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After a courtship period of one and half year, Pfizer and Biocon have parted ways, citing differences in “individual priorities”.
While break ups are never easy, the Pfizer-Biocon parting of ways might be hard on Biocon only in the near term. It will have to forego future royalty payments and an easier piggyback access to developed markets. In the long run, however, its growth will hinge on how soon it can forge marketing alliances for its products.
New partners
The impact of the sour deal on its financials too may not be material (but for Q4 results) as it will get to keep all the upfront and milestone payments it has received so far (a significant part of $200 million).
It will also receive an additional amount on deal annulment.
Biocon is now looking to tap several partners for specific regions (such as US, EU and emerging markets) instead of going with just one. Interestingly, only last year, following its deal with Pfizer, it had sold its 70 per cent stake in German firm AxiCorp, which offered it a front-end presence in Europe.
Finding new partners — especially when MNCs are increasingly seen forging alliances with Indian generics — might not be very challenging, but it will be time consuming.
It will add to opportunity loss as due diligence will have to be done once again for each prospective suitor. Therefore, on-time products launches and semantics of the marketing alliances it forges with regional players will hold the key to Biocon's insulin growth aspirations.
What went wrong
Why would Pfizer decide to part ways after sinking about $200 million, not to mention the time and effort, into the deal?
While Biocon says that Pfizer was shifting its focus away from insulin to monoclonal antibodies and recombinant proteins, the exact reasons haven't been spelt out. Had the deal remained, Pfizer could have enjoyed the spoils from the generic incursions starting 2015 on patent expirations for leading insulin products (approximately a $15 billion market for bio-similars).
While, to some extent, the ongoing restructuring activities at Pfizer Inc that will focus on core pharmaceutical businesses could have driven this, there could be more to it that meets the eye.
srividhya.sivakumar@thehindu.co.in
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