The market views the ending of Biocon’s deal with Pfizer as a glass half full. For starters, the Bangalore-headquartered biotechnology company will now need to look for a new partner after its agreement with the American pharmaceutical corporation ended. By the pact signed in October 2010, both companies had agreed to commercialise biosimilar products worldwide. Given that Biocon is committed to investing $161 million in its Malaysian unit, there could be a drain on its resources over the longer term.
In the medium term, however, the Kiran Mazumdar-Shaw company will benefit from the $175 million it stands to receive from Pfizer. Of this, $100 million is the upfront payment Biocon received after the deal was inked in October 2010. Another $100 million was deposited into an escrow account, the drawing down of which was linked to the setting up of a facility in Malaysia.
Biocon is expected to retain $75 million of this $100 million as well. According to Avendus, the $175 million cash inflow is likely to cover near-term investment requirements. These include early investments in trials/registrations and the $161-million Malaysian unit.
Also, Biocon will get back all rights that were licenced to Pfizer under the deal. However, over the long term this development will prove to be a drain on Biocon’s resources as it will need to invest in trials, registrations and ramp-up of its facility in Malaysia. Analysts believe the company will need to look for a partner soon. They say inflows from New York-based Pfizer may not be able to cover investment requirements, as clinical costs tend to vary between products and regions.
According to ICICI Direct, Biocon is conducting Phase-3 trials of recombinant human insulin (biosimilar of Novo Nordisk’s Novolog) in Europe and global Phase-1 trials for glargine (biosimilar of Sanofi-Aventis’ Lantus). Biocon will continue to develop other biosimilars — aspart (biosimilar of Novo Nordisk’s Novolog) and lispro (biosimilar of Eli Lilly’s Humulog). As draft biosimilar guidelines are in place and these products are expected to get launched post-2014, the brokerage expects Biocon to scout for new tie-ups for these products in the US and the EU.