Glenmark's R&D Gamble
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Image: Vikas Khot
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Glenn Saldanha, Managing director and CEO of Glenmark Pharmaceuticals
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lenn Saldanha looks like a man at peace. The turmoil within the pharmaceutical industry — pipelines running dry, mergers and acquisitions in the hope of new discovery and an emerging question mark on investing in innovation — seems distant for the managing director and CEO of Glenmark Pharmaceuticals.
At 41, he is pretty much in control of the task he set out to do a decade ago: Turning Glenmark into a multinational company that makes innovative drugs, and not just the generic drugs it has been developing for 23 years.
In an assertion of the belief that the company needs to innovate, French pharma company Sanofi paid $50 million to Glenmark in July. This was an upfront payment in the $613 million out-licensing deal that Saldanha had sealed with Sanofi in May. The rest of the money will come in milestone payments if and when the molecule GBR 500 crosses various clinical stages. The first phase of clinical trials for the molecule has been completed.
This deal has been momentous for Glenmark not just for its size, but as a validation of Saldanha’s stance to back innovation after the company went public in 2000. But this stance is one for which he has sometimes been penalised by the market.
His journey has been sobering, but at present, confidence levels in the company are high. GBR 500 is the first biologic (biotechnology drug) to be out-licensed by an Indian company. The molecule belongs to the technology platform of monoclonal antibodies whose market was worth $48 billion in 2010 and is estimated to cross $80 billion by 2015 when the overall biologics market is estimated to be at $239 billion.
These are dizzyingly high numbers, but Saldanha says the high that he and his company are craving lies elsewhere. “Our biggest high would be to bring the first Indian molecule to worldwide market. That’s what keeps us ticking; we have no ambition to be a $5 billion or $6 billion company,” he says.
Saldanha is all too aware that the world of molecules is a mercurial one. It may look promising at one stage, worthless at the next. But, if the first decade is any indication — Glenmark earned about $200 million in out-licensing six molecules by spending $125 million on research — Saldanha’s argument that R&D is a profitable business, and not a cost centre as most Indian pharma have made it out to be, looks convincing.
Positioning Glenmark as a hybrid between a nimble biotechnology firm and a steady generics company, Saldanha hopes to license new drugs to Big Pharma till he has the money to take it to the market himself. “If you keep doing it long enough, you’ll get there.”
Choosing the Bets
There are some who believe that Glenmark’s out-licensing success is about timely salesmanship, not deep drug discovery. But thinking that this success is only about serendipity and R&D spending is skewed thinking.
Choosing where to locate skills, which diseases to chase and the opportune moment for in- or out-licensing molecules are all astute business decisions.
“Realising the potential of the molecule, the market and when to out-license is a skill that many [Indian promoters] don’t have. It’s difficult to believe that none of the molecules in any Indian [company’s] pipeline so far was promising enough,” says an analyst with an international brokerage in Mumbai.
He, however, thinks Glenmark’s capability to discover new molecules needs more validation. Glenmark had in-licensed GBR 500 at an early stage from a Canadian start-up. It is not an in-house Glenmark discovery.
But such observations don’t unsettle Saldanha. He has carefully chosen which horse to ride and spends more time in the stable grooming future horses than most chief executives do.
He had decided to place his bets on innovation in 1998, on his return to India after five years in the US. In the US, he had worked with Eli Lilly and, as a consultant for PricewaterhouseCoopers, with Bristol Myers Squib, Smithkline, and Johnson & Johnson.
Between 1998 and 2001 when Dr. Reddy’s Laboratories (DRL) had out-licensed its first two molecules, Saldanha knew he wanted Glenmark to innovate. In 2000, it went public and in 2001, taking $10 million from the IPO proceeds, he began the journey.
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