The deal between Biocon Biologics and Serum Institute Life Sciences (SILS), under which the latter will sell vaccines globally every year in exchange for a 15% stake in the former, appears to be mutually beneficial. Upon completion of the deal, Biocon Biologics will be valued at $4.9 billion.
Biocon Biologics is a 100% subsidiary of Biocon Limited, while SILS is a subsidiary of Serum Institute of India Pvt. Ltd. The partnership between the two companies, which have strengths in biologics and vaccines, should augur well for new product development.
More than that, they will also benefit from synergy in research and development capabilities, manufacturing facilities and marketing networks. In the short term, sales of 100 million vaccines each year will drive revenue.
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However, the companies have not shared details on revenue and profit-sharing.
Still, analysts believe Biocon’s selling price ₹250-300 per vaccine and equal share on margin.
Biocon’s shares had risen last year after the company demonstrated a strong biosimilar portfolio in developed markets.
However, the shares have fallen 19 per cent so far in 2021. This is largely due to the pandemic, which has alerted investors to the trajectory of biosimilars and the frequency of new product launches, analysts said.
Analysts at Motilal Oswal Financial Services Ltd said that there was soft growth in the June quarter due to pricing pressure in generics, delay in fresh approvals and operational issues in the generic segment, adding to the pressure on valuations. .
However, the partnership with SILS should accelerate valuations. In addition, the company’s biosimilar portfolio is now progressing well. Analysts said key prescription trends in the US market indicate strong gains.
According to a recent report by Nirmal Bang Institutional Equities, the company’s insulin glargine, Semagli, has been consistently gaining prescription share.
“In the current quarter, Biocon’s average weekly prescription volume is up 20% as compared to 1QFY22. Biocon’s market share has improved by 100 basis points and currently stands at 3%.”
The supply volume driving rate of Ogivari, a drug used to treat adjuvant breast cancer, or metastatic cancer of the stomach or gastroesophageal junction, is also better than the average monthly dose seen in Q1FY22.
These factors support the earnings outlook for FY22.
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