ViewPoints: Healthy gains for Biocon as it ties up Novartis biosimilar collaboration

(Ref: ViewPoints Desk)

Approval of a first biosimilar Avastin product in Europe this week is testament to how fully formed the biosimilar market now is, putting the onus on committed players to firm up their long-term strategies. Novartis - a dominant player on the current landscape through its Sandoz division - has announced an intriguing collaboration with Biocon, focused on next-generation biosimilars.

The backstory

The partnership covers biosimilars in oncology and immunology, through which Novartis and Biocon will share responsibility for development, manufacturing and regulatory approval, with cost and profit shared equally on a global basis. Novartis will be responsible for commercialisation in North America and the EU and Biocon elsewhere. 

The bigger picture

Novartis and Biocon are unwilling to disclose which branded franchises they are targeting, with management at Biocon going only as far to describe them as "multi-billion dollar opportunities" expected to lose patent exclusivity over the next decade.

Sandoz has already launched a number of first- and second-generation biosimilar products (it is the only company that can boast five biosimilar launches), while Biocon has targeted a number of the same brand franchises (such as Humira and Neulasta) through an existing agreement with Mylan. Branded products targeted under the Novartis partnership will not overlap with those covered by the Mylan collaboration, which will be unaffected by the new deal, Biocon said.

In a conference call on Thursday, Biocon management argued its new partnership with Novartis would play an important role in "moving the company up the biosimilars value curve." In addition to improved financial terms - Biocon is entitled to a third of profits through its collaboration with Mylan - it will allow Biocon to enhance its development-to-commercialisation capabilities, the company said; noting that Mylan holds the marketing authorisations for all biosimilars developed under its separate partnership and is also primarily responsible for regulatory applications.

Final thoughts

With an option in place to expand this existing collaboration with Mylan, it is interesting that Biocon has chosen a separate agreement with Novartis to focus on next-generation biosimilars, though not necessarily surprising; in addition to improved financial terms and an opportunity to build out its capabilities beyond manufacturing, partnering with a global market leader endorses Biocon's emerging role in the biosimilars market.

From Novartis' perspective, the benefits are less clear, argue analysts at Credit Suisse. Biocon's infrastructure in emerging markets is an obvious attraction, they note, as is "access to proven low cost manufacturing." They suggest Novartis is looking to make short to medium term commercial investments in the emerging markets, but also view the deal as "suggestive of a wish to share development risks as much as costs."

A Sandoz spokesperson said the collaboration is "about leveraging each company's strengths," but said it is too early to comment on access to Biocon's manufacturing capabilities, given that products being targeted are in the early stages of development. "This is our first collaboration of this kind within the biosimilars space, which is designed to strengthen our capabilities even further," they added. Novartis is keen to play up the continued strength of its internal biosimilar development capabilities, but said "we are complementing it with an enhanced focus on exploring complementary strategic partnership opportunities," suggesting more collaborations could be on the horizon.

Questions remain over Novartis' investment strategy in the emerging markets for its current portfolio of biosimilars and the deal with Biocon could signal the company is shying away from near-term heavy investment, shaped by a reality that local players will be able to compete aggressively of price, argue analysts at Credit Suisse. However, a Novartis spokesperson told FirstWord there is "no need to read anything into our strategy in emerging markets beyond the specific biosimilar products that will be part of this particular collaboration with Biocon."