Pfizer Inc will sell insulin made by India's Biocon Ltd in a deal that deepens the world's largest drugmaker's push into biosimilar medicines and diabetes.
Pfizer will pay Biocon $200 million up front under the agreement announced by the companies on Monday. Biocon will also be eligible to receive additional development and regulatory milestone payments of up to $150 million plus payments related to sales of these medicines.
Pfizer stands to gain greater access to the $14 billion market for insulins used to control diabetes ahead of 2015, when a number of products are expected to lose patent protection.
It also marks one of the most significant deals for Pfizer as the company seeks a foothold in selling similar versions of biotechnology medicines.
Shares in Denmark's Novo Nordisk, the world's biggest insulin maker, were down 5 percent.
Pfizer will have exclusive rights to commercialize Biocon's drugs globally with certain exceptions, such as Germany, India and Malaysia, where Biocon will have co-exclusive rights.
The products will be versions of recombinant insulins sold now under brand names Novolin by Novo Nordisk and Humulin by Eli Lilly; as well as glargine, which is sold now as Lantus by Sanofi-Aventis; aspart, sold by Novo as Novolog; and lispro, sold by Lilly as Humulog.
Pfizer's "participation in this market does raise the bar for the major producers of insulin over the long-term," Leerink Swann analyst Seamus Fernandez said in a research note.
Biocon's recombinant, or genetically engineered, insulin products are already approved in 27 countries in developing markets.
Pfizer expects to gain approval for the recombinant insulins in Europe in 2012 and in the United States as soon as 2015, said David Simmons, president of Pfizer's established products business unit. Approvals for the other products will come later in most markets.
"We believe we will be first to market in most if not all the countries worldwide for each of the products in the portfolio," Simmons said in an interview.
Late-stage clinical trials are ongoing for the products. Simmons said Pfizer would offer the insulins at a lower price than the brands, but declined to specify the discount.
Emerging markets are a priority for Western drug companies such as Pfizer, as they face slowing sales in their home markets. Cheap off-patent drugs that can be sold in high volumes under a multinational brand are an attractive market opportunity.
Biocon will remain responsible for the clinical development, manufacture and supply for the biosimilar insulin products. It plans to invest $300 million over three years starting in 2011 to expand capacity to produce biosimilar drugs, its finance chief said.
Biocon, which was set up by Kiran Mazumdar-Shaw in her garage in 1978 and which the market values at about $1.8 billion, has seen its stock skyrocket 46 percent this year, outpacing the benchmark index's 15.5 percent rise in the period.
Pfizer's shares were down about 6 cents at $17.68 in midday trading on the New York Stock Exchange.