last year Dr. Vijay Baragi, then director of preclinical research at Amgen, got a call from a recruiter pitching him Glenmark. Prior to Amgen, Baragi had spent 18 years at Parke-Davis, Warner-Lambert and, post-acquisition, at Pfizer. He'd never heard of Glenmark but got interested once he took a look at its pipeline. He's now a senior vice president of preclinical research in Mumbai.

"These guys are warp speed," says Baragi. "Business folks challenge scientists and vice versa. If things are moving well, Glenn comes along and says can we move up target by one month, [and] suddenly there's a new challenge. This is unlike most companies that have a standard, canned procedure."

And they also challenge old dogmas, says Baragi. Glenmark has been testing GRC 10693, a compound meant to target pain receptors. It was testing whether a chemical substance could activate the receptors, which are located in the peripheral and central nerves. Initial tests in the preclinical stage showed that one side effect could be prolonging the "QT interval" associated with cardiac arrhythmia, which can be fatal. Most companies, says Baragi, would have abandoned the molecule at this stage. Glenmark, on the other hand, did key preclinical studies showing that in this case the compound was very likely free of this liability. "A big company would be so scared of doing this," says Baragi.

Clinical trials in Europe were speeded by another newcomer attracted by the nimble model and pipeline, Dr. John Efthimiou. He'd spent most of his career at GlaxoSmithkline (GSK), Novartis, Roche and Phynova. The phase 1 study is normally restricted to healthy participants. Efthimiou amended the study to include induced pain early on during phase 1. Known as proof of mechanism, this is usually done in phase 2a. In this case, either capsaicin (the key ingredient in chili pepper) is injected in the forearm skin of the participants or currents are applied to the forearm.

"We're looking for faster ways to see if we have a medicine," says Efthimiou, and therefore are willing to compress standard protocol, often by a year. "We're looking to move from phase 1 to the bigger phase 2b studies, bypassing 2a." [This would be hard to do in a US trial.] Glenmark now tries to add proof of mechanism in nearly every phase 1 study. GRC 10693, and another drug still in phase 1, are both targeting pain and are considered the most advanced in their class now in clinical development.

"This is the first Indian company to go from discovering a molecule [and taking that] to a medicine that's used in patients with common diseases," says Efthimiou. And the model is based on quick decisions, whether at the two research centers in India or at others in Geneva (biologics) and in Oxford (clinical trials), where he works. "We all talk every day, on the weekends," Efthimiou says. "If anyone has a question or idea you just pick up the phone and call. ... Teleconferences, long flights, videoconferences, we do them all. Skype is very useful. That doesn't happen at GSK."‹