Biocon Case

From Generics Manufacturing to Biopharmaceutical Innovation

BIOCON

BY :ABHISHEK GUPTA

ARIFUL KAYAL DEBAL CHOUDHARISHRADDHA NAHATA

FACULTY : PROF. TIRTHANKAR NAG

MESSAGE …

Things that lead to Strategic changes…

• Competition both within & outside India especially China

• Statins o Constituted 50% of the revenueso Fall in the revenue from the drug by 35%

• Fall in the Stock prices of the company

• First Biopharmaceutical products were – Insulin (Eli Lilly 1982)– Genetically engineered human growth harmone (Genetech 1985)

Global Biopharmaceutical Industry…Biopharmaceutical are the drugs derived using biotechnology methods

• By 2006 it became a useful product to treat :- Diabetes - Arthritis - Hemophila - Leukemia- Other cancers - Transplants

o 1980-2005 global revenue US$63.16 billion having a 18 % YOY growth

o By 2006 Market share of Biopharmaceutical grew to US$320 billion with 12 major players having annual revenues of us$500 each

o Amgen & Genentech largest players reflected by their market revenue & Share prices and US the major market holder

o By 2006 250 biotech drugs & vaccines were going under trial addressing over200 diseases

o Disease specific but for the high segmented patient populations

o Priced right it’s profitable irrespective of market size which provided impetus to industry & heralded a period of great expectation

Economies of the Biopharmaceutical Industry…

• Innovative Drugs– Usually branded a/c for 10-15% of global pharmaceutical market– Went through no. of phases & sometimes took years

• Bigenerics– Generic versions of biopharmaceutical drugs that had come of patents– With many premium priced biopharmaceuticals coming of patent market

looked attractive & Expected to grow at 70% YOY– Incentive to these producers– Two versions :

• Generic version of existing biopharmaceutical • Biological version of Traditional chemical based pharmaceutical drugs


• Only Europe had the legal framework for biogenerics by 2006

• Bio clusters– World’s successful biotech firms clustered in an area which

became leading centers for biopharmaceuticals – Dominating cluster found in 9 areas of USA– Important factor for success :• Availability of pre-commercial medical research • Top Scientists & institutions • Availability of private sector capital needs to

commercialize research findings


• High qualified human resource which also helped in feedback

• High quality pre-commercial research behind development of the sector (NIH- USA)

• Venture Capital was an important source for startups

• Partnership with major or mature pharmaceutical companies provided startups in terms of capital & markets (Gentech & Eli lilly - insulin)

• Wave of mergers and acquisitions noticed in 1990’s and early 2000’s


Biotech in India

• Rated among top 12 biotechnology powers by Ernst & Young

• Growth rate of industry around 40% each year • Mix of entrepreneurial biotechnology companies &

established pharmaceutical companies• Biodiversity available a source of new products• Biocon largest with sales of US$ 158 million• Strong tradition of pharmaceutical generics with firms like

Dr Reddy’s & Ranbaxy• Contract research market showed a double digit growth in

2006

• Clinical Research attracted overseas producers to come to India

• India’s competency in informatics proved a platform for aligning applications in molecular biology to drive the new segment

• Government Support & Industry Regulations–Extension of 150% weighted average tax

deduction till 2010

Biotech in India

• Overlap of Jurisdiction in the drug approval process a concern

• Financing– Differences existed in terms of :

Traditional pharmaceuticals that were expanding

into biopharmaceuticals & Biopharmaceuticals start ups

Biotech in India

• Major Clusters in Bangalore Hyderaband & Pune

Biocon -Company Background

• Incorporated in 1978 as JV between Biocon Biochemicals Ltd.(Ireland) & Ms Kiran Mazundar Shaw (young entrepreneur) in Bangalore

• Leading Biopharmaceutical Co. in India

• 1997 Unilever took over

• IPO April 2004 & proceeds invested in 90 acre biotech project

• Produced enzymes & generic drugs

Contd..

• Has 2 subsidiaries Clinigene & Syngene

• Clinigene – clinical research organization conducting third party trials– 1st Indian Lab to be recognized by American Pathologists– Own Clinical trials by BIOCON helped in specialize in

certain disease areas– Clinigene’s business divided into 3 categories

» Clinical trails for domestic pharmaceuticals » Services for multinationals wanting to register

their products in India » Services for multinationals looking for global

studies

• Syngene– Also offers research services – Difference of focussed on early stage discovery points

Contd..

