2008

Kaustubh V. Gholap

Chennai Business School

6/17/2008

Business Strategy

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PROJECT REPORT

On

Business Strategy & Tactics

2008-09

Unit 4 A, Western Industrial Estate

Opp. SEEPZ, MIDC, Marol,

Andheri (E) 400 093

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Understanding Business Strategy of

Biocon Limited

Name of the Student : Kaustubh Vasant Gholap

Name of the Guide: Prof. Shrinivasan

Date: 05/04/2008

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Declaration

Date: -

17/06/2008

I am very glad that Prof. Shrinivasan had given us the opportunity to do the

survey about the Business Strategies of Biocon limited India according to Indian

Pharma Industry. I am also thankful to Mr. Y. B. Bhide, Associate Dean, Chennai

Business School and Miss. Pallavi Prabhu for their timely guidance for the

completion of this project. Without their encouragement and appreciation it will

not be possible to complete this project.

This Project is a new approach towards the changes in Pharma Development in

Indian Pharma Industry especially after the liberalization and in context with the

rapid increase in the GDP of India. I am fortunate that I am learning in Mumbai

where you can easily found a culture mix and various attitudes and instant reply

about the market Trends. This study revealed the intrinsic point about the major

changes in Pharma Sector with help of booming Indian Economy.

The data collected here is truly original and it is only used for the analysis and

interpretation of this project.

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Index

Sr. no. Particulars Page number

1 Introduction To Biocon

Limited

5

2 Vision & Mission 7

3 Corporate Structure 10

4 Company History 11

5 Major Events 12

6 Awards 13

7 Drug Developments 16

8 Business Strategies 19

9 CSR 28

10. Products And Services by

Biocon

30

11. Annexure 31

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“Our ability to continuously scale new heights across the

biopharmaceutical value chain enables us to realise the promise of future

therapeutics.”

- Kiran Mazumdar-Shaw,

Chairman & Managing Director

Biocon is a fully integrated healthcare company that delivers innovative biopharmaceutical

solutions. From discovery to development and commericalisation, we have the defining science,

cost-effective drug development capabilities and significant manufacturing capacity to move

ideas to market.

Leveraging India’s globally competitive cost base and exceptional scientific people resource, we

are advancing our in-house R&D programs, while also providing custom and clinical research

services to international pharmaceutical and biotechnology majors through our subsidiary

companies, Syngene and Clinigene.

Biocon has rapidly developed a robust drug pipeline, led by monoclonal antibodies and several

other molecules at exciting stages in the biopharmaceutical value chain. With the successful

commercial launch of our first anti-cancer drug and several promising discovery partnerships in

the clinic, we remain committed to scaling new heights in frontier science and achieving new

milestones in affordable medicine.

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Vision & Mission :

To be an integrated biotechnology enterprise of global distinction.

Essential to this mission is excellence in:

- Intellectual asset creation through discovery, research and development

- State-of-the-art manufacturing capabilities

- Internationally benchmarked quality and regulatory systems

- New medical insight through disease specific clinical research

- Customer relationship through outstanding products and services

- Human resource development through training, mentoring and empowering

- Management of research and business partnerships

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Corporate Structure:-

The Biocon Group's corporate structure comprises of Biocon Limited (the Holding Company), its two

subsidiaries, Syngene International Limited and Clinigene International Limited and its joint venture

company Biocon Biopharmaceuticals Private Limited.

Syngene

Syngene is a 99.99% owned subsidiary of Biocon. It was incorporated on November 18, 1993.

By way of a restructuring, 99.9% of the shares in Syngene held by Kiran Mazumdar Shaw, ICICI

and a few other scientists were transferred to Biocon in consideration for the issue of shares by

Biocon to the shareholders of Syngene on March 31, 2002. The paid-up capital of Syngene is Rs.

28,750,000.

Clinigene

Clinigene is a 100% owned subsidiary of Biocon Limited. It was incorporated on August 4, 2000

with an authorised capital of Rs 5,000,000. The paid-up capital of Clinigene is

Rs. 500,000.

Biocon Biopharmaceuticals Private Limited (BBPL)

BBPL is a Joint Venture company of Biocon in collaboration with CIMAB SA, Cuba. The equity

participation by Biocon is 51%. The Joint Venture agreement was entered on February 22, 2002.

The paid-up capital of BBPL is Rs. 8,800,000.

Biocon Limited

Syngene International

Clinigene International

Biocon Biopharmaceuti

cals

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Company History:-

History and Major Events

Biocon was incorporated as Biocon India Private Limited on November 29, 1978 under the

Companies Act. The word 'Private' was deleted from our name under the provisions of Section

43A(2) of the Companies Act with effect from July 1, 1995. Thereafter Biocon was converted to

a private limited company under the provisions of Section 43(2A) of the Companies Act with

effect from December 21, 2000. It was reconverted into a public limited company on June 18,

2001.

The name of Biocon was changed from Biocon India Limited to Biocon Limited and a fresh

certificate of incorporation consequent on change of name was issued by the ROC on

November 19, 2003.

Main Objects of the Company

Our main objects as contained in our Memorandum of Association are:

- To carry on the business of manufacturing, processing, distilling, compounding, formulating,

acquiring, buying, selling, importing, exporting and dealing in all enzyme products from

animal, microbial, plant sources, products from fish sources, vegetable and herb extracts,

agricultural products including cattle feed, and all chemicals heavy or fine, organic, inorganic,

biological or any other formulations, derivatives and compounds thereof from mineral origin

or from other chemicals or from by- products or waste products of other trades and industries

and other branded preparations and compounds, derivatives and formulations thereof and

consumers products based thereon, pharmaceutical specialities, surgical specialities,

cosmetics, germicides, detergents and acids.

