Biocon Biologics to launch an IPO by FY24E – BIOCON

Biocon Biologics to launch an IPO by FY24E – BIOCON

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/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”


Share this post