Pfizer deal buzz lifts Biocon to 52-wk high

BANGALORE/MUMBAI: Shares of Biocon surged to a 52-week high on Monday on rising speculation that global drug giant Pfizer is in talks with the Bangalore-based firm to buy a stake or strike a marketing alliance.

Biocon hit a high of Rs 346.9 in intra-day trading on Monday before slipping to Rs 330.7. The shares have risen 11.2% in the past five days. Speculation has been growing that Pfizer and Biocon are likely to announce a large transaction.
People close to the development said that the two companies are talking about a tie-up but declined to provide further details on the talks.

“I cannot comment on rumours and speculation,” Kiran Mazumdar Shaw, CMD, Biocon told ET in an email response. An official of Pfizer India declined to comment and emails sent to the global parent did not elicit any response. Pfizer closed at Rs 1,137.4, a fall of 2.9% on BSE.

Pfizer has been scouting for acquisitions and tie-ups in India and abroad as its once-strong portfolio of patented drugs becomes thin and new discoveries become costly.
The cost of bringing a drug to the market has increased sharply and returns, thanks to high marketing costs and litigation, have not kept pace. Lipitor, a big Pfizer drug, that generates nearly $1.4 billion will go off patent in 2011.

Pfizer gobbled up Warner-Lambert in 2000, Pharmacia in 2003 and Wyeth in 2009. Last year, it also entered into a series of agreements with Aurobindo Pharma to market medicines that are no longer patent protected and don’t have market exclusivity in the US and Europe.

Kewal Handa, MD of Pfizer India around a year and a half ago had said in a news channel interview that Pfizer will look to expand its portfolio in the Indian market. Analysts who track the company said that the Indian arm of Pfizer can spend up to $200 million on a stake purchase of an Indian company.

Drug industry analysts say that the talks with Pfizer could involve a licensing or sourcing deal or a stake purchase.
The first is most likely, they add. The deal could range between $500 million and $1 billion and could interest Pfizer as Biocon’s products are in advanced stages of trials, a senior executive at another drug firm said.

“Alliance with Pfizer would facilitate product launch in the regulated markets which Biocon cannot do alone considering that late stage R&D funding requires huge investments,” said Bhavin Shah, research analyst, Dolat Capital Market.
A research director of a Mumbai-based broking firm also believes that the two firms are looking at an alliance.

“Pfizer would be looking at Biocon’s insulin and its analog portfolio. This would give the multinational a strong foothold in the emerging markets. As far as Biocon is concerned, it would get a strong global marketing and distribution partner.

Biocon has two molecules in late development stage, the first being oral insulin. Biocon’s KM Shaw said the company’s new delivery mechanism that prevents digestive juices from denaturing insulin has been quite successful in phase II trials and is now in phase III trials. The second molecule is a monoclonal antibody, meant to cure Psoriasis.