- To establish and run an extraction plant for the extraction of oils, colouring matters, crude drugs and other extracts from seeds, barks, cakes, flowers, plants in all forms for the

production of natural colourants, alkaloids, steroids, other drugs and medicines and other products.

- To cultivate, crush, utilise, buy sell and deal in seeds, substances, and plants of every

description.

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History and Major Events:

Year Key Events, Milestones and Achievements

1978

Nov 29, 1978 - Biocon’s Founding Day - the start of a biorevolution in India. Biocon

commenced operations as a joint venture between our promoter Ms. Kiran Mazumdar-

Shaw and Biocon Biochemicals Limited, an Ireland based multinational. Biocon began

the manufacture and export of Papain, a plant enzyme, and Isinglass, a marine

hydrocolloid, which are key products for the brewing industry

1979 Biocon was the first Indian company to manufacture and export enzymes to USA

and Europe

1982 BCZ ( BioChemizyme India) was incorporated to focus on research and

development in relation to enzymes

1984 Biocon began focussing on research and development, to develop novel enzymes

for the Biocon group worldwide through solid-state fermentation process technology

referred to as "koji technology".

1989 HLX (Helix Biotech Limited) was incorporated as a pharmaceutical biotechnology

company, which later diversified into pharmaceutical bulk activities.

1989 Biocon along with Unit Trust of India/Technology Development and Investment

Corporation of India (UTI/TDICI), Biocon Biochemicals Limited, Ireland and others

invested in BCZ.

1989 Unilever plc. acquired Biocon Biochemicals Ltd. in Ireland and merged it with its

subsidiary, Quest International

1989 Biocon was the first Indian biotech company to receive US funding for proprietary

technologies

1990 Biocon scaled up its in-house research programme, based on a proprietary solid

substrate fermentation technology, from pilot to plant level

1992 UTI/TDICI transferred their entire shareholding in BCZ to Biocon Limited, Ireland.

BCZ commenced operations

1993 Biocon received ISO 9001 accreditation from RWTUV, Germany

1993 Syngene was incorporated as a CRO to conduct research for third party clients in

the area of drug discovery and development. Syngene's skill set in the areas of

molecular biology and synthetic chemistry are complementary to our expertise in the

areas of fermentation and microbial genetics.

1995 Unilever acquired 50% of the shares in BCZ by acquiring the entire shareholding of

Biocon Biochemicals Limited, Ireland and Biocon Limited, Ireland. Unilever also acquired

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shares in Biocon from Biocon Biochemicals Limited, Ireland and Biocon Limited, Ireland

and others

1995 BQIL (Biocon Quest India Limited) was established with Biocon and Unilever

acquiring around 50% stake each. BQIL commenced manufacturing operations from

August 1996

1996 The commercial success of Biocon's proprietary fermentation plant lead to a 3-fold

expansion

1996 Biocon leveraged its technology platform to enter biopharmaceuticals and statins

1997 Biocon spearheaded initiatives in human healthcare through a dedicated

manufacturing facility

1998 HLX commenced manufacturing operations

1999 Glentec International acquired the entire shareholding of Unilever in BCZ, BQIL

and Biocon.

2000 Biocon acquired the entire shareholding of BCZ, BQIL & HLX from Glentec

International, Ms. Kiran Mazumdar-Shaw and others in exchange for issue of shares by

Biocon. Biocon became an independent entity Glentec International acquired a majority

stake (approx 64%) in Syngene as part of a fresh issue of shares.

2000 ICICI Ventures and its affiliate funds were inducted as shareholders of Biocon by

way of subscription to 15.35% of the share capital of Biocon.

2000 Biocon's proprietary bioreactor christened PlafractorTM based on solid matrix

fermentation received a U.S. patent. Biocon commissioned its first fully automated

submerged fermentation plant to produce specialty pharmaceuticals

2000 Clinigene was incorporated to conduct longitudinal clinical studies in select disease

segments as a wholly owned subsidiary of Biocon.

2001 As part of a court based restructuring, BCZ, BQIL and HLX were amalgamated into

Biocon, with effect from April 1, 1999.Biocon's Lovastatin facility was approved by the

US FDA

2001 Biocon's proprietary bioreactor, PlaFractor™ is granted a US 2001 and world-wide

patent

2002 Biocon acquired 99.99% of Syngene from its other shareholders, including ICICI

Venture and its affiliate funds, which divested their entire stake in Syngene in exchange

for issue of shares by Biocon. Syngene was made a 99.99% subsidiary of Biocon Limited.

2002 Clinigene's clinical laboratory was the first in India to receive CAP accreditation

2003 BBPL(Biocon Biopharmaceuticals Private Limited) was incorporated to

manufacture and market a select range of biotechnology based life saving drugs as a

51:49 joint venture with CIMAB (Cuban Centre of Molecular Immunology) and Biocon

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2003 ICICI Ventures along with its affiliate funds divested its shareholder interests in

Biocon in favour of other private equity funds, being AIG AOF, a wholly owned

subsidiary of AIG Asian Opportunity Fund L.P. and IVF and also to the Welfare Trust.

2004 Biocon went for an IPO to raise Rs 300 crores to fund its huge capital expansion

plans.

2004 Biocon's IPO was oversubscribed 32 times.

2004 Biocon created a buzz in the stock market in March 2004 with its hugely successful

IPO. Biocon closed Day One of listing on the bourses with a market value of $ 1.11

billion, to become only the second Indian company to cross the $ 1 billion mark on the

day of listing.

