Bangalore: India’s largest listed biopharmaceutical firm Biocon Ltd forged a strategic deal with Pfizer Inc. on Monday for worldwide commercialization of four insulin products, seeking to address a market worth a combined $14 billion (Rs62,020 crore).
Biocon will receive $200 million from the world’s largest drug maker under the deal that covers recombinant human insulin, Glargine, Aspart and Lispro.
Biocon will be paid an additional $150 million on completion of various milestones such as regulatory approvals.
“The $200 million will come to us in the form of $100 million upfront, with another $100 million going into an escrow account to be released over the period of two years,” said K.N. Murali Krishnan, president (group finance) at Bangalore-based Biocon. “It will, therefore, not reflect in our P&L (profit and loss) for the next quarter, although it will appear in the balance sheet at the end of the year.”
The combined addressable market share of these four products worldwide is about $14 billion, split into $2.4 billion for human recombinant insulin, $5 billion for Glargine, $3.75 billion for Aspart and $2.8 billion for Lispro.
Biocon will be responsible for clinical development, manufacturing, supply and seeking regulatory approvals for these biosimilar insulin products. Pfizer will have exclusive rights to commercialize the products globally, except in Germany, India and Malaysia where Biocon already markets these products, and a number of other developing countries where Biocon licensees are present.
Pfizer and Biocon will share the rights to commercialize the products in such countries.
The deal comes in the wake of many pharma companies forging strategic alliances with Indian drug makers as they approach patent expiries on key drugs in 2012 and their new drug pipelines dry out. Sixty-one drugs worth an estimated $80 billion in annual revenue will go off patent in the US between 2011 and 2013.
“Almost every major drug of Pfizer, whether Lipitor or Viagra, is set to go off patent by 2012. Lipitor, its biggest blockbuster, brought it revenue worth $11.9 billion in 2009,” said an analyst from a brokerage firm who did not want to be named. “So obviously the company is trying to fill this gap. And most major deals have been from India.”
In the last two years, Pfizer has entered deals with Aurobindo Pharma Ltd, Strides Arcolab Ltd and Claris Lifesciences Ltd.
Other multinational drug firms that have struck similar deals with Indian generic manufacturers have been GlaxoSmithKline Plc with Dr Reddy’s Laboratories Ltd, and AstraZeneca Plc with Torrent Pharmaceuticals Ltd, Aurobindo Pharma, Abbott Laboratories Ltd and Cadila Healthcare Ltd.
“This deal demonstrates Pfizer’s definite interest in the biotech space where it hasn’t really ventured before,” said Dipta Chaudhary, programme manager, pharma biotech, South Asia and Middle East, at Frost and Sullivan. “So far, only Eli Lilly, Sanofi Aventis and Novo Nordisk were present with proprietary products. But Pfizer’s entry is going to change the entire dynamics of the market by bringing in a cost-competitive product.”
While recombinant insulin is available in slow, medium and fast-acting forms, Lispro and Aspart are the fastest acting forms of insulin and the latest drugs to be developed in this portfolio. Most therapies combine two of these drugs for optimal effect.
Biocon currently has 9.3% of the Indian market share in biosimilars. Its recombinant insulin products are approved in 27 developing countries and commercialized in 23.
“In each of the 23 markets where we are present, we have a market share between 10-25%,” Rakesh Bamzai, president of marketing at Biocon, told a press conference.
The 2010 market for diabetes drugs and devices is estimated at $40 billion according to Biocon, with the four drugs under the agreement comprising 35% of the segment. While recombinant human insulin or classical insulin is the oldest drug, having been around almost 20 years, Largine will lose patent protection in 2014 in most developing countries. Lispro will lose patent protection by 2015 and Aspart will lose patent protection by 2017.
Subsequent to this, the products will be commercialized in these countries.
“This collaboration supports our stated efforts to become a strong player in follow-on biologics as well as in the diabetes disease area, by adding to Pfizer’s broad biotherapeutics portfolio...,” said Biocon’s chairperson and managing director Kiran Mazumdar-Shaw.
Krishnan said Biocon is looking at investments in capacity expansion of around $300 million over the next three years in both India and Malaysia to service the growing markets and meet increased demand as a result of the Pfizer deal.
Another $200 million is expected to be spent on the development of new drugs such as IN105, an oral insulin product, which is undergoing phase-III trials in India, and phase-I trials globally. These new drugs are not part of the Pfizer deal.
Biocon stock ended up Rs.3.70 at Rs.402.75 on a day the Bombay Stock Exchange’s benchmark Sensex gained 43.84 points at 20,168.89.
The announcement was made after market hours.