Memorandum

Biocon and Mylan enter into exclusive strategic collaboration for Biocon's biosimilar insulin glargine, lispro, and aspart – February 14, 2013

Executive Highlights

  • Biocon and Mylan have entered in an exclusive strategic collaboration for the global development and commercialization of Biocon's glargine, lispro, and aspart biosimilar insulins.
  • The companies will share development, capital, and other costs (including trials) to bring the products to market. Mylan will have exclusive commercialization rights in the US, Canada, Australia, New Zealand, and Europe through a profit sharing arrangement with Biocon.
  • Biocon’s biosimilar glargine is slated to start a global phase 3 study in 2013, and filing is expected in 2015. Biocon’s biosimilar lispro and aspart are still preclinical.

Biocon and Mylan just announced an exclusive strategic collaboration for the global development and commercialization of Biocon's glargine, lispro, and aspart biosimilar insulins. Under the agreement's terms, Mylan and Biocon will share development, capital and certain other costs (including the cost of trials) to bring the products to market. Mylan will have exclusive commercialization rights in the US, Europe, Canada, Australia, and New Zealand through a profit sharing arrangement with Biocon (no further details provided). Mylan will have co-exclusive commercialization rights with Biocon in certain other markets around the world (we presume India and other markets where Biocon has already established a foothold). Financials were not disclosed. The whole biosimilar continuum is not for the faint of heart, and we will certainly be watching Mylan and Biocon very closely.

At JP Morgan 2013 in early January, management mentioned that Biocon is currently in talks with US and EU regulators to hopefully start the global phase 3 study for biosimilar glargine in 2013. Regulatory filing of the compound is expected in 2015. (Biocon's F3Q13 call a few weeks later did not provide any update on the compound’s status.) Biosimilar lispro and aspart were still preclinical as of the last update in Biocon's F4Q12 call in April 2012; at that time, both were expected to enter phase 1 “shortly” (this timeline is probably fairly aspirational). As a reminder, the patent for Sanofi’s Lantus (glargine) expires in 2015, the patent for Lilly’s Humalog (lispro) expires in 2013, and the patent for Novo Nordisk’s Novolog (aspart) expires in 2017.

We think this deal makes strategic sense for both Biocon and Mylan – in short, Mylan brings tremendous scale (18,000 employees, more than 1, 100 drugs, and distribution in 150 countries) and regulatory and commercialization capabilities in the US and Europe. Meanwhile, Biocon brings diabetes R&D experience and growing experience in manufacturing biologics. The companies have an existing partnership (2009) for a wide array of oncology and immunology biosimilars (details below) – the latest-stage product in this non-insulin portfolio is biosimilar trastuzumab (Herceptin), which has initiated a global phase 3 trial after successful completion of a global phase 1 study.

It will be interesting to watch who comes to market first with a biosimilar glargine and when since BI and Lilly are also pursuing this route via their insulin glargine candidate LY2963016. During Lilly’s 4Q12 call, management stated it could potentially submit the compound for regulatory review in 2013. Management’s remarks from that call are pasted below – the clear emphasis was on Lilly’s competitive advantage over others in the biosimilar glargine game, mainly reflecting manufacturing scale and experience. We continue believe that manufacturing represents a significant barrier to entry for the US in particular, particularly given traditionally challenging manufacturing requirements in insulin in particular.

  • Mylan and Biocon previously signed an agreement in 2009 to develop, manufacture, and commercialize high value biosimilars. This portfolio of biologics ($34 billion in total sales) includes biosimilar bevacizumab (Roche/Genentech’s Avastin for various cancers), trastuzumab (Roche/Genentech’s Herceptin for breast cancer), pegfilgrastim (Amgen’s Neulasta for chemotherapy), adalimumab (Janssen’s Remicade for Crohn’s disease), and etanercept (Amgen/Pfizer’s Enbrel for rheumatoid arthritis). The latest-stage product in this non- insulin portfolio is biosimilar trastuzumab (Herceptin), which has initiated a global phase 3 trial after successful completion of a global phase 1 study. This 2009 non-insulin biologics agreement gave Mylan exclusive commercialization rights in “all regulated markets,” broader than the new insulin collaboration (see above).
  • Mylan brings serious scale to the partnership – the company has a portfolio of more than 1,100 generic pharmaceuticals and several brand medications. It also offers a wide range of antiretroviral therapies, which more than one-third of HIV/AIDS patients in developing countries use. The company’s products are marketed in approximately 150 countries and territories, and it has a workforce of over 18,000 employees.
  • As a reminder, Biocon's biosimilar glargine established bioequivalence to Sanofi's glargine in a phase 1 trial reported in F1Q13. More detail can be found in our report at http://www.closeconcerns.com/knowledgebase/r/db8093e8.
  • In its 4Q12 call, Lilly management stated that it could potentially submit its/BI’s insulin glargine candidate LY2963016 for regulatory review in 2013. Lilly does not plan on disclosing data at this time. This candidate is currently in two active trials, according to ClinicalTrials.gov. A phase 1 trial has a final study completion date of February 2013 (Identifier: NCT01688635), and a phase 3 trial has a final study completion date of April 2013 (Identifier: NCT01421147). Lilly studied LY2963016 in one other phase 3 study (Identifier: NCT01421459) that compared LY2963016 to Lantus in patients with type 2 diabetes, and this trial completed in September 2012.
  • After Lantus loses its patent exclusivity in 2015, Lilly expects that Lantus will retain one-third of the market, with biosimilar glargine versions making up another third of the market. Presumably other “next-gen” insulins combined with human long-acting insulin would take the balance. Lilly management stated during the 4Q12 call that Lilly’s current insulin manufacturing infrastructure, commercial infrastructure, and device presence give it a competitive advantage over other companies developing biosimilar glargine. Lilly has always had impressive insulin manufacturing capacity, and on November 1 announced an 80,000 square foot expansion in Indianapolis (A $140 million investment) to create insulin cartridges.
  • Biosimilars overall are expected to grow from $1 billion in global pharma spending in 2011 to $5 billion by 2016 (IMS Market Prognosis, May 2012; Biocon’s February 2013 investor presentation). For Biocon specifically, biosimilars (insulins and monoclonal antibodies) represent 5% of its ~$450 million overall business ($23 million) in FY12. By 2015, this is expected to triple to $70 million, 10% of its estimated $700 million business. Come 2018, the company expects biosimilar sales will triple again, totaling $200 million, or 20% of its expected $1 billion+ business.
  • This Biocon/Mylan announcement comes just a few months following the Biocon/BMS option agreement for IN-105, Biocon's oral insulin. More details can befound in our initial report on the agreement at http://www.closeconcerns.com/knowledgebase/r/e8cf905e and in our Biocon F3Q13 report at http://www.closeconcerns.com/knowledgebase/r/4483ffa4.

-- by Adam Brown and Kelly Close