2004 Biocon Limited, and North Carolina's Nobex Corporation announced a research

collaboration to jointly develop an oral Insulin product for the treatment of Diabetes on

a global scale.

2004 Syngene inaugurated its new research centre at Biocon's new facility Biocon Park.

2004 Biocon Limited, announced the launch of INSUGEN®, the new generation bio-

insulin, manufactured in Asia's largest human insulin plant.

2004 Biocon Limited and Vaccinex, Inc. announced a broad strategic partnership to

discover and co-develop at least four therapeutic antibody products.

2004 Biocon Foundation was established with the aim of identifying and implementing

projects that will impact the social and economic scenario in the country. Biocon

Foundation launched Arogya Raksha Yojana, a unique micro-health insurance scheme

for rural India in association with Narayana Hrudayalaya.

2005 Biocon Limited, signed a commercial agreement for supply of insulin API in Asia,

Africa and the Middle East.

2006 Biocon inaugurated Biocon Biopharmaceuticals, India's largest multi-product

Biologics facility at Biocon Park

2006 Biocon inaugurated Biocon Park, India's largest integrated biotechnology hub,

comprising an integrated cluster of research laboratories and manufacturing facilities

spread across 90 acres in KIADB (Karnataka Industrial Areas Development Board)

industrial estate.

2006 Biocon announced a licensing agreement with Bayer HealthCare (BHC) for the

exclusive marketing and trademark rights for INSUGEN® for the Chinese market.

2006 Syngene and Innate Pharmaceuticals AB, Umea, Sweden concluded a cooperation

agreement to jointly develop, manufacture and market virulence blockers to counteract

bacterial diarrhoeal disease.

2006 Biocon launched India's first anti-cancer drug BIOMAb EGFR™.

2006 Clinigene PRIDE study reaffirmed Insugen safety and efficacy. Clinigene completed

India's largest documented safety study on insulin vials

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2007 Biocon and Abu Dhabi based pharmaceutical company Neopharma sign an MOU to

establish a JV to manufacture and market a range of biopharmaceuticals for the GCC

countries (Gulf Cooperation Council).

2007 Biocon grants exclusive license to Ferozsons Laboratories Limited for marketing

BIOMAb EGFR™ in Pakistan.

2007 Biocon and Bentley Announce Approval and Expansion of Bentley's Nasulin Phase

II Studies in India. Biocon's Clinigene to conduct clinical trials

2007 Biocon announces the launch of its Nephrology Division and a comprehensive

portfolio of renal therapy products.

2007 Syngene enters into a research partnership with Bristol-Myers Squibb and

completes the ground breaking ceremony of new research facility at Biocon Park.

2007 Biocon signs Memorandum of Understanding with Deakin University, Australia. To

establish Deakin Research Institute in Bangalore

2007 Biocon divests enzymes division for USD 115 million to Novozymes. Biocon

business portfolio to focus on biopharmaceuticals

2007 Biocon and Abraxis BioScience, announce an agreement wherein Abraxis will

license the right to develop a biosimilar version of G-CSF (Granulocyte-Colony

Stimulating Factor) in North America and the European Union.

2007 Biocon and Neopharma sign an MOU to establish Neobiocon, a joint venture

company in Dubai's biotechnology and research park, Dubiotech.

2007 Biocon and Abraxis BioScience,Inc announce a licensing agreement for the

commercialization of ABRAXANE® (paclitaxel protein-bound particles for injectable

suspension) (albumin-bound) in India. Under the terms of the agreement, Biocon will

also have the right to market ABRAXANE in Pakistan, Bangladesh, Sri Lanka, United Arab

Emirates, Saudi Arabia, Kuwait and certain other Persian Gulf countries.

2007 Since its establishment, Biocon Foundation opened four Arogya Raksha Yojana

primary healthcare clinics. Biocon Foundation established a cancer hospital along with

Dr. Devi Shetty of Narayana Hrudayalaya

2008 Biocon acquires a 70% stake in German pharmaceutical company, AxiCorp GmbH

for a consideration of €30 Million

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AWARDS

Kiran Mazumdar-Shaw has received several awards on behalf of Biocon and in her personal

capacity as one of India 's leading business entrepreneurs.

Biocon:

2007

Syngene receives "BioServices Company of the Year", BioSpectrum Awards

Biocon's BIOMAb EGFR™ wins "Product of the Year",

BioSpectrum Awards

2006

Best IT User Award in the Pharmaceutical Sector, NASSCOM

2004

India's first and No. 1 biotech company with a global ranking of 16* (Source:

Biospectrum July 2004)

Biocon in India's top 5 Life Sciences companies (at close

of trade as on July 30, 2004)

Best Reinvention of HR Function Award, Indira Group, Mumbai

Best Employer Of India Award, Hewitt

2003

Bio-Business Award for bio-entrepreneurship, Rabo India

Express Pharma Pulse Award for excellence in the

pharmaceutical industry

2001

Biotech Product, Process Development and Commercialisation Award, Department of

Biotechnology, Ministry of Science and Technology, Government of India

2000

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Technology Pioneer Recognition, World Economic Forum

1985

Export Performance Award, Karnataka State Financial

Corporation (KSFC)

National Award for Best Small Industry, Government of India

Kiran Mazumdar-Shaw:

2007

Honoured with the, 'Veuve Clicquot Initiative For Economic Development For Asia'

award

Honorary Doctor of Technology, University of Abertay, Dundee ( UK )

2005

Padmabhushan Award , one of India 's highest civilian honours, from the President of

