The biologics business consists biosimilars that include monoclonal antibodies and recombinant insulins and novel biologics
Biopharmaceutical firm Biocon said it has created a new subsidiary to house all its biologic assets to enable the company to unlock value at a later date.
The biologics business consists biosimilars that include monoclonal antibodies and recombinant insulins and novel biologics.
"We have set up a new subsidiary Biocon Biologics, and all our biosimilar assets are consolidated under this legal entity, as we believe it will enable us to unlock value in the future," said a Biocon spokesperson in an email interview.
The company declined to give further details on timeline for unlocking value, and whether it intends to list the subsidiary on bourses or plans to sell equity stakes to PE investors.
"We do not have any specific details to share at this point in time," the spokesperson said.
Biocon's announcement of a separate subsidiary comes at a time when the company got its first ever approval to sell biosimilar version of cancer drug Trastuzumab in US through its partner Mylan.
Trastuzumab blockbuster cancer biologic drug sold by Swiss pharmaceutical major Roche under brand name Herceptin that raked in sales of USD 2.5 billion in 2016.
Biocon has partnered with Mylan to develop and market biosimilars pegfilgrastim, trastuzumab, bevacizumab, adalimumab and insulin glargine—for regulated markets such as Europe and US.
Biosimilars are identical copies of original biologic drugs that have active properties similar to the reference biological product requiring large clinical trials on patients to establish safety and efficacy before approval by regulatory agencies, unlike small generic molecules that can be launched by doing bioequivalence studies.
In April, Kiran Mazumdar-Shaw in an interview with Moneycontrol said it could take upto five years before the company unlocks the value of its biologics business.
"We want to unlock value through our businesses, that is the strategy, but having said that right now we are pretty focussed on making sure that biologics business actually starts delivering on what we have invested." Mazumdar-Shaw said.
"So for at least five years, we need to make sure that everything that you invested gives you a very rich return. That’s what we have unlocked (in) Syngene," she added.
In 2015, the company listed its contract research and drug discovery services business Syngene, and Mazumdar-Shaw said that a range of options was open for the rest of the businesses.
Biocon's other two biosimilars that include Peg-filgrastim and Insulin Glargine were also under review by US FDA and Europe. Europe is also reviewing biosimilar Trastuzumab.
Biocon estimates that its biologics business will start paying off richly from 2019 onwards. Biocon in its guidance has stated that the company will touch a billion-dollar in revenues in FY19 and biosimilars alone are expected to contribute about 20 percent of those revenues.
Analyst are even more bullish.
Brokerage firm Motilal Oswal expects USD 350m-400 million from sales of these three biosimilars in medium term.
"Trastuzumab approval by US FDA is an important milestone for the company. We maintain our neutral rating with revised target price of INR485@ 26xFY20E PER (v/s INR335 @ 24x 1H FY20E PER). We have increased our TP multiple to capture upside of biologics business in developed market which will commence from 2019 onwards. We have increased our FY20E EPS by 17 percent on the back of higher visibility of Biosimilar sales," Motilal Oswal said in its report.
CLSA said it estimates Trastuzumab launch at FY19-end and value this opportunity at EPS Rs 30. It values other biosimilar opportunities at Rs 93 per share.Share of Biocon declined 0.18 percent and were trading at 512.60 on BSE at 11.38 am, the benchmark Sensex dropped 0.38 percent to 32,743.65 points.