• By end of 2006 Large share of Revenue Came from Statins

• Revenue also generated by production of enzymes insulin & contract manufacturing

• However with falling prices of Stallins Company started working on a move from generic to innovative drugs

Biocon – R & D 1978-2004

• Initial goal was to focus on production of plant based enzyme & create a market

• Within 1 year company started producing and exporting enzymes

• In 1982 decided upon expanding R&D and develop enzymes that would the partner’s product range

• Two years hence R&D program started with 3 scientists • Two goals of R&D :

– Prospect for mico-organisms in search of novel enzymes– Fermentation technology suitable for production of these enzymes

• In 1986 1st success of development of mutant strain capable of producing viable levels of Pectinase an enzyme used in food

• Followed by development of working pilot model of solid state fermentation technology

• 1998 new application for the fermentation was appointed

• Statin & Insulin major produces

Biocon – R & D 1978-2004

• Adoption of WTO TRIPS meant they could only produce generic of drugs that had come off patent

• Had to focus on development of proprietary products• Biocon started focusing on 2 areas diabetes & Oncology• One of the major new products was Oral insulin under

development labeled IN 105 in partnership with Nobex Corporations

• BIOMAb, a antibody for treating cancer was under process• Entered into Joint Venture CIMAB

Biocon – R & D 2005 onwards

Manufacture• Forced to adapt its technology early on as per norms &

guidelines• Result was improved solid-state fermentation labeled

Plafactor which resulted in high yields• Plafactor helped in filing several new patent applications• Complied with the USFDA regulations & was the 1st company

in India to obtain its approval for manufacturing Lovastatin• 1st company worldwide to produce the pharmaceutical using

sub-state fermentation technique • Instead of using its new capacity for contract manufacturing

Biocon sought to leverage their position as the only large scale producer of insulin & other cell products

Products• Main source of revenue Statin which was sold in bulk• Little experience in selling biopharmaceutical end products

directly to consumers• 1st branded product was Insugen, a generic insulin product

– Sold in 16 states– Market share of 10%– Sales force of 150 people– Registered in other countries such as Latin America

• BIOMAb head & Neck Cancer drug was stated to be launched in 2007• At early stage of development products of Oral Insulin was sold & the company was keeping its options open always

Partnerships

• Biocon had entered into partnership with several foreign firms to develop innovative products, market its products & Sell its products

• Partners were :– Nobex Pharmaceuticals – Bentley Pharmaceuticals– Vaccinex – Joint Venture with CIMAB

Competitors• No. of Chinese & Indian players entered driving the price and

the market share down

• Major Companies– Ranbaxy– Dr. Reddy’s– Wokhardt– Novo Nordisk– GlaxoSmithKline– Elli Lilly & Co. (INDIA)

BIOCON IPO• Purposes of the IPO

– Provide an exit to private equity investors– Give value to stock options that BIOCON has created– To create a public profile that can be tracked globally

• Indian investor mainly focused on BIOCON’s Statin business whereas foreign investors showed interest in the insulin products & the capabilities of the Co. had in :

protein manufacturing Customer Research ServicesClinical Opportunities

• Went Public on 7th April 2004

• US$80million IPO was oversubscribed by around 32 times

• Demand of shares was so strong that in couple of days the share price doubled itself from the issue price

• Issue Price was US$7.22 and it touched US$15.93 on April 12

BIOCON IPO

Working at BIOCON

• Team considered to be one of its greatest assets• In 2006 it had 2000 employees 30% women• Qualification– Half the employees postgradutes– 10% holding Phd degrees

• Expected to double no. of employees by 2008• BIOCON considered as employer of choice of people wanting to work in biotech sector of INDIA• Also known for its generous stock options to key employees

• Company also had a social mission part of its corporate identity

• Big share of the top management employee were the 1st timers

• Company also managed to recruit people with work experience from overseas

• Top management also had plans for its succession planning

Working at BIOCON

BIOCON the way ahead

• By start of 2007 companies had realised that changes in Country’s IP regulations & increased competition in the market for generics meant a move from generics to innovative drugs was perhaps the new imperative

Biocon Case

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