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Biocon Biologics IPO: Syngene encore on the cards

Syngene, which was listed in August 2015, raised Rs 550 crore. The IPO was subscribed 32 times. Incidentally, True North was an investor in Syngene before it was listed.

January 07, 2020 / 08:18 PM IST
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Biocon Biologics, the subsidiary of biopharmaceutical company Biocon, will be looking for another round of private equity funding as it plans to launch its IPO in the near future.

"We might raise little more private equity prior to IPO. This basically gives an idea of where we believe we can unlock the value in terms of Biocon Biologics in the next few years," Kiran Mazumdar-Shaw, Chairperson of Biocon, told CNBC-TV18.

Steep valuation

After the latest fund raising, Biocon Biologics alone now constitutes about 60 percent of parent Biocon's market capitalisation of around $5 billion. The contract research subsidiary Syngene, excluding minority shareholders stake, is valued at $1.4 billion and the residuary business of Biocon business, that includes small molecules and domestic formulations, is now valued at $600 million.

Analysts estimate the valuation of Biocon Biologics at more than 10 times, with anticipated revenues of Rs 2,000 crore in FY20. Biocon's revenue at the end of FY19 was at Rs 5,658.8 crore, of which 27 percent or Rs 1,528 crore was contributed by the biologics division.


The steep valuation of a subsidiary that wasn't in existence just a year ago has come as a surprise. Biocon Biologic was carved out as subsidiary, with research and development, manufacturing and distribution functions of biosimiars in April last year.

The company said this was done to create a vertically integrated biologics company, with an intention to unlock value and give investors a pure-play investment opportunity in biologics.

The company did the same for its contract research arm Syngene, by raising private equity money and then followed by an IPO, giving exit to the investors. Syngene, which was listed in August 2015, raised Rs 550 crore. The IPO was subscribed 32 times. Incidentally, True North was an investor in Syngene before it was listed.

Biosimilar story unfolding

Analysts say the valuation is based on the expectation of Biocon delivering its biosimilar growth story.

The company has set an aspiration target of $1 billion by FY22 for its biologics division.

The company has a product pipeline of 28 molecules, including 11 with Mylan, several with Sandoz, and is developing many independently

The US launches of biosimilar drugs trastuzumab and insulin glargine (approval expected in March 2020), continued growth in existing developed and emerging markets, the launches of insulin aspart and bevacizumab in various markets, and enhanced of market share of biosimilars are the key levers that the company is banking on to achieve a $1 billion target.

But some analysts are cautious about the valuation; and revenue projections Biocon is making.

"We expect another round of PE investment in the company that could result in Biocon stake dropping to 90 percent before a potential listing of the subsidiary over the coming 12-24 months," said Kotak Securities in its latest research note.

"The PE investment was widely anticipated, though we still struggle to see a need for funding in Biocon Biologics, particularly given the management’s ambitious $1 bn revenue aspiration for the segment by FY2022. We believe expectations from biosimilars pipeline remain elevated, and see risks of potential disappointments as evidenced by Neulasta, Herceptin (US) as well as EU launches," the note added.
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Jan 7, 2020 08:02 pm

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