Glenmark rises armed with research after five year hiatus
It’s been a while since Glenmark Pharmaceuticals licensed a drug. Between 2004 and 2011, arguably its best years in research, Glenmark cut as many as seven deals with multinational companies for indigenously developed drugs, which brought in $220 million in payments.
Since then, there’s been a lull. The company’s last experimental drug was licensed to Paris headquartered Sanofi in a deal that would have garnered more than $600 million – a record. However, none of these drugs could be developed to secure regulatory approval.
Glenmark’s push into innovation — seen as a guzzler of cash — and its ability to monetise R&D with its relatively small size had peers dumbfounded. But five years on, that beehive of activity seems to be missing — a virtual pause button has been pressed, some say.
A closer look shows that the absence of deals is actually quite deceptive and belies Glenmark’s actual progress as it stealthily works out of its network of labs in the UK, Switzerland and India. “If we have not done any deals after 2012, that is all by design,” explained Glenn Saldanha, chairman of the company that grossed over a billion dollars in sales last year. Unlike the past strategy of farming out its “first-in-class” or “best-in-class” drugs at an early stage to global firms, “the model has changed a little bit,” he told ET in an interview at the company headquarters in Mumbai.
With five biologic drugs — made from cells — that are comparable with the most advanced programmes pursued across the world and a couple of NCEs (new chemical entities), Glenmark seems to have added more sheen.
“It’s a pit stop in a long race,” a former employee succinctly said.
Like any typical up-and-coming drugmaker, Glenmark had identified potent compounds, licensed them briskly and moved on to the next lead. This was the only way to sustain the high costs of R&D. Also, by its nature, research is prone to unforeseen vagaries, which is why none of its drugs reached the point of securing regulatory approvals.
Saldanha was disappointed by the setbacks as market analysts discounted its efforts and pounded its stock price. The reasons for the failures may differ from case to case. Merck of Germany exited diabetes research, abruptly halting development of a compound licensed out by Glenmark. In other cases, the results of clinical trials did not meet expectations.
Failures in research can sink drug companies, regardless of their size. As scientific studies continuously get refined, thousands of drugs are screened, making redundancy a daily battle.
The upshot of playing the game, on the other hand, is rewarding. A single successful drug can vitalise a company’s R&D machine and ring in billions of dollars, as seen with US drugmakers Gilead and Celgene. Glenmark seems to have learned its lesson the hard way.
“Today, the operating environment to license out a small molecule (chemical-based drugs) is much tougher because the amount of rigour and clinical data required to justify safety is much higher,” said Saldanha, who worked in the US for Eli Lilly and had a stint at consulting giant PricewaterhouseCoopers before taking over the reins of his company two decades ago.
Glenmark had a meteoric rise under Saldanha. With an exponential growth – from just Rs 138 crore in sales in 2000 to Rs 7,650 crore now – the dynamics of managing research have also changed.
“There is no pressure now to do deals for the sake of doing. We had six to seven deals, so doing the 8th, 9th or 10th is not a big thing. Our ambitions have changed dramatically now…just getting the next upfront payment will not change the fortunes of this company,” he noted.
Although small molecules (chemical-based drugs) form an important part of its research focus, Glenmark has steadily raised its stress on biologics – the much sought after segment for innovators. Its R&D investments are at about 10% to 11% of revenue.
“We moved into oncology, built the BEAT technology, we have about five biologics – the portfolio is more attractive,” he remarked. Glenmark’s BEAT is a proprietary antibody technology platform and rated by experts as a potential source of gamechanging leads.
Saldanha’s brimming confidence and passion about potential drugs has an uncanny resemblance to Cipla Chairman Yusuf Hamied or Sun Pharmaceuticals chief Dilip Shanghvi or what used to be very typical of late K Anji Reddy, the legendary founder of Dr. Reddy’s Laboratories.
Developed by scientists at its Swiss research centre, BEAT, or Bispecific Engagement by Antibodies based on the T-cell receptor, binds at least two targets with a single bispecific antibody. While research on bispecific antibodies has been known for a long time, BEAT is said to overcome certain hurdles associated with the stability of the drug and manufacturing-related issues. While its results can swing both ways, the technology has helped Glenmark fill its pipeline with at least three potent drugs.
The first – coded GBR 1302 – is for patients of advanced breast cancer who do not respond to Herceptin, Kadcyla or Perjeta – the three wellknown drugs from Swiss giant Roche. The dosing of the drug is currently being carried out in Germany, which is the early stage of experimental trials in humans.
Last month, Glenmark announced advancing yet another biologic into research – GBR 1372 – an antibody that can target cancers showing mutations and develop resistance to currently used standard treatments Erbitux and Vectibix in colorectal cancer.
Asked why Glenmark could not license these drugs for handsome returns, Saldanha indicated that it is important to think about commercialisation, in line with the changed model.
“We may jointly develop products and basically ensure we have a seat at the table. Historically, we did deals and partners took those ahead while we moved on to something else,” he said.
Saldanha said the bispecific antibodies actually kill cancer cells directly, as opposed to checkpoint inhibitors, which prompt the immune system to attack the cancer tumours. Also, the biologics developed by Glenmark may have an edge in cases of solid tumours as in breast cancer and colon cancer.
According to specialists who track the global oncology research space, cancer drugs attract the highest investments.Vikas Sonawale, who leads a team of 15 senior analysts at Mumbai-based CancerResearchAnalytics.com, said the global market for cancer drugs is above $100 billion and to date, regulators have approved over 250 drugs. Of them, 20 were approved in the past two years alone.
“The interest in M&As for cancer drugs is at a high,” Sonawale said, citing the recent deal US drug maker Celgene signed with EngMab for $600 million.
Still bigger, in August, Pfizer scooped up Medivation after a tough bidding tussle with Sanofi and agreed to pay $14 billion, practically paying to gain rights to just one drug Xtandi (for prostate cancer), which has sales of $2 billion and is expected to touch $6 billion by the turn of the decade.
“Of the total pharma IPOs in the last few years in the US, over half of the companies are working on researching cancer – either as a focused area or as one of the core areas…Thereis a strong reasoning for Indian companies to invest in building a pipeline of innovative cancer drugs…it’s worth considering as a separate vertical,” Sonawale noted.
While it may be too early to forecast how Glenmark’s drugs will fare, for the next four to five years, the generics business will continue to be a key source of revenue.
Glenmark has estimated that at least 30% of its revenue by 2024 will come from innovative drugs.That could be a bold statement, given its strong dependence on generics.
“At the end of the day, there are so many variables, because if we get some good data (from the researched drugs), then the 30% (revenue) will be a conservative estimate,” Saldanha said sanguinely.
For Glenmark, it has been hard to take back drugs that had been licensed out, but giving up is not an option. Saldanha is candid that relicensing a returned compound is tough. For GBR 500, the compound that Sanofi had planned to develop for multiple sclerosis, he said there is some emerging interest and discussions are ongoing.
“It has a well-established safety profile, there is some proof of efficacy, so there is interest,” Saldanha hinted, his eyes sparkling with optimism of a rebound.