In a room in Bangalore's Le Meridien hotel, Kiran Mazumdar-Shaw, the be-all of Biocon, speaks spiritedly. Speaking in the aftermath of Pfizer cancelling its partnership with her company, the country's largest in biotechnology, she says the media has blown it out of all proportion. So have the analysts, she says, who have downgraded her company's stock without looking at the fundamentals. "Just because Pfizer has withdrawn, everything does not collapse. Biocon will still take its products to the global markets, but in a different way."
Biocon struck a marketing deal valued at $350 million with the world's largest drug maker Pfizer
in October 2010 to take the Bangalore-based company's biosimilar insulin products to the global markets. As a sign of things to come, Pfizer paid $100 million upfront. Another $100 million, deposited in an escrow account, could be tapped when development milestones were met. The remaining $150 million were linked to regulatory milestones over three to five years.
But why did Pfizer scrap the deal, just 16 months after signing it? "The priorities changed for Pfizer," says Mazumdar-Shaw. Almost all multinational pharmaceutical giants are cutting costs. So too Pfizer, which is trying to get out of non-core businesses like nutritional and animal health. It also has its own biosimilar programme.
"A company has a certain resource to allocate. Would you allocate it to a shared asset or would you focus on in-house programmes? Pfizer felt it might be better to focus on the in-house programme, where they may get better returns."
With Pfizer gone, Biocon will have to bank on regional partners. Mazumdar-Shaw thinks that would be easy. Biocon already has 20 partners selling its products in 27 countries and they could do the job for insulin as well. Many of them are happy to see Pfizer go, as they no longer need to share the spoils with the big brother.
The break-up will not make Biocon shy away from big deals, though lessons are there to be learnt. "It is about contending with frequent strategy changes. Big Pharma is in a state of churn. There is a patent cliff and they are also challenged with declining R&D productivity. They will constantly review their priorities."
The news of the Pfizer split comes at an inopportune time for Biocon, which reported a 16 per cent drop in net profits
for the three months to December last year.
Unfazed, Mazumdar-Shaw talks of a healthy innovation pipeline. "Innovative products have builtin risks. These risks are about clinical efficacy, clinical safety and regulatory hurdles. It is about how you design your trials, what data comes out of the trials and then how you position your product."