Glenmark Spins Out Innovation With New US Base
Executive Summary
Glenmark’s innovation business will now be housed in a spin-out arm, based in the US, where the Indian parent believes the ecosystem is more conducive to cutting-edge R&D. The new structure could also potentially provide new opportunities to unlock value for the parent company.
Glenmark Pharmaceuticals Ltd. plans to spin out its innovation business, which includes a basket of promising early to advanced new chemical entities (NCEs) and new biological entities (NBEs), into a new company based in the US.
The new unit, which received an in-principle go-ahead from the Glenmark board on Feb. 14, will include all innovative molecules in the pipeline, including preclinical assets and technology, the Indian firm’s R&D centers in Switzerland, Paramus in the US and Navi Mumbai, India, which are linked to the innovation business, and a biologics manufacturing facility in Switzerland. All employees associated with innovative R&D - estimated to be in excess of 400 - will be part of the new company.
Glenmark chair and managing director, Glenn Saldanha, told Scrip that the company expects the spin-out to bring a “strong, heightened focus” into the innovation business and that the business was moving to an environment (the US) where work is “appreciated and can attract the best talent. Biotech and the ecosystem itself is so different in the US, where investors and people value the whole innovation aspect. In India we are always challenged with defending our expenditure on innovation,” Saldanha said.
Down the line, the move could also help unlock value for Glenmark, with the executive not ruling out potential opportunities to raise new capital, though it will be up to the spin-out's independent board to decide the the future course of this entity, he maintained.
Independent Board, New CEO
The spin-out unit, to be styled as a wholly‐owned subsidiary of Glenmark, will have its own independent board and a new CEO. The other members of the management and team remain unchanged.
Glenmark’s president and chief scientific officer, Dr Kurt Stoeckli, a former Sanofi executive, will also now be part of the new innovation spin-out. (Also see "Ex-Sanofi Exec Stoeckli Primes Glenmark’s Cancer Therapy Ambitions" - Scrip, 23 Dec, 2016.) The transfer of the assets and employees to the new innovation company is expected to be completed in the next six to nine months, a company statement said.
Glenmark believes that with its pipeline now at an advanced stage, it is the right time to carve out the innovation business to be an independent entity and allow it to chart its own journey towards becoming a leading global biotech organization.
Currently, Glenmark’s innovation pipeline comprises eight assets, including NCEs and NBEs, in various stages of development in the areas of immunology, oncology and pain management. It includes three immuno‐oncology bispecific antibodies developed through Glenmark’s proprietary platform. The Bispecific Engagement by Antibodies based on the T-cell receptor (BEAT) platform facilitates the efficient development and manufacture of antibodies with dual specificity and Glenmark expects the new spin-out to further leverage the platform to enhance its pipeline.
Of the five clinical and three preclinical assets in development, two assets are currently in Phase IIb and one asset is likely to enter Phase IIb in fiscal 2020. Glenmark has thus far garnered around $250m through eight out‐licensing deals for its novel molecules to global pharmaceutical companies, including Merck & Co. Inc., Eli Lilly & Co. and Sanofi, though it has yet to commercialize a home-grown innovative asset in the US.
‘Transformational Step’
Chair Saldanha also dismissed any comparison of the new move with the spin-out approach of Sun Pharmaceutical Industries Ltd.’s India-listed arm Sun Pharma Advanced Research Co. Ltd., which he termed a vertical split (a demerger).
“The quality of the research that the new [Glenmark spin-out] company is doing is all innovation - high-end biologics, oncology, immunology - and not incremental R&D. It’s a very different model,” Saldanha explained, adding that his firm is probably the first Indian drug company to go to the US market with an “innovative front-end.”
“It’s a big transformational step because you are looking at a pure innovative entity.”
The spin-out plan came alongside a strong showing on the earnings front for the company in the fiscal third quarter. Glenmark reported revenues of INR25.55bn ($355.9m; +16%), while net profit stood at INR1.16bn (+11%) in the quarter.
Residual Business
Meanwhile, Glenmark’s residual specialty and generics business will continue to be housed in the parent company and not form part of the new spin-out.
“ The residual business will continue to focus on building the generics, specialty and OTC [over-the-counter] businesses and also will eventually look at launching some of the innovative assets either through in-licensed opportunities or stuff like that,” Saldahna told Scrip. (Also see "Glenmark Re-Evaluates Complex Generics Basket, Won’t Be Part Of The 'Crowd'" - Scrip, 14 Nov, 2018.)
Glenmark’s specialty pipeline includes Ryaltris nasal spray (olopatadine HCl and mometasone furoate monohydrate) for the treatment of seasonal allergic rhinitis, which has seen out-licensing deals over the recent past, GBR 310, a biosimilar of Xolair (omalizumab) for allergic asthma and chronic idiopathic urticaria, and GSP 304, a long-acting muscarinic antagonist administered by nebulization, being studied for chronic obstructive pulmonary disease. (Also see "Glenmark, Yuhan Partner for Ryaltris, Eyes On US Trajectory" - Scrip, 14 Jan, 2019.)
The Mumbai-based company has also completed the transfer of its active pharmaceutical ingredient business into a wholly-owned subsidiary, Glenmark Life Sciences Ltd, effective Jan. 1, 2019 and could potentially consider bringing in a minority partner for the operation. (Also see "Glenmark Spins Out Business To Drive Value" - Scrip, 13 Aug, 2018.)