On Wednesday morning, Bioton reported signing three agreements with Ferring, buying out licences for production of human insulin licence for US$ 40.5m. As a result, Bioton will stop paying royalty fees of some 10% of insulin sales revenues. Additionally, Bioton will receive rights to royalty fees paid by Diosynth, licence owner for North and South America, which are estimated by Bioton for some US$ 1m per annum. According to the company, the buyout of the licence agreements should allow Bioton to increase profitability, as the annual amortization of purchased licences (20 years, ca. PLN 6.3m pa) should be significantly lower than annual royalties the company would have paid (estimated for this year at PLN 18m).
Bioton’s CEO stated that, given company’s ambitious plans of global expansion, the US$ 40m paid for licences should have a payback period of 4-5 years. The signed agreements should also allow Bioton to start its own insulin production R&D, which was precluded under the previous royalty contract. The news, although it seems beneficial for Bioton’s margins, did not have a positive trading impact on Wednesday. Bioton’s share price underperformed the market falling 2.3%.