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http://content.icicidirect.com/mailimages/ICICIdirect_Biocon_EventUpdate.pdf
P f i z e r a l l i a n c e f a l l s a p a r t , a d i s a p p o i n t m e n t …
Biocon and Pfizer have called off the alliance, which they had signed for
commercialisation of Insulin and Insulin analogue products worldwide.
The cancellation was on account of a change in priorities at Pfizer’s end.
Both these companies had signed an agreement to commercialise four
bio-similars in October 2010. Biocon will get back all rights that were
licensed to Pfizer under the deal. Under the deal, it has already received
US$100 million as an up front payment. Of this, ~| 180 crore has already
been accounted for so far. It also received another US$100 million in
escrow account, which was supposed to be used to set up a
manufacturing facility for Biosimilars and R&D activities.
We believe Biocon will retain a major portion of this US$200 million but now stands
to lose ~US$150 million that it was supposed to receive as milestones for
regulatory fillings in three to five years. So far, Pfizer has launched Human
Insulin and Glargine only in India in November 2011. We believe this may
be insignificant. However, we believe this development will be negative in
the long run. Hence, we have altered our earnings as well as multiples to
reflect the blurred potential although the stock has overreacted recently,
giving ample space for decent upside.
V a l u a t i o n
We have cut down our sales, EBITDA and net profit projection by 7%, 7%
and 10%, respectively, for FY13E reflecting a potential loss of licensing
and development fees and potential revenue loss in emerging markets. In
our projection, we have assumed the company will book ~| 270 crore as
one-time income pertaining to pending upfront payment, which had not
been booked so far, in Q4FY12E. For our projections, we have not
considered any one-time gains related to Escrow account for want of
clarity on accounting issues. As the development is disappointing, we see
some bright side as Biocon will have more flexibility in R&D activities and
resource mobilisation. We have cut down the multiple by one notch
reflecting uncertainties in scouting for a viable alliance. Our revised price
target is | 313, based on 17x FY13E EPS (revised) of | 18.4. This still
offers an upside of ~23% from the current level. We maintain our BUY
recommendation on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_Biocon_EventUpdate.pdf
P f i z e r a l l i a n c e f a l l s a p a r t , a d i s a p p o i n t m e n t …
Biocon and Pfizer have called off the alliance, which they had signed for
commercialisation of Insulin and Insulin analogue products worldwide.
The cancellation was on account of a change in priorities at Pfizer’s end.
Both these companies had signed an agreement to commercialise four
bio-similars in October 2010. Biocon will get back all rights that were
licensed to Pfizer under the deal. Under the deal, it has already received
US$100 million as an up front payment. Of this, ~| 180 crore has already
been accounted for so far. It also received another US$100 million in
escrow account, which was supposed to be used to set up a
manufacturing facility for Biosimilars and R&D activities.
We believe Biocon will retain a major portion of this US$200 million but now stands
to lose ~US$150 million that it was supposed to receive as milestones for
regulatory fillings in three to five years. So far, Pfizer has launched Human
Insulin and Glargine only in India in November 2011. We believe this may
be insignificant. However, we believe this development will be negative in
the long run. Hence, we have altered our earnings as well as multiples to
reflect the blurred potential although the stock has overreacted recently,
giving ample space for decent upside.
V a l u a t i o n
We have cut down our sales, EBITDA and net profit projection by 7%, 7%
and 10%, respectively, for FY13E reflecting a potential loss of licensing
and development fees and potential revenue loss in emerging markets. In
our projection, we have assumed the company will book ~| 270 crore as
one-time income pertaining to pending upfront payment, which had not
been booked so far, in Q4FY12E. For our projections, we have not
considered any one-time gains related to Escrow account for want of
clarity on accounting issues. As the development is disappointing, we see
some bright side as Biocon will have more flexibility in R&D activities and
resource mobilisation. We have cut down the multiple by one notch
reflecting uncertainties in scouting for a viable alliance. Our revised price
target is | 313, based on 17x FY13E EPS (revised) of | 18.4. This still
offers an upside of ~23% from the current level. We maintain our BUY
recommendation on the stock.
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