Biocon Biologics to launch an IPO by FY24E – BIOCONRujuta Tamhankar
Update on the Indian Equity Market:
On Wednesday, NIFTY closed in the red at 16,605 (-1.1%). Among the sectoral indices, AUTO (-3.0%), PRIVATE BANK (-2.4%), and BANK (-2.3%) closed lower while METALS (+4.1%), MEDIA (+1.9%), OIL & GAS (+1.2%) closed higher. Among the stocks, COALINDIA (+8.5%), HDFCLIFE (+7.0%), and SBILIFE (+5.7%) were the top gainers while MARUTI (-6.0%), DR REDDY (-5.2%), and BAJAJ AUTO (-4.6%) were among the top losers.
Excerpts from an interview of Mrs. Kiran Mazumdar Shaw, Chairperson (BIOCON) with Economic Times dated 1st March 2022:
- Acquiring Viatris’s Biosimilar business accelerates the company’s presence in the commercial space in the developed markets. The business will be transferred to Biocon Biologics, the biosimilar arm of the company.
- The company has 7 molecules launched in the global markets and another 14 molecules are under development.
- The advantage that the company has in the Biologics segment over its competition is that they are fully integrated end-to-end play- manufacturing and R&D. The management believes that with manufacturing, R&D, and the increased scale due to the acquisition of Viatris, they have higher negotiating power to sign bigger deals.
- Biosimilars is a very complex business and comparatively young segment, hence early movers have an advantage.
- The deal will be financed using a mix of debt and equity, also the company has hinted at a possibility of an IPO in the future.
- The management expects the new venture to generate a lot of cash which would help the company with the payback.
Asset Multiplier comments:
- While the acquisition of Viatris biosimilar gives the company access to a well-established front end in the developed market, it has a significant impact on the company’s near-term financials.
- We believe the firm is well-positioned for growth, particularly in the biosimilars category, due to the ramp-up of interchangeable Semglee and new launches such as Bevacizumab, Aspart, and Adalimumab in both established and emerging countries.
Consensus Estimate: (Source: Market screener website)
- The closing price of BIOCON was ₹ 345 as of 2-March-2022. It traded at 57x/34x/23x the consensus earnings per share estimate of ₹ 6/ 10/ 15/ for FY22E/FY23E/FY24E respectively.
- The consensus average target price is ₹ 407 /- which implies a PE per share multiple of 27x on FY24E EPS of ₹ 15/-.
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