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Leader by far in bio-tech space…
Focus on niche therapies through bio-technology
• Biocon is Asia’s largest manufacturer of insulin and one of the
leading manufacturers of Statins and immuno-suppressants
• The company has a strong presence in the diabetology segment,
which is the fastest growing therapeutic segment (growing ~25%
per annum) in the domestic formulations market. It also has a
presence in segments like oncology, nephrology and cardiology
• It has R&D tie-ups with leading MNCs like Mylan, Amylin and BMS
• Two of its novel drugs i.e. oral insulin (diabetic) and anti-CD5 MAb
(Oncology) are in later stages clinical trails. It is planning to outlicense
oral insulin (IN105)
• It has struck an out-licensing deal with Pfizer to launch four
human insulin products in emerging and advanced markets post
patent expiry. It has received US$100 million from Pfizer while
another US$100 million will be received in due course
• It has also struck a deal with US based Optimer to supply APIs,
which will be used in diarrhoea drug Fidaxomicin, which is a
patented product with a market size of ~$350 million. Biocon is
the sole API supplier for Fidaxomicin.
Going ahead
• The deal with Pfizer (for four products) has opened up huge
opportunities in the field of human insulin. While supply in the US
will start post FY14, supplies to emerging markets and EU will
start in FY12 and FY13, respectively
• Revenues from Fidaxomicin are expected to start from H2FY12
• Cash received from Pfizer (US$200 million) will strengthen the
R&D capabilities and product launches will improve the margins
• Divestment in Axicorp will affect the sales initially but will improve
the overall margins, going ahead
Valuation
The Pfizer deal has vindicated Biocon’s capabilities in biotechnology in
general and the insulin space of diabetology in particular. Biosimilars
normally get less price erosion post patent launch on account of their
complex nature. Divesting the low margin business (Axicorp) is a good
move for the company to concentrate more on its core bio-pharma
business. We see good traction from its research services business also.
The cash which it received from Pfizer will take care of incremental R&D
expenses. We remain positive on the stock.
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