India, Dr. APJ Abdul Kalam

Honorary Degree of Doctor of Science (Honoris Causa) from Indian Institute of

Technology, Roorkee

The Indian Chamber of Commerce Lifetime Achievement Award

Honorary Doctorate from Manipal Academy of Higher Education (MAHE), in recognition of

outstanding achievements in biotechnology and industrial enzymes

Rotary Award for Corporate Citizenship

Business Leader of the Year Award - Biotechnology,

Chemtech-Pharma Bio Awards

2004

Honorary Doctorate of Science from Ballarat University, in recognition of pre-eminent

contribution to the field of biotechnology

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Business Woman Of The Year Award, The Economic Times

2003

Alumni High Achiever Award, Australian Alumni Association

2002

Karnataka Rajyotsava Award for pioneering biotechnology in India, the Government of

Karnataka

Best Entrepreneur: Healthcare & Life Sciences Award,

Ernst & Young

Sir M. Visvesvaraya Memorial Award for contribution

to biotechnology, Federation of Karnataka Chambers

of Commerce & Industry (FKCCI)

1999

Woman of the Year Award, International Women's

Association, Chennai

1998

Golden Jubilee Felicitation, Mount Carmel College, Bangalore

1989

Padmashri for pioneering biotechnology in India,

Government of India

1987

Outstanding Young Person Award, Jaycees India

1983

Best Small Scale Industry in Karnataka Award,Rotary Club, Karnataka

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Best Model Employer Award, Rotary Club, Karnataka

Outstanding Contribution Award, AWAKE

1982

Best Woman Entrepreneur Award, National Institute of

Marketing Management, India

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Drug Development:-

PHARMACEUTICALS Small molecule pharmaceuticals play an important role in Biocon’s R&D programs. We are

leveraging our expertise in fermentation and chemical synthesis to improve manufacturing

productivity for existing products and introduce new generics into our pipeline. Under

development are several generics for the anti-infective, oncology and immunosuppressive

domains. Additionally, we are looking to advance our expertise in API manufacture to develop

value-added capabilities in dosage formulation. BIOSIMILAR PROGRAMS

Numerous innovative Biotherapeutics have started to go off patent and are facing the

introduction of a wave of similar biological medicinal products, known as biosimilars. In the face

of escalating healthcare costs, biosimilars represent a tremendous opportunity to provide cost-

effective drugs. However, the molecular complexity of biotechnology-derived products requires

a high level of quality control over manufacturing of the active substance and the finished

product, as well as clinical safety and efficacy data for registration and evaluation.

Biocon has in progress, several biosimilar programs that are of strategic importance not only to

our future but also that of affordable medicine. Our R&D is in a unique position to capitalise on

the biosimilar opportunity due to the investments we have made in developing a high level of

expertise in characterisation and process validation. We are confi dent that we have in place the

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technical skills and regulatory knowledge to overcome the challenge of getting biosimilars such

as Insulin approved for key markets of the US and EU.

DISCOVERY MOLECULES

Our most significant R&D thrust during the year 2006-2007 has been to develop discovery

molecules. Our focus on novel biologics, primarily Monoclonal Antibodies (MAbs) have

resulted in a robust and rapidly advancing pipeline. Biocon’s most exciting programs include the

development of Oral Insulin (IN -105) in the treatment of diabetes mellitus and a new MAb

(T1h) targeted against CD6 in the treatment of rheumatoid arthritis. Other programs that are

expected to enter preclinical development later this year are BVX-10 (a novel human anti -

TNF/), BVX-20 (a novel human anti- CD20) and oral BNP – (BN-054).

IN -105 (Oral Insulin)

Subcutaneous Insulin is very effective in the treatment of diabetes but its prescription is

generally delayed due to inconvenience of needle usage and potential hypoglycemia (caused by

excess insulinisation). In contrast, Oral Insulin (ie. Insulin in tablet form) is simple and painless

to administer. Additionally, it is delivered through the portal vein, mimicking the natural

physiology of the body. If successful in the clinic, Oral Insulin could become a very important

therapy for intervention in earlier stages of diabetes.

Biocon is developing IN -105, a conjugated Insulin molecule that is orally delivered and targeted

towards the treatment of diabetes. During the last year, we have made significant progress along

its development lifecycle. Biocon’s R&D group has successfully developed a tablet for oral

delivery of IN -105, its formulation carefully selected to give consistent absorption and

glucodynamic (glucose-lowering) effect. In the clinic, this molecule has completed Phase I trials

and is expected to enter Phase II in India later this year. The encouraging results of the Phase Ia

and Ib studies represent a vital hurdle crossed in the development of IN -105 as a product. IN -

105 will enter Phase I trials in Europe towards the end of next year.

Anti-CD6 (T1h)

Rheumatoid Arthritis (RA) is a chronic, inflammatory, systemic disease in which the immune

system attacks the joints and causes its destruction. RA also impacts multiple systems in the

body, including the heart, skin, blood vessels and lungs.

The introduction of biologics that target the signaling molecules and different cell types in the

immune system has significantly advanced the treatment of RA. While joint damage is hard to

reverse, the inflammatory conditions that are present during RA have been greatly reduced,

causing an improvement in patient quality of life.

T1h is a novel humanised Monoclonal Antibody that blocks the activity of CD6, a specific

antigen found on the surface of an important cell type in the immune system, T cells. T1h

suppresses T cell proliferation in vitro and is expected to modify the course of arthritic disease in

the clinic by modulating T cell behaviour.

