Biocon Case

Biocon is an Indian corporation that was incorporated in November 1978 as a joint venture
between Biocon of Ireland and Dr. Mazumdar-Shaw and they were the first Indian company to
manufacture and export their products to the United States and primarily determined as enzyme
manufacture and developed expertise in the various fermentation process. Later in 1996, Biocon
decided to enter a new business in biopharmaceuticals. The first step of Biocon in developing the
business in the biopharmaceutical market was manufacturing generic drugs led Biocon to statins.
Biocon was succeeded with small molecules and was ready to move to large molecules, so they
started to investigate the insulin market and were successful in producing the insulin.
Nevertheless, despite the success with insulin and statin, Biocon’s goal was the development of
proprietary drugs. Biocon had grown from the industrial enzyme company to a fully integrated
biotech company and the boldest move in Biocon’s evolution to a fully integrated biotech
company had been developing a proprietary drug Biomab for head and neck cancer.
1) Analyze the environment.
a. Customer: Who are the customers and what are their needs?
Due to the lack of experience and knowledge of new technology and selling the oncology
drugs, Biocon entered into a joint venture with the Cuban company CIAMB (commercial branch
of the Center of Molecular Immunology) who had been working for several years on oncology
drugs has allowed creating a truly unique patented product Biomab. Nowadays Cancer affected
almost all populations in the world young, old, women, men, children, and according to the
World Health Organization 70% of all cancer deaths occurred in low- and middle-income
countries where the resources and treatment were limited. So, firstly Biocon was planning to
manufacture the product for the Indian market and if possible, for the entire world. The target
market for Biomab would be India and why they decided to focus on head and neck cancer,
because of the high incidents in India(nearly 21% of cases and 27% of deaths worldwide from
head and neck cancer occurred in India). Indian’s health care system is divided into private and
public sectors where 20% of medical services provided free through the government and the
remaining 80% of services are provided by private medical organizations. Biocon had forecasted
that 95% of patients would be self-paying due to the high cost of cancer drugs. However, Biocon
expects that the potential market will increase by targeting the government and insurance
companies and charging a lower price for the cancer drug. Biocon expects that users of the
Biomab will be doctors who introduce this drug to their patients. People who will use this cancer
drug needs that the drug will be available in the price range for them and has shown positive
results in their treatment. For every person who is facing this dangerous illness, each cancer drug
is the hope for life. Moreover, Biomab is a class of biological therapy drugs that were developed
specifically to block the epidermal growth factor receptor responsible for the spread of cancer
cells.
b. Competition: Who are the competitors and how do they compare?
The main competitor of Biomab developed by Biocon is the Erbitux which was developed by
ImClone Systems in the U.S. and approved by the USFDA in February 2004 for colorectal
cancer and already available in 53 countries including India which was introduced in April 2006.
Moreover, Erbitux received approval from the European Agency (February 2006) and UFSDA
(March 2006) to use the drug in the treatment of head and neck cancer. Erbitux got their
approval on basis of the phase-3 study on the 400 patients. Erbitux and Biomab are the cancer
drugs that compete for the Indian market as both presented for the treatment of head and neck
cancer. Erbitux has the advantage of three years of market experience in utilizing the drug for
the treatment of colorectal cancer and strong evidence from its clinical experiments of validity
for head and neck cancer. Nevertheless, Biomab has more advantages over its competitor. First,
the results of the phase-2 clinical experiments had shown 100% response in patients who used
this drug in combination with radio and chemotherapy, second Biomab didn’t have adverse
reactions on the skin, unlike Erbitux and finally, Biocon is the first Indian company who wants
to produce the proprietary cancer drug for Indian people. However, Biomab has only 2 phase
clinical results while Erbitux has 3 phase clinical results and Biomab had still not proven itself
that could be used against the company by their competitors.
c. Company: In light of its history, is Biocon well-positioned to be successful with
this drug?
From my point of view, Biocon could position yourself to be successful with this drug as despite
that has only phase-2 results, while Erbitux has strong evidence of phase-3 results, Biomab
phase-2 results were positive rather than Erbitux phase-2 results. Moreover, considering that
Biocon doesn’t have any experience in selling cancer drugs and experience in the oncology
market developed Biomab and got the positive clinical trial 100% for chemo and radiotherapy in
combination with this drug. Of course, it is huge progress for the company who were positioned
as enzyme industry and without any experience had gone the way to the biotech industry. The
phase-3 trials involve administering a drug to larger groups of people (1000 people) to confirm
its effectiveness however the phase-2 trials are also administered to a large group of people (100
people) to confirm its effectiveness and evaluate its safety and Biocon has already passed this
phase successfully. Biomab was successful in the phase-2 trials based on 6 dose treatment cycle,
while Erbitux trials were based on an indefinite treatment plan.
2) Based on the above analysis, should Biocon release the Biomab immediately? If yes,
what marketing mix element decisions (e.g., place/distribution, promotion/communication,
pricing) decisions should follow this? To support your answer, run a break-even analysis
(based on your recommended marketing mix elements) with the information provided in
the case.
As the Biocon has already passed phase-2 trial successfully and results were sufficiently
compelling for Indian oncologists and consider adopting the drug and ready consider adopting
the drug and argued for launching Biomab immediately. Biocon is an Indian company and
should distribute the cancer drug on the Indian market and sold through the traditional pharma
channel (Biocon – CFA – wholesaler – retail/hospital pharmacy – doctor). Biomab, unlike other
drugs, will be refrigerated all the time using its refrigerated packaging and handled carefully, so
local pharmacy adds very little value and will support our sales organizations and significant
economic benefit to customers. Biocon teams expect that Erbitux to be priced near the
international price level 4000 $– 5000$ per dose, while Biomab to be priced at 1000$ per dose.
Biocon will have the advantage in determining the price of Biomab in contrast with Erbitux
using the two-tier price structure which is called ‘Indian brand discount” which is common
practice for the local market. Further, Biocon could support the patients by providing a detailed
explanation of their product through the website, consumer helplines, sales force, and direct to
consumer advertising, as doctors spend a lot of time explaining to patients and their families
about the product and the usage of them and of course it will depend on how Biocon will provide
the information and to get the credibility it should be detailed. Moreover, due to the successful
phase-2 trial results based on 6 dose treatment cycle, the doctors could have a clear conversation
with their patients regarding determining the cost of the treatment.
Break-even analysis:
Break-even Q = Fixed cost/(Price – Variable cost)
Revenue = Price*Quantity = 1000
Quantity = 1, price = 1000$

Out of revenue:    
COGS   25%
R&D   15%
Marketing cost 25% - 30% 30%

FC = 25 000 000 + (1000*45%) = 25 000 000 + 450 = 25 000 450

VC = 1000 * 25% = 250
Price = 1000
Break-even Q = 25 000 450/(1000-250) = 33 334 units