Patricia Koza in Warsaw -

All the talk may be about the mushrooming exports from the BRIC countries, but a company from the recently emerged Poland called Bioton is preparing to conquer those countries and beyond.

Polish biotech company Bioton, whose swift growth has made it a darling of the Warsaw Stock Exchange, is now preparing to take on the BRICs (Brazil, Russia, India and China) and beyond.

Bioton, Poland's first manufacturer of recombinant human insulin – a product identical to that produced by the human pancreas – plans to begin sales of its flagship product, Gensulin, in Russia in coming weeks, with China not far behind.

Staked with $20m in seed money by Polish entrepreneur Ryszard Krause 10 years ago, Biotin has expanded rapidly via organic domestic growth as well as takeovers or joint ventures in Russia, Singapore, China, Kazakhstan and Ukraine, and now boasts a market capitalisation approaching PLN29.6bn (€7.6bn).

The worldwide insulin market is growing about 10% annually and is projected to be worth over $11bn by 2011. It is highly concentrated, with three companies dominating: the US' Eli Lilly with about 52%, Danish Novo Nordisk with about 30% and French Sanofi-Aventis with about 15%.

Bioton's goal is to snatch from these pharmaceutical giants a 5% share of the world market by 2009 and 10% by 2012. Its world share is already approaching 2% thanks to its flagship product, Gensulin, which is registered or awaiting registration in more than 40 countries. Its key advantage: quality equal to its Western competitors at a price that is 15%-20% cheaper.

Hitting BRICs

Bioton's first main targets are two of the BRIC markets. CEO Adam Wilczega recently told reporters that the move into Russia could boost profits for 2006 over the PLN100m mark versus the PLN23.4m recorded in 2005.

Analysts aren't so sure, but do note that Biotin has often exceeded forecasts. "Their success in Poland has made the company more aggressive in other markets," says Krzysztof Radojewski, an analyst with BRE Bank, who expects the company to turn a pure profit – one clear of its investments – within two or three years. "The Russian market can be very profitable."

Bioton Vostok, in which the Polish company holds a 38% stake, is building an insulin plant in the Orlov Region of Russia with a goal of capturing 20% of the Russian market – estimated at $268m in 2005 – by the end of 2007. Russian insulin sales are projected to reach $40m-$50m next year. There are no domestic competitors in Russia because the former Soviet government in 1989 banned the production of low-quality insulin in favour of high-quality imports.

Bioton has also obtained permission from Chinese authorities to establish a manufacturing facility through a joint venture with Singapore-based SciGen, an Asian distributor of biotech products, and China-based Hefei Life Science & Technology Park Investments and Development. Bioton holds a 90.5% stake in SciGen and 24% of Hefei. It also has invested in biotech companies in Ukraine, Kazakhstan and India.

Seeds of growth

Bioton was established in 1989, but its growth story begins in 1996 when it obtained $20m in seed money from Prokom Investment controlled by Krause, who also owns companies producing computer hardware, software and services for the oil industry. Prokom Investment now holds a 49.9% strategic stake.

"The [state-run] Institute of Biotechnology and Antibiotics was searching for a partner for a project to make Polish insulin," said Marek Zieleniewski, a spokesman for Krause. "They needed lots of money, but there were no guarantees. It was a big challenge. After long talks, Krause said he was interested."

Research began the following year and in 2001, Bioton introduced Gensulin to the market. In the five years since, Gensulin has wrested a 23% market share from its three international competitors in Poland. Due mainly to Gensulin, from 2001-2004 Bioton"s revenue rose by 46%, while ebitda (earnings before income, tax, depreciation and amortization) rose five-fold. Bioton also has more than 30 other biotech products in its arsenal.

Bioton was floated on the Warsaw Stock Exchange in 2005 and within a couple of months made it to the blue-chip WIG20 list, where it ranks among the top-20 companies by market cap.

Sales in 2005 reached PLN151.6m and Krause has said that when annual sales reach PLN1.5bn, Bioton will list on either the London or New York stock exchange.

Has Bioton got its long-range sights on its competitors' biggest market, the US? Nobody at the company is saying, but the prospects are enticing.

In June, the regulatory Food and Drug Administration, of FDA, approved a copycat version of human growth hormone, the first such generic biotech medicine to be authorized. That could open the door for fast-track approval of bio-equivalent insulin, such as Gensulin. Poland's only other recombinant insulin producer, state-owned Polfa Tarchomin, also offers such a product in certain non-US markets.

That road might be just as risky as the one Krause embarked on in 1996 – but the rewards may be just as great.

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