Biocon’s T1h has completed a Phase I study in patients with RA. The product was found to be

safe and well tolerated. A Phase II dose-range finding study, designed to evaluate the safety and

efficacy of T1h in patients with severe RA, is expected to start in 2007.

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BVX -10

Another promising target for therapeutic intervention in RA is the Tumor Necrosis Factor Alpha

TNFa, a cytokine that has multiple biologic actions, including mediation of inflammatory

responses and modulation of the immune system. There is evidence that TNFa plays a central

role in autoimmune and inflammatory diseases, contributing to the progression of both

inflammation and joint destruction.

Biocon’s BVX -10 is a novel human Monoclonal Antibody directed against TNFa. It was

developed in collaboration with our partner Vaccinex, a biotechnology company in Rochester

NY, using their unique and proprietary ActivMab platform technology. Phase I trials are

expected to start in Q1 2009.

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Business Models Strategies: -

Biocon India

iocon is India's leading integrated

biotechnology enterprise focused on the development of biopharmaceuticals. Since its

inception Biocon has evolved from an enzyme manufacturing company to a fully

integrated biopharmaceutical enterprise, focused on healthcare. Biocon has successfully

forayed into drug discovery and development. It has developed innovative and effective

biomolecules in diabetology, oncology, cardiology and other therapeutic segments. Biocon

delivers products and solutions to partners and customers in over 50 countries.

B

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Biocon was founded on November 29, 1978 as a joint venture between Biocon Biochemicals

Ltd. of Ireland and an Indian entrepreneur, Kiran Mazumdar Shaw. In 1979, Biocon became the

first Indian company to manufacture and export enzymes to USA and Europe. Unilever plc.

acquired Biocon Biochemicals Ltd. in Ireland in 1979 and merged it with its subsidiary, Quest

International. In 1989, Biocon became the first Indian biotech company to receive US funding

for proprietary technologies.

Resemblance with the Business Strategy

Ansoff Matrix

Existing Products New Products

Existing

Markets

Market Penetration

Product Development

New

Markets

Market Development

Diversification

Ansoff's matrix provides four different growth strategies:

Market Penetration - the firm seeks to achieve growth with existing products in their

current market segments, aiming to increase its market share.

Market Development - the firm seeks growth by targeting its existing products to new

market segments.

Product Development - the firms develops new products targeted to its existing market

segments.

Diversification - the firm grows by diversifying into new businesses by developing new

products for new markets.

In 1993, Biocon's R&D and manufacturing facilities received ISO 9001 certification from RWTUV,

Germany. In 1994, Biocon established a subsidiary Syngene International Pvt. Ltd to address the

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growing need for outsourced R&D in the pharmaceutical sector. In 1996, Biocon entered the

biopharmaceuticals and statins segment. In 1998, Unilever sold its shareholding in Biocon to

the Indian promoters and Biocon became an independent entity. In 2000 Biocon commissioned

its first fully automated submerged fermentation plant to produce speciality pharmaceuticals.

In the same year Clinigene, India's first clinical research organisation and a subsidiary of Biocon,

was set up to pursue clinical research and development. In 2001, Biocon became the first Indian

company to be approved by US FDA for the manufacture of lovastatin, a cholesterol-lowering

molecule. In 2003 Biocon became the first company worldwide to develop human insulin on a

Pichia expression system. In 2004, Biocon entered the stock market with its IPO and became

only the second Indian company to cross the $ 1 billion mark on the day of listing. In 2006,

Biocon launched India's first cancer drug BIOMAb EGFR.

Biocon eyes more buys to boost growth

February 27, 2008

Publication : Reuters India

India's top biotechnology firm, Biocon Ltd, is looking at overseas acquisitions for about $10 million to

boost its sales globally and gain access to innovative drugs, its chairman said on Wednesday.

Biocon, which makes insulin, cholesterol-lowering statins and other branded drugs, had earlier this

month agreed to buy 70 percent of German marketing firm AxiCorp GmbH for 30 million euros ($45

million) to boost distribution and marketing of pharmaceuticals in Europe.

"I am looking at smaller companies where even if I have to invest and get a majority or controlling

stake it won't cost me more than $10 million or thereabouts," Kiran Mazumdar-Shaw told Reuters in

an interview.

The targets are marketing firms in Europe and research-focused biotechnology companies in the

United States, Australia and New Zealand, she said.

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Resembling Business Strategy :

Horizontal Integration

The acquisition of additional business activities at the same level of the value chain is referred to as

horizontal integration. This form of expansion contrasts with vertical integration by which the firm

expands into upstream or downstream activities. Horizontal growth can be achieved by internal

expansion or by external expansion through mergers and acquisitions of firms offering similar

products and services. A firm may diversify by growing horizontally into unrelated businesses.

Some examples of horizontal integration include:

The Standard Oil Company's acquisition of 40 refineries.

An automobile manufacturer's acquisition of a sport utility vehicle manufacturer.

A media company's ownership of radio, television, newspapers, books, and magazines.

Advantages of Horizontal Integration

The following are some benefits sought by firms that horizontally integrate:

Economies of scale - acheived by selling more of the same product, for example, by geographic

expansion.

Economies of scope - achieved by sharing resources common to different products. Commonly

referred to as "synergies."

Increased market power (over suppliers and downstream channel members)

Reduction in the cost of international trade by operating factories in foreign markets.

Last month, Biocon said its quarterly profit rose more than five times after one-off gains from sale of

its enzymes unit to Denmark's Novozymes, and forecast more growth despite recession concerns in its

key U.S. market.

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Bangalore-based Biocon has been looking to acquire firms to boost its marketing and drug discovery

muscles, after it sold off its enzymes business in July last year for $115 million.

