Actavis announced earlier this week that it had finally tied up an agreement with the Polish company Bioton, having first mooted it in September 2010. According to the press release, Actavis will pay Bioton €22.25m immediately and a further €33.25m in instalments, if certain defined milestones are met with regard to the registration of recombinant human insulin in the developed markets. The two companies will form a joint venture, presumably owned 50:50 (although this wasn’t explicitly stated), within which Bioton will be responsible for the development and manufacturing of both insulin and insulin analogues, while Actavis will do the marketing in certain defined territories (namely, the US, EU and non-EU Europe, which means places like Switzerland). In Poland, both companies will market the products under their own brands, since this is the only location in which Bioton has its own sales force. Costs and profits will both be shared on a 50:50 basis. In addition, Actavis and Bioton have a Memorandum of Understanding with regard to the right to sell insulins in a further 24 markets in Asia Pacific and MENA, which include Turkey and Australia. Should this turn into a formal agreement, Actavis will pay Bioton a further €1.9m, of which €1m will be due on signing. Sales of recombinant insulin in these additional territories are expected to start at the end of this year, so our assumption is that they are mainly markets where Bioton’s Singapore-based subsidiary, SciGen, either has, or is obtaining, registrations.
According to Actavis, it expects to generate sales of €1.5bn over the first seven years of its agreement with Bioton. This appears quite a bold prediction given that even Bioton’s recombinant human insulin is not, as far as we are aware, very close to EU registration (and it’s not clear that Bioton has the capability to deal with the EMA in any case – Actavis will presumably have to do this part) and any analogues will follow later on. In addition, the insulin market in Europe (or the US) is likely to be extremely difficult to penetrate. Although Bioton has what it believes is a very good pen delivery device, existing patients are likely to be reluctant to switch from the pen that they have at present and the giants of the European insulin market, Novo Nordisk and sanofi (or Novo and Lilly in the US) are likely to cut their prices rather than allow any market share to go to a new entrant. Actavis and Bioton should benefit from being able to produce safety data from the large pool of patients that is already treated with Bioton’s insulin but even so, getting specialists actually to write prescriptions for a Bioton/Actavis product is going to require a big marketing effort and a lot of time. Fortunately, all of this is clearly reflected in the low up-front payment that Actavis is making, which really only represents the worth of the product in the emerging markets, where sales are either already being made or else will be shortly.
The jv with Bioton is Actavis’ first meaningful step into biosimilars and is important because it inches the company along the road towards greater differentiation. Actavis’s CEO, Claudio Albrecht, has strongly-held and frequently-expressed views about the generics industry as a whole, namely, that it is doomed in its current state and needs to shift its focus to brands (or products with branded qualities). Unfortunately, the company that he is running remains very much commodity generic based and in the absence of a balance sheet that would allow large acquisitions, he is stuck with a step-by-step approach to transformation. Not that Actavis is totally lacking in differentiated products. It has an attractive controlled drug business in the US, recently augmented via a marketing deal for the patented morphine/oxycodone product, MoxDuo, and an injectables operation in Europe. It also has brand products bought from Roche, an expanding range of OTC drugs and an R&D pipeline that includes some first-to-file opportunities in the US and a number of controlled-release or otherwise hard-to-make products. However, a quick look at its launches in Europe over the last 12 months (via its development arm, Medis) shows that while it continues to do very well in terms of being first-to-market, the products that are coming through remain very much at the commodity end of the scale. Obviously, Medis needs to be able to offer all the important products coming off patent because that is its business model, but it is not immediately clear how Actavis is going to turn itself into something more akin to a specialty pharma company as things stand at present, with or without Bioton.
Posted on 3rd February 2012