Biocon leads on deal with Pfizer

Tue, 19 Oct 11:30 am

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After starting today's session on a positive note Indian indices have moved marginally into the red. However, other key Asian markets are mainly trading positive with Hang Seng up 0.5%. Currently, heavyweights in the Sensex are trading mixed with stocks from the healthcare and auto space seeing investors' favour. However, IT stocks are trading in the negative.

Currently, the BSE-Sensex is trading down by around 3 points, while the NSE-Nifty is trading flat. Strong buying interest is being seen amongst the mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 1.3% and 1.1% respectively. The rupee is trading at 44.47 to the US dollar.

Pharma stocks are trading positive with Biocon leading the gains by a wide margin. IPCA Labs and Apollo Hospitals are also trading in the positive. Indian biotechnology major Biocon and global giant Pfizer have entered into a strategic agreement for the commercialisation of four of Biocon's insulin products. The products include biosimilar versions of insulin and insulin products such as Recombinant human insulin, Glargine, Aspart and Lispro.

Under the terms of the deal, Pfizer will make an upfront payment of US $200 m to Biocon. The biotech major will also be eligible to receive additional development and regulatory milestone payments of up to US $150 m. It will also receive payments linked to Pfizer's global sales of the four products. Pfizer will have exclusive rights to commercialisation globally, with certain exceptions. This is a positive for Biocon and will strengthen its biotech portfolio worldwide. The market for diabetic drugs and devices in 2010 is estimated at US $40 bn (insulin contributes 35% of the segment). By 2015, a number of insulin products are expected to lose patents, resulting in a huge opportunity in the global biosimilar market.

Telecom stocks are trading strong with MTNL and Tata Tele Maharashtra leading the gains. As per a leading news daily, RCOM plans to merge the domestic enterprise business with its global operations. Accordingly, the newly formed division will comprise of overseas cable network assets and domestic corporate business. The division will also include data centers. Later it may be converted to a subsidiary and sold to strategic and financial investors. Merging the two business units will ensure synergistic benefits to RCOM as a single team will handle all the services in India and abroad. Post the merger the newly formed business enterprise will account for 35% of RCOM's revenue. It may be noted that enterprise business is a high margin venture as companies shell out higher amounts for managed services. It is also an important source of revenue for telecom players which have been bleeding of late.