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Implications of Biocon-Pfizer Insulin Deal

October 19, 2010

Biocon has entered into a global commercialization deal with Pfizer for its biosimilar insulins (incl analogs) pipeline viz. Recombinant Human Insulin, Glargine, Aspart & Lispro. Pfizer will pay Biocon US$200m upfront & US$150m by way of development & regulatory milestone payments in addition to manufacturing-related income & royalties on launch.

The upfront payment of $200mn translates into a per share value of Rs45 (pre-tax) for Biocon. Mgmt indicated that a meaningful portion of the upfront payment will be spent on enhancing Biocon’s manufacturing capacity to cater to future product requirements of Pfizer and also for clinical trials and regulatory approvals in new markets.

This is clearly a large deal from Biocon’s perspective. Besides enabling it to capture significant value from its pipeline upfront, Pfizer’s
involvement is also likely to ensure a relatively better ability to navigate through regulatory requirements / hurdles & capture share on launch. Pfizer-Biocon deal further underscores the increasing focus of global pharma companies on collaborating with Indian companies and leveraging their low cost manufacturing base.

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