New vistas

Mumbai, April 1: The boffins of biotechnology have latched on to a new buzzword: out-licensing.

After Glenmark walked down that unpaved road last year, Biocon, the Rs 687.49-crore Bangalore-based bio-pharmaceutical company, is ready to swarm into that space.

“We have a pipeline of 12 molecules that could be out-licensed over a period of 12 to 24 months,” said Biocon chairman and managing director Kiran Mazumdar-Shaw.

The company is in an advanced stage of discussion on three molecules. It is keen to outlicense an oral insulin molecule called IN105 for type II diabetes and a potential drug for congestive heart failure.

The others range from a monoclonal antibody for rheumatoid arthritis to a squamous cell antibody for non-Hodgkins lymphoma.

Biotechnology firms usually start pioneering research on a molecule and then find the moneybags who can carry forward that research. And that’s where out-licensing comes in.

Biocon’s out-licensing announcement has grabbed the attention of several pharmaceutical houses in the country. “Big pharmaceutical companies are on the lookout to in-license new molecules and a number of generic companies are interested in generic biologics. We have already announced a few of these licensing deals like insulin to Bayer for the China market, Biomab EGFR to Firozsons in Pakistan and another deal for insulin to an undisclosed partner in the US market,” Mazumdar-Shaw told The Telegraph.

Last October, Glenmark outlicensed a molecule for type II diabetes treatment to Merck KgaA. The out-licensing deal has served as a good ballast for Glenmark’s valuation on the stock markets. The stock has more than doubled since last October from around Rs 300 to Rs 613.75 on Thursday on the Bombay Stock Exchange.

Pharmaceutical companies have been facing pressure on their margins but still expect robust growth. “The pharmaceuticals sector should continue to post good growth in the coming fiscal. The industry has managed to achieve 20 to 25 per cent compounded annual growth rate (CAGR) in the past and this will continue next year. Companies might face some pricing issues which may put their margins under pressure,” said an analyst at Karvy Stock Broking Ltd.

“We have faced pricing pressure in our generics products but have countered that with our services business as well as our formulations based business. In the short term, our generics portfolio will drive growth but in the medium term some of our new molecules will rev up growth for us,” said Mazumdar-Shaw.

The company spends approximately Rs 75 crore on R&D activities. “Biocon has demonstrated good growth despite our heavy investment in R&D. We believe that we will demonstrate good growth even this time,” she added.

Mazumdar-Shaw is a little disappointed that the government has not done enough to deal with the concerns of the industry. “Although tax breaks for R&D have already been initiated, there is a need for better financial understanding of what comprises intellectual assets and the need to equate intellectual assets with capital assets. Once that is achieved we can treat R&D as capital investments rather than expenditure. This will have a very positive impact on profit and loss for innovation-led companies in the knowledge sector,” she said.