LAST WEEK, Glenmark announced that its subsidiary, Ichnos Sciences, had entered a licensing agreement for the OX-40 antagonist, Telazorlimab (ISB 830), with Astria Therapeutics. Astria will take over the product’s development and hold global rights, aiming to create a next-generation Telazorlimab with 10x higher potency. In return, Ichnos expects to receive $320 million in upfront and milestone payments, along with potential low-double-digit royalties on sales, though the majority of these payments are likely to be received in the later stages of the agreement, with limited near-term financial impact.
Telazorlimab (ISB 830) is an OX-40 antagonist designed for autoimmune disease treatment. Phase II clinical trials by Ichnos for atopic dermatitis showed mixed results, with the primary endpoint, EASI, being met at higher doses compared to a placebo. However, secondary endpoints like EASI 75 and IGA did not show significant improvements compared to the placebo.
Notably, Ichnos had not been actively investing in the clinical development of Telazorlimab recently, so the out-licensing is not expected to result in significant cost savings.
A positive development in the innovation programme and out-licensing deal could benefit the stock, but the Telazorlimab deal is not expected to be a significant driver. The spotlight is now on ISB 1342 and ISB 1442, both in phase I proof-of-concept studies for refractory multiple myeloma (R/R MM), with outcomes expected in October 2023 and December 2023.
While we haven’t factored in the innovation upside into our estimates and target price, we consider a lower R&D spend of $60 million in FY25 (versus $80 million in FY23 as guided by management), factoring in a negative impact of Rs 141/sh related to innovation R&D spending in our target price.
We maintain a Neutral rating on Glenmark with a target price of Rs 841/sh, valuing the base business at 15x one-year-forward earnings and accounting for the negative impact of innovation R&D spending at Rs 141/sh. Additionally, we assign an 8x multiple to innovation R&D spending. As of now, the stock is trading at 22.1x/18.7x/14.5x FY24/ 25/26 EPS of Rs 35.7/ 42.2/54.6.