With EU, US out of reach, Biocon’s drivers are clear

omegrown biotech company Biocon is turning focus to the emerging markets as headwinds blow in the US and Europe.
Markets in Latin America, Asia, Africa and the Middle East will be the new growth triggers, said Kiran Mazumdar Shaw, CMD, Biocon.

“The regulated markets have not yet opened up, so opportunity will be sought in other geographies,” Shaw said in a conference call.

The domestic branded formulations business, which includes insulin (diabetes), statin (cardiology), nephrology, oncology and immuno-dermatology businesses, will also see renewed focus.

The business will contribute about 20-25% of Biocon’s overall turnover in three years, up from around 10% now, Shaw said.
Turnover last fiscal was around Rs1,800 crore, excluding the numbers of German unit Axicorp, which Biocon exited in April.
“Irrespective of the status on entry into the US and EU markets, good growth should come from the domestic business as segments like cancer, diabetes, cardiology are chronic areas and can offer opportunity for building strong brands,” said an analyst with a brokerage.

Bino Pathiparampil, an analyst with IIFL, said the company currently has a low base in the domestic business and hence will be able to make the most of the unfolding potential for lifestyle and chronic therapy areas.

Shaw said it would be four or five years before the company can look at the US for biologics opportunity as regulatory guidelines for the market are not yet clear.”At least for the EU there is some clarity on guidelines,” she said, adding, “It is unrealistic to expect Biocon with Mylan to enter these territories. A timeline like FY15 and FY16 looks like the earliest opportunity for entering these markets, especially US with biosimilars.”

Biocon had entered into a partnership with US-based Mylan in 2009 for development, manufacture, supply and commercialisation of biosimilars.

Biosimilars are off-patent versions of biopharma drugs and require extensive clinical trials in order to get approvals.
As per industry estimates, developers of biosimilars often require about $100-200 million per molecule for the clinical trials, as against a minuscule $5 million that goes into developing a generic drug.

Various statistics state that between 2009 and 2014, biologics worth $60 billion will face patent expiries.

Bhavin Shah, analyst, Dolat Capital Market said once the regulated markets open up, the firm should be able to make the most of the available opportunity as there won’t be too much of competition initially. Also, it will be able to capitalise on its partnerships with Mylan and Pfizer (where Pfizer would market biosimilars manufactured by Biocon).

However, at a later stage, generics biggies like Sandoz and Teva could pose competition for the company in the regulated markets, Pathiparampil cautioned.