Global Insight Perspective | |
Significance | Novo Nordisk (Denmark) has revealed that it is planning to propose the formation of a public/private partnership with the Brazilian government for the supply of insulin products. The deal would be similar to a deal with the Cuban government signed in 2007. |
Implications | Novo Nordisk is still smarting from its failure to secure a contract worth approximately US$57 million to supply the Brazilian government with NPH insulin, after it was beaten by Eli Lilly in a public tender. |
Outlook | The Brazilian government may look on Novo Nordisk's proposal sympathetically, as the firm has made huge investments in its Brazilian insulin production facility in Montes Claros. |
Under the terms of the proposed deal, which was reported in the Valor Econômico newspaper, Novo Nordisk's general manager for Brazil, Cláudio Coracini, is proposing to supply the Brazilian government with crystal, human or even analogue insulin in exchange for a deal to sell more insulin to the government. Novo Nordisk envisages that its proposed partnership with the Brazilian government could run along the same lines as a partnership agreed with Cuba in 2007. Under the terms of that agreement, Novo Nordisk undertook to transfer part of its manufacturing know-how to the Cuban government and to guarantee local sales.
The proposal represents an attempt by the Danish firm to regain its former supremacy in the public sector market for insulin, after the company failed to win the last two tenders held by Brazil's Ministry of Health (MoH). In 2007, U.S. drug company Eli Lilly won the MoH's insulin tender for the second year in succession, by offering a price which corresponded to 9.18 reais (US$5.36) per vial. The total value of the contract was worth 98 million reais (US$57 million) for the supply of 10.7 million vials of NPH insulin (see Brazil: 15 October 2007: Lilly Wins Brazilian Government Insulin Tender). According to Coracini, Novo Nordisk lost out to the U.S. giant on account of exchange rate fluctuations, given that Novo Nordisk's imports are priced in euros while Lilly's imports are priced in dollars.
Novo Nordisk Retains Lead in Brazil's Private Sector Insulin Market
Brazil's public sector market for insulin is bigger than its private sector market, which is still led by Novo Nordisk. According to IMS, in 2007 Novo Nordisk accounted for 52.8% of Brazil's private sector insulin market, ahead of Lilly with 38.6% and Sanofi-Aventis (France) with 10.5%. Eli Lilly has recently signalled its intention to overtake Novo Nordisk in the private market, although the Danish company is confident that its new-generation analogue insulin will help its sales grow by at least 10% in 2008.
Outlook and Implications
Novo Nordisk's determination to regain leadership of the Brazilian insulin market stems partly from the fact that it has recently made heavy investments in the country. Last year, the company completed construction of a US$200 million factory in Montes Claros, which is the largest insulin production site in Latin America and Novo Nordisk's largest factory outside Denmark (see Brazil: 27 April 2007: Novo Nordisk Opens Largest Insulin Manufacturing Base in Latin America). The company is also planning an additional investment of US$50 million to expand the site. However, the site produces modern-generation analogue insulins, which are relatively expensive and are not widely used by the government's official healthcare programmes.
At one stage, Novo Nordisk's plant was expected to be geared towards producing the inhalable insulin system AERx, but Novo Nordisk has recently abandoned its development of the product (see Denmark: 15 January 2008: Novo Nordisk Abandons Development of AERx Insulin Delivery System).