India’s largest bio-pharmaceutical company, Biocon, suffered a severe jolt on Tuesday, as its $350-million pact with global pharmaceutical major Pfizer was called off, hardly 18 months after the deal was signed.
Biocon had signed the pact with Pfizer in October 2010. Pfizer was supposed to market Biocon’s four insulin products in various countries, including the highly competitive US market. It was supposed to be the inflection point on which Biocon had pinned hopes of strong growth. According to analysts, revenues were supposed to double in five years.
“This issue raises its risk profile in this high-risk, capital-intensive business,” Deutsche Bank wrote in a research note, while cutting the target price by nine per cent to Rs 215. The Biocon stock hit its 52-week low at Rs 238 on the Bombay Stock Exchange during the day before it recovered to close at Rs 250.80, with a loss of 6.3 per cent over yesterday’s closing price.
As part of the agreed deal, Pfizer had paid an upfront sum of $100 million, while another $100 million was in an escrow account. In addition, Biocon was eligible to receive additional development and regulatory milestone payments of up to $150 million and was to receive additional payments linked to Pfizer’s sales of its four insulin biosimilar products across global markets.
Biocon will also get a deal break-up fee from Pfizer, the sum of which was not disclosed.
Biocon was so bullish after the deal with Pfizer that it went ahead and sold its majority stake in AxiCorp, a company based in Germany which was helping Biocon sell a slew of products in the European markets.
“The companies have agreed that due to the individual priorities for their respective biosimilar businesses, it is in their best interest to move forward independently. Biocon and Pfizer are committed to ensuring continuity of patient care and will work together to effect a seamless transition. As of March 12, 2012, all rights licensed to Pfizer will revert to Biocon, and all insulin distributed under the brand name UniviaTM and GlarviaTM will be commercially available from Biocon Ltd only, and will be exclusively manufactured, supplied, marketed and supported by Biocon,” a statement from Biocon said.
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“Biocon remains committed to delivering its biosimilar insulins portfolio to global markets in its endeavour to make a difference to diabetic patients across emerging and developed economies. Biocon will continue to work with its existing partners in several markets and will pursue a commercial strategy on its own and through new alliances in other markets,” said Kiran Mazumdar Shaw, Chairman and Managing Director, Biocon Ltd.
According to a report by ICICI Securities, Biocon is conducting Phase III trials of Recombinant Human Insulin (a biosimilar of Novolog of Novo Nordisk) in Europe and global Phase I trials for Glargin (a biosimilar of Lantus of Sanofi-Aventis). "As draft biosimilar guidelines are in place and these products are expected to get launched post-2014, Biocon is expected to scout for new tie-ups for these products in the US and the EU," said the report.
Rashmi Sancheti of Marwadi Shares and Finance Ltd said in a report, "Partnerships in emerging markets will enable the company to commercialise the insulin. However, regulated markets of the US and Europe, which account for 70-80 per cent of the insulin market, will pose a challenge given the dominance of three players. The launch will get delayed in regulatory markets if the company could not find local partners for commercialisation."
“Pfizer continues to be dedicated to developing a broad portfolio of biosimilar medicines, including monoclonal antibodies and recombinant protein products, both internally and through collaborations,” said Diem Nguyen, General Manager-Biosimilars, Pfizer. “In addition, we will continue to be active in our own research and business development efforts for diabetes, which represents a huge unmet medical need, and we remain committed to seeking new solutions to help physicians and patients,” he added.