"For Europe, it's a totally marketing strategy that we are looking at," said Mazumdar-Shaw, who set

up Biocon in her garage in Bangalore in 1978. "At the same time we are also looking at acquisition

opportunities in say innovation."

She said a plan to launch an initial public offer of its contract research unit, Syngene, was on track by

the end of the fiscal year that begins in April. The company has not yet finalised details of the offer.

A 12 percent drop in the stock market this year, caused by a global equities rout, knocked out a few

IPOs in the Indian market in recent weeks, including a $1.6 billion issue from Emaar MGF Land, the

Indian unit of Dubai's Emaar Properties.

ORAL INSULIN

Clinical trials for Biocon's innovative oral insulin is making good progress and the company should be

able to sign a licensing deal to launch the product in global markets early next year, Mazumdar-Shaw

said.

Brokerage ICICI Securities said in a Feb. 19 research report that Biocon might generate "windfall

revenue" through the licensing of oral insulin. It has assumed the deal size to be between $100 million

and $300 million.

"We believe we are actually in a very good position because you can see that number of recent

diabetic drugs have had safety concerns associated with them," the Biocon chief said.

"That's why we believe an oral insulin could have a very, very interesting opportunity in managing

diabetes very effectively with no safety concerns".

Biocon sees prices of statins, which contributes a quarter of its revenue, stabilising on waning

competition. The United States and Europe are its main markets for the statins used to lower

cholesterol levels.

Investment on research and development activities in the year to March 2009 will be 15-20 percent

higher than this year's spending of over 1 billion rupees, said Mazumdar-Shaw, who earned a master's

brewing degree in Australia before pioneering Biocon.

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Shares in Biocon, which has a market value of more than $1 billion, ended 0.3 percent higher at

441.05 rupees on Wednesday in a Mumbai market that edged up 0.1 percent. The stock is down

about 24 percent so far this year.

Biocon buys 70% stake in German pharma co for € m

bangalore, February 12, 2008

Publication : Bussiness Line

Biocon Ltd announced its first footprint in Europe by acquiring 70% stake in German pharma

distribution company AxiCorp GmbH for C30 million (around Rs 174 crore).

Biocon now has the distribution muscle in Germany and Europe; it would first launch its branded

injectible insulin Insugen, on its own in these markets and follow up with others later, said its CMD,

Ms Kiran-MazumdarShaw, at a news conference.

Insugen's European launch may be 18-24 months away as it was in the process of registration with the

EMEA (European Medicines Agency, the regulator).

AxiCorp, founded in 2002, is a @75-million, 170-strong company specialising in marketing and

distributing lowcost drugs across Europe.

"AxiCorp heralds our European foray for biosimilars like recombinant human insulin.

"We arc very focussed on becoming a key player in insulin globally," she said. "We can deliver through

a combination of Biocon's low cost manufacturing and AxiCorp's low cost distribution," Ms Mazumdar

Shaw said.

The new autonomous subsidiary will introduce Biocon's generics, biosimilars, biologics and innovative

pharmaceutical products, while significantly boosting the new parent's bottomline.

Germany has Europe's biggest and growing market for anti-diabetes drugs with an annual insulin sales

of €950 million, according to AxiCorp's General Managers and founders, Mr Holger Gehihar and Mr

Dirk Ullrich.

The buy marks the first of the expected acquisitions Biocon has planned following the nearly Rs 460-

crore sale of its enzymes business to Novozymcs in July last year.

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Resemblance to Business Strategy

Diagram of Porter's 5 Forces

SUPPLIER POWER

Supplier concentration

Importance of volume to supplier

Differentiation of inputs

Impact of inputs on cost or differentiation

Switching costs of firms in the industry

Presence of substitute inputs

Threat of forward integration

Cost relative to total purchases in industry

BARRIERS

TO ENTRY

Absolute cost advantages

Proprietary learning curve

Access to inputs

Government policy

Economies of scale

Capital requirements

Brand identity

Switching costs

Access to distribution

Expected retaliation

Proprietary products

THREAT OF

SUBSTITUTES

-Switching costs

-Buyer inclination to

substitute

-Price-performance

trade-off of substitutes

BUYER POWER

Bargaining leverage

Buyer volume

Buyer information

Brand identity

Price sensitivity

Threat of backward integration

Product differentiation

Buyer concentration vs. industry

Substitutes available

Buyers' incentives

DEGREE OF RIVALRY -Exit barriers

-Industry concentration

-Fixed costs/Value added

-Industry growth

-Intermittent overcapacity

-Product differences

-Switching costs

-Brand identity

-Diversity of rivals

-Corporate stakes

According to the AxiCorp officials - formerly with Sanofi Aventis the German company has grown on

28 | P a g e

an innovative low-cost drugs model based on cheaper generic alternatives and offpatent drugs

sourced from all over Europe into Germany and has launched 180 products across the continent, said

it also has its own brand of discounted drugs, Axeonnt.

A senior company official said Insugen would double its markets to 40 countries by the end of this

year. It was the company's first global brand, soon to enter West and South-East Asia and Latin

America where the registrations were going on.

Biocon's share price on the BSE on Monday ended just oven one per cent lower at Rs 401.4 over

Friday's close of Rs 405.95.

Publication : Forbes

When Kiran Mazumdar-Shaw founded a pioneering biotech company, no one would work for her.

Today she's the richest woman in India.

