Biotech Values

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The side effect of this deal is NVO, down 10% in two days:

Biosimilar threat tarnishes Novo's star status

COPENHAGEN/LONDON, Oct 19 (Reuters) - Fears of cut-price competition in the insulin market sent shares in Novo Nordisk (NOVOb.CO) skidding again on Tuesday, lopping some 10 percent off the Danish drugmaker's market value in less than two days.

The threat from so-called biosimilar insulins has been crystallised by Pfizer's (PFE.N) agreement to sell versions of insulin developed by India's Biocon (BION.BO). [ID:nSGE69H0I8]

Piper Jaffray senior analyst Sam Fazeli said the news was a sudden reminder of the likelihood of generic insulin competition in a few years' time and shares in Novo -- the European drug sector's star performer this year -- could drop even more.

"The real risk from generic insulin is far out, but Novo's valuation was so high it was vulnerable," he said.

"They are taking a hit because they are the most expensive pharma company in the world. In order to have that kind of valuation, you need to have a business that is bullet-proof."

Fazeli, who has a neutral stance on Novo's shares with a price target of 495 crowns, added that if Biocon had made a deal with any drugmaker other than the world's biggest "maybe people wouldn't have been so worried".

The Danish drugmaker, the world's biggest supplier of insulin, has been on a roll since mid-2009 on hopes for its new diabetes drug Victoza and confidence in its insulin franchise.

Expanding waistlines globally have fuelled an epidemic of type-2 diabetes that has boosted demand for its products.


http://www.reuters.com/article/idUSLDE69I0ZK20101019