Shares in the company zoomed up almost 20% to 327.80 rupees ($7.31) – the highest price in a month – before paring some of the gains. In afternoon trade on the Bombay Stock Exchange, Glenmark was up 12% at 306.60 rupees, while the benchmark Sensex was down 0.7%.

This is the sixth such deal that the Indian drug maker has signed in its endeavor to create a new product under a licensing agreement with a foreign pharmaceutical company. The strategy is aimed at helping finance costly and lengthy research.

The difference this time is that Glenmark isn't licensing out a chemicals-based molecule. It is selling the licenses for an experimental biological drug – complex proteins manufactured in living cells – aimed at treating Crohn's disease and other conditions such as multiple sclerosis.

Under the deal, Sanofi could potentially pay Glenmark $613 million for the drug, code-named GBR500, achieving certain development, regulatory and commercial milestones, including $50 million as upfront payment.

Glenmark claims that it's the first Indian company to have successfully sold a license for a biologic treatment.

"It's the first novel biologic out-licensing deal coming from any Indian company,

" Glenmark Chief Executive Glenn Saldanha told reporters in Mumbai Monday.

Macquarie Capital analyst Abhishek Singhal told television news channel CNBC-TV18 that the deal "reinforces the credibility of Glenmark's innovation pipeline where they have been able to crack an out-licensing deal on a novel biological entity."

Mr. Singhal said Glenmark is one of Macquarie's preferred pharmaceutical stock picks. Macquarie has a target price of around 445 rupees on Glenmark, without valuing any upside from the Sanofi deal.

An analyst with a Mumbai-based brokerage said that the deal is positive for Glenmark as it will allay investor concerns over the company's cash flow issues.

But the analyst, who declined to be named, said he doesn't expect Glenmark stock to move up further from current levels as Monday's bounce more than accounts for the upside from the Sanofi deal news.

Glenmark has experienced a turnaround since the fiscal year ended March 31, 2009, when its net profit plunged to 1.93 billion rupees from 6.32 billion rupees as sales fell across markets. Cash flows were further strained when financing costs shot up on loans taken to fund the company's aggressive global expansion, while milestone payments from drug licensing partners dried up.

Glenmark has since focused on improving its cash flow position by controlling working capital expenditure, deferring non-essential spending and paring debt. At the same time, it has benefited from growth returning to most markets and renewed interest in its drug research and development programs.

The company last week reported net profit of 4.58 billion rupees for the fiscal year through March 2011. It added that this number conformed to International Financial Reporting Standards and may not be comparable with the previous fiscal year.

Mr. Saldanha told reporters Monday that the company will use the $50 million received upfront from Sanofi to repay part of its debt, which he said currently stands at about 19 billion rupees ($423 million).