Kiran Mazumdar-Shaw should have been afraid. Every day for three months in 1985 she waded

through a crowd of angry employees to get to her office at Biocon India, a maker of enzymes in

Bangalore. This was her payback for hiring uneducated employees. After they joined a communist

labor union, she retaliated by automating the plant. The crowd outside burned her in effigy. "I didn't

think they'd hurt a woman," she says.

But her detractors have certainly tried to hold her back, making it about as tough as possible for a

woman to find her way. Still, over the last two decades Mazumdar-Shaw, now 51, has turned a small

enzyme manufacturer into one of India's premier tech companies. It netted $30.5 million on revenue

of $122 million for the fiscal year ended Mar. 31. Her 40% stake in the company is worth $480 million,

making her the richest woman in India.

The daughter of a brewmaster and a stay-at-home mom, Mazumdar-Shaw grew up in a progressive,

middle-class family, which encouraged her to pursue an education instead of an arranged marriage.

She returned to India in 1975 after getting a B.S. in zoology at the University of Bangalore and an M.S.

in brewing from Ballarat College in Australia, expecting to have to fend off job offers. No one would

hire her. "It was too rough a job for a woman," she recalls being told.

After consulting for two years, she got lucky after being approached by Leslie Auchincloss, the then

owner of Biocon Biochemicals, an Irish specialty chemicals company that had been trying to break into

India. Foreign ownership was limited to 30%, and Mazumdar-Shaw seemed an ideal partner. "She was

so focused and had such a forceful personality that I knew she could hold her own," recounts

29 | P a g e

Auchincloss. Biocon India started out with $10,000 and a plan to produce enzymes for beer, wine,

paper, animal feed and detergents.

It wasn't a glass ceiling that Mazumdar-Shaw ran into but a concrete one. It took her weeks to rent

space because landlords thought she wouldn't be good for the rent. She couldn't find anyone willing

to work for her, so she begged a female friend to fill in as a secretary. Bankers turned down her

request for a $10,000 line of credit; she got the money only after meeting a banker at a friend's

wedding. Her first accountant, a man, left as soon as another job opened. By far the worst treatment

came from raw-materials vendors who insisted she bring in a male manager if she wanted their wares.

By the late 1980s Biocon India was a profitable concern that was pulling in $1 million a year.

Auchincloss sold his 30% interest to Unilever. Mazumdar-Shaw kept her 70% and stayed on, but

occasionally chafed under British (and Dutch) rule. "If I wanted to take a certain action, I had to

apprise them, then meet with the other managers before I could make a move," she complains. She

reclaimed some autonomy by founding Syngene, a drug services research outfit--which provided

early-stage development for drug companies--as a separate company.

After India relaxed its foreign ownership rules, Unilever tried and failed to buy Mazumdar-Shaw's

stake. In 1997 the food giant sold its specialty chemicals division, which included Biocon, to Imperial

Chemical Industries. ICI had no interest in drug research and a year later was willing to let its slice of

Biocon go for $2 million, on the condition that it be supplied with enzymes for two years. Mazumdar-

Shaw came up with the money by persuading her husband, John Shaw, a former textile executive, to

sell his London home and join Biocon. (Now he's in charge of international business development and

owns 25% of the stock.)

Newly liberated, Mazumdar-Shaw ventured beyond enzymes into insulin production. In this detour

Biocon was reversing the dance steps of the Danish insulin firm Novo and making good use of the

fermentation expertise it already had. A huge market was right outside its doors--the 32 million

Indians with diabetes. From insulin Mazumdar-Shaw could branch into other drugs for the Indian

market; and from India, into the U.S.

The new line of business demanded capital. By this time Mazumdar-Shaw had enough name

recognition to be able to raise the cash less painfully: $3 million for a 15% equity share came from

ICICI Ventures (no relation to ICI), and $5 million came from banks as loans at 10% to 12% interest.

She also put in $3 million from retained earnings. "We bet the bank," she recalls. "If it failed, it would

bankrupt the company."

After the 2001 patent expiration on lovastatin, one of the earliest cholesterol blockers, Biocon got

30 | P a g e

permission from Indian regulators to sell the generic in India. That was a warm-up. In 2001 Biocon

became the first Indian company to get U.S. Food & Drug Administration permission to sell lovastatin

in the U.S. Now it has 50% of the U.S. market for the copycat version.

Not content to be a star in generics, Mazumdar-Shaw now has 600 scientists doing research to

develop the company's own patented drugs. Biocon has two compounds in clinical trials in India: a

monoclonal antibody to treat head and neck cancers, now in Phase II, and a recombinant insulin, in

Phase III. (A second monoclonal antibody to deal with rheumatoid arthritis has yet to go to trial.)

Helping to fuel that R&D budget, $16 million a year, is the $70 million Biocon banked when it went

public last April.

There will be a flood of money coming in from America, as well. As U.S. drug development costs soar,

pharmas are looking to India, where expenses from molecule to market can run 80% less. Partnerships

with seven of the largest U.S. and European pharmaceuticals--in drug discovery and clinical trials--now

account for 15% of Biocon's top line.

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Products & Services Offered by Biocon:

1. Biopharmaceuticals: Today, Biocon is a leading biopharmaceutical company with strong

capabilities in statins, immunosuppressants, recombinant insulin and a wide product range

across key therapeutic segments including diabetology, cardiology and oncology. Following

biopharmaceutical products are offered by Biocon:

Small molecules: Biocon produces anti-diabetic agents, anti-hypertensive agents, anti-

inflammatory agents, anti-oxidants, cardiovascular agents, digestive-aid enzymes, hemostatic

agents, hepatoprotective agents, immunosuppressants, and neutraceuticals.

