Pfizer Teams With India Brewmaster in Return to $14 Billion Insulin Market
Biocon Ltd. Chairman Kiran Mazumdar Shaw
Namas Bhojani/Bloomberg
Kiran Mazumdar Shaw, chairman and managing director of Biocon Ltd.
Kiran Mazumdar Shaw, chairman and managing director of Biocon Ltd. Photographer: Namas Bhojani/Bloomberg
Pfizer Teams With Indian Brewer $14 Billion Insulin Market
Namas Bhojani/Bloomberg
A technician works at Biocon Ltd.'s cancer drug facility in Bangalore.
A technician works at Biocon Ltd.'s cancer drug facility in Bangalore. Photographer: Namas Bhojani/Bloomberg
Biocon Ltd. founder Kiran Mazumdar- Shaw learned the intricacies of enzymes while studying how to make beer. Now Pfizer Inc., the world’s largest drugmaker, is tapping that knowledge to revive its insulin business.
The biotechnology company that Mazumdar-Shaw started in her garage in 1978 for about $1,200 is Asia’s biggest insulin maker, with a market value of about $1.35 billion. The Bangalore, India-based group signed a deal in October to supply Pfizer with four generic insulin products in emerging markets, including India and Brazil, and then the U.S. and other developed nations.
Biocon received $200 million upfront from New York-based Pfizer, which is re-entering the $14 billion global insulin market almost four years after it scrapped its Exubera inhaler. India’s biggest drug-supply deal will help meet global demand forecast by market researcher RNCOS to expand 20 percent a year through 2015 as the number of diabetics tops 285 million.
“This is a perfect match,” said Ranjit Kapadia, vice president of institutional research at HDFC Securities Ltd. in Mumbai. “This deal will open up many more avenues for Biocon. Pfizer gets a low-cost manufacturing base, and they just have to market the products.”
Doubling Share
Pfizer likely will start selling Biocon’s insulin under its own brand in the second half of this year, according to the U.S. company. Biocon, India’s biggest biotechnology firm, posted a 25 percent gain in third-quarter profit to $22 million as sales for the period ending Dec. 31 rose 15 percent.
The company’s stock soared about 52 percent last year, beating the 34 percent increase in the Bombay Stock Exchange’s 18-member Healthcare index. Biocon is down 27 percent to 306.85 rupees this year, as the benchmark Sensex has lost 14 percent on concerns government measures to quell inflation will hamper economic growth.
Some of Biocon’s domestic products are subject to state price controls. It had 4 percent of India’s $168 million insulin market last year, according to IMS Health Information and Consulting Services India Pvt. in Mumbai. The Pfizer deal may boost that to 10 percent by value by 2015, said Priti Arora, a pharmaceutical analyst at Kotak Securities Ltd. in Mumbai.
Biocon’s best-selling drugs are statins to reduce cholesterol. It also makes drugs for heart disease and cancer, with most of its revenue coming from generics.
Malting and Brewing
“Insulin will become their biggest revenue generator after this deal,” said Siddhant Khandekar, a pharmaceutical analyst at ICICIdirect in Mumbai.
Biocon, which employs more than 5,300 people, makes insulin in its factory, Asia’s largest, in Bangalore. Mazumdar-Shaw and family members control 61 percent of the company, according to stock exchange filings, and she is India’s fourth-richest woman with a net worth of $900 million, Forbes magazine reported in September.
Mazumdar-Shaw, 57, found her inspiration for starting Biocon in beer. Her father was a brewmaster at India’s United Breweries Ltd. and crafted Kingfisher, the nation’s No. 1 beer.
After graduating from Bangalore University with a zoology degree, Mazumdar-Shaw told her father she wanted to pursue a career in applied sciences. He suggested making beer.
“I said, my God, why would I want to do brewing?” she said. “He said, ‘Don’t look down on brewing. Look at it as a science.’”
She moved to Australia in 1974 and enrolled in what is now the University of Ballarat, outside Melbourne, to study malting and brewing. She was a trainee brewer at Carlton & United Beverages, which eventually became part of Foster’s Group Ltd.
‘Fend for Myself’
Mazumdar-Shaw didn’t drink alcohol before going to Australia, and she was the only woman in the class. She graduated in 1975 as the top student and became India’s first female brewmaster.
“Going to Australia was quite a transformational phase of my life,” she said. “I’d led a very protected and charmed life in India, and suddenly I had to fend for myself.”
When she returned home, breweries wouldn’t hire her because they feared she couldn’t handle the odd shifts and male- dominated workers’ unions, she said.
Mazumdar-Shaw then met Les Auchincloss of enzyme-maker Biocon Biochemicals Ltd. of Ireland, and he asked her to help him start an India subsidiary supplying brewers, packaged-food companies and fruit-juice makers.
She incorporated Biocon India on Nov. 29, 1978, in her garage in Bangalore and used a rented, 3,000-square-foot shed nearby as her factory. Her first employee was a car mechanic.
‘Alarm Bells’
“It was like a kitchen-sink operation,” she said. “I had a real problem getting people to work for me because I was a woman.”
The next year, Biocon started exporting enzymes to the U.S. and Europe, according to its website. Mazumdar-Shaw then realized that the same processes that make enzymes for beer -- growing microbes in large vats under precise temperatures and pressures -- could be applied to making medicines. Insulin, a hormone, can be made synthetically in a similar process.
“I could actually leverage all that I had done for enzymes and start applying it to biopharmaceuticals,” she said.
By 1996, the company entered the generic statin business. Mazumdar-Shaw saw an opportunity in India after learning that most insulin there was made by foreign companies.
“That all sort-of rung a lot of alarm bells in my mind,” she said. “I said, hey, this is the space I should be in.”
Failed Trial
Biocon introduced Insugen in 2004 and now has a 10 percent share of the Indian market for insulin made from recombinant human DNA, the company said.
About 90 percent of diabetics worldwide have the Type 2 variety, in which insulin is unable to regulate sugar in the blood. Type 1, once known as insulin-dependent or childhood- onset diabetes, is caused by the body’s failure to produce enough insulin.
Biocon is developing an insulin pill, called IN-105, which Mazumdar-Shaw said in 2005 could be a “blockbuster” because of its convenience over injections. The drug failed in trials to meet its primary goal for controlling blood-sugar levels, the company said Jan. 10.
Biocon will continue developing it, Mazumdar-Shaw said.
Pfizer took a $2.8 billion charge in 2007 after discontinuing sales of its Exubera insulin inhaler amid complaints about its size and cost. Novo Nordisk A/S, Eli Lilly & Co. and Sanofi-Aventis SA sell more than 90 percent of insulin globally by value, said Henrik Simonsen, a pharmaceutical analyst for SEB Enskilda in Copenhagen.
Kindler Meeting
Pfizer started negotiating with Biocon after former Chief Executive Officer Jeffrey Kindler met Mazumdar-Shaw at a San Francisco conference in January 2010. The deal was announced Oct. 18.
Biocon will supply four generic versions of existing insulin products, including those made by Novo Nordisk, Eli Lilly and Sanofi-Aventis. Pfizer has exclusive rights to market the insulin globally except in India, Germany and Malaysia, where Biocon also can sell it.
“It is one of the most significant deals for Biocon and one of the landmark deals in the Indian generic space,” said Hemant Bakhru, an analyst with CLSA Asia-Pacific Markets in Mumbai.
To contact the reporter on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net.
To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net
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