Pfizer’s Big Generics Bet

Oct.24.10 | About: Pfizer Inc. (PFE)

By Michael Fitzhugh

Pfizer (NYSE:PFE) is embracing new opportunities in the anticipated $920 billion generic medicines marketplace, leveraging the accomplishments of new partners to fortify its offerings in two key emerging markets, Brazil and India.

In Brazil, the company is taking a 40 percent stake in Teuto Brasileiro, which for $240 million will grant Pfizer access to about 250 mostly generic drugs, entrée to its significant Brazilian distribution network, and an option to acquire the remainder of the company starting in 2014.

Pfizer also gains the option of registering and commercializing Teuto products in Brazil and beyond. Those products include treatments for pain and inflammation, cardiovascular disorders, anti-infectives, and central nervous system and respiratory diseases, among others. Teuto will be able to distribute select Pfizer products under its own name in Brazil.

In India, Pfizer is spending up to $350 million for the right to market biosimilar insulin formulations created by Biocon, a generics giant on the sub-continent. Together, Pfizer and Biocon covet a bigger slice of the $40 billion diabetes drug and device market, an ever more competitive space energized by generic and top tier-pharma interest alike.

Insulin supplies remain sporadic in many parts of the developing world where Biocon has already secured approval for its biosimilar versions of the hormone, a staple of treatments targeting the growing global diabetes pandemic. Pfizer hopes to turn those regulatory triumphs into treasure by applying its well-developed marketing muscle.

Pfizer is fronting $200 million for exclusive access to several Biocon biosimilars, including its recombinant human insulin; Glargine, a generic of Sanofi’s long-acting Lantus; Aspart, a generic of Novo’s fast-acting NovoLog; and Lispro, a generic of Lilly’s fast-acting Lispro.

Biocon stands to capture up to $150 million more for hitting development and regulatory milestones, plus sales-related payments if Pfizer can make the global partnership into a sales success.

Pfizer’s desire to strengthen its hand in the follow-on biologics and diabetes areas drove the deal, says David Simmons, president and general manager of Pfizer's established products business unit. Like most major pharmaceuticals, the company is also under growing pressure to establish new sources of revenue to fill the multi-billion dollar sales gap it will face when patents on several of its bestsellers, including Lipitor and Viagra, expire.

Biocon is India’s largest biotechnology company by revenue. Pfizer is the world’s second largest drug company after Johnson & Johnson (NYSE:JNJ).