Biologicals: In the field of Biogenerics, Biocon is currently working on products that include:

Insulin, Streptokinase, and Monoclonal Antibodies.

Dosage Forms: Biocon provides products in the therapeutic segments of cardiology and

diabetes.

2. Enzymes: Biocon is India's largest producer and exporter of enzymes. It manufactures and

markets a broad range of industrial enzymes, food additives and process aids. Biocon is the first

enzyme company globally to receive the ISO 9001 accreditation. Enzymes manufactured by

Biocon are: Amylases, Amyloglucosidases, Cellulases, Catalase, Lipases, Glucanases,

Hemicellulases, Phytases, Proteases, and Pectinases.

3. Custom Research: Biocon subsidiary Syngene conduct high value R&D in early stage drug

discovery and development for a diverse global clientele.

4. Clinical Research: Biocon subsidiary Clinigene offers global biotechnology and pharmaceutical

majors strong clinical trial services, regulatory and laboratory capabilities for clinical drug

development. Its value added services include value-added services include patient registries

and clinical databases in diabetes, lipidemia, oncology, cardiovascular diseases.

Major Achievements of Biocon:

First Indian company to manufacture and export enzymes to USA and Europe.

First Indian biotech company to receive US funding for proprietary technologies.

First Indian company to be approved by US FDA for the manufacture of lovastatin, a

cholesterol-lowering molecule.

First company worldwide to develop human insulin on a Pichia expression system.

32 | P a g e

India's largest producer and exporter of enzymes.

Second Indian company to cross the $ 1 billion mark on the day of listing.

Launched India's first cancer drug BIOMAb EGFR

Trivia

Biocon is India's first biotechnology company, established in 1978

Biocon is the country's first biotechnology company to export microbial enzymes to USA and

Europe

Biocon is the first biotechnology company to receive ISO 9001 certification in India

Syngene, a Biocon subsidiary, is the country's first biotech custom research company in drug

discovery

Biocon is the first Indian company to be approved by US FDA for the manufacture of

pplovastatin, a cholesterol-lowering molecule

Biocon's subsidiary, Clinigene, has India's first CAP (College of American Pathologists)

accredited clinical research laboratory

Biocon is the first company to manufacture human insulin using a Pichia expression system

33 | P a g e

CSR

“We focus on disease prevention, improved healthcare facilities and child

education.This three-pronged strategy will go a long way in improving the lives of

India’s rural communities.” – Rani Desai, Head Biocon Foundation

At Biocon, we believe our investment in better healthcare must go beyond developing new

medicine to making medical assistance accessible to less advantaged, rural communities of

India. Executing our corporate-social responsibility through the Biocon Foundation, we have

adopted an integrated outreach strategy that focuses on social change and empowerment of

rural communities through public health, sanitation and education programs.

Public Health Arogya Raksha Yojana Health Micro-insurance Scheme (ARYMIS)

Launched in February 2005 in collaboration with Narayana Hrudayalaya Hospital and ICICI

Lombard General Insurance Company, ARYMIS provides high quality, yet affordable healthcare

to economically weaker urban and rural communities.

Arogya Raksha Clinics

5 Arogya Rakha Clinics support ARYMIS. Each clinic has:

- a full-time doctor

- a BioCare pharmacy stocking highly subsidized generic drugs

- a Laboratory offering basic lab tests, at discounted rates

- a Mobile Medical Service to enable the clinic doctor and staff to travel to and provide

consultation at remote villages

In the past two years, more than 400 people have undergone surgeries of which 38 patients

have had major heart surgeries. Our clinics and network hospitals have, so far, treated close to

40,000 patients for minor ailments.

Health Camps

General and specialized health camps are conducted in remote areas where good medical

facilities are not available. These camps provide cardiac, neurological, ophthalmic, orthopedic,

gynecological and general health checks. Organised tri-monthly, every camp is attended by an

average of 300 people.

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Preventive Health Education

We recruit and train members from local communities to conduct workshops on health and

sanitation education, with special emphasis on common ailments, pediatric & gynecological

illnesses, nutrition and HIV/AIDS.

Other Public Health Initiatives:

- We have part-funded a Mobile Diabetic Foot Clinic run by the Jain Institute of Vascular

Sciences, Bangalore.

- We will partner Karuna Trust to run two Primary Health Centers in Arunachal Pradesh.

- We are establishing a cancer hospital and research facility in collaboration with Dr. Devi

Shetty of Narayana Hrudayalaya Hospital.

Education

Chinnara Ganita (Math for Children)

We are collaborating with Pratima Rao, a leading educationist and Macmillan India to inculcate

a love for math and foster self reliance in learning. In Year 1 of its inception, 11,000 children in

Classes 1 & 2, from government primary schools, were given a Math Self Help Book. This book

was well received by children and teachers. We plan to extend this facility to higher classes,

thus engaging a wider cross section of children.

Teaching Infrastructure Support

We are involved in designing and building a teachers’ training centre and a resource facility for

students in Anekal. In addition, we intend to upgrade and/or build infrastructure for

government schools. Our near term goal is to cover all government schools in Anekal District.

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Bibliography:-

http://www.telegraphIndia.com/1030616/asp/opinion/story_2065311.asp

http://www.managmentparadise.com

http://digital.dnaIndia.com/epapermain.aspx?queryed=9&eddate=3/27/2008

http://google.com

http://quickmba.com/strategy

http://citefin.com

http://biocon.co.in

http://wikipedia.org

http://indianharmatoday.com

http://economictimes.com

http://smartmanager.com

http://businesstoday.co.in

http://businessworld.co.in