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Sovereign wealth fund ADQ to invest $75 million in Biocon Biologics, deal values firm at around $4 billion

The current investment has put the post-money valuation of Biocon Biologics at ~$4.17 billion, said Kiran Mazumdar-Shaw, Executive Chairperson of Biocon

January 07, 2021 / 05:28 PM IST
 
 
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Biocon on January 7 announced that the board of its subsidiary Biocon Biologics has approved a $75 million (Rs 555 crore) capital injection from the Abu Dhabi government’s sovereign wealth fund ADQ in lieu of a 1.80 percent stake.

The latest transaction is the fourth successive fundraise by Biocon Biologics in the last 12 months as it looks to unlock value for the shareholders of its parent and scale up its  r&d and manufacturing capabilities. Previous fundraising rounds have seen participation by Wall Street powerhouse Goldman Sachs, Tata Capital’s PE arm and India-focused private equity firm True North which invested a combined sum of $255 million.

Moneycontrol was the first to report the proposed fund infusion on November 24th, 2020.

The deal was struck at a  post-money equity valuation of $ 4.17 bn for Biocon Biologics firm which is planning an IPO in the next 2-3 years. It also marks the debut investment by ADQ in the domestic pharma and healthcare segment and opens the doors of the Middle East market to Biocon.

As part of the official announcement, Kiran Mazumdar-Shaw, Executive Chairperson, Biocon, said: “We welcome ADQ as our investment partner as we pursue our shared goal of expanding access to high quality affordable biopharmaceuticals to patients across the globe. We are committed to pursue our affordable innovation model to generate savings for the healthcare systems worldwide. This investment is an endorsement of the value that Biocon Biologics business has built as a fully integrated pure-play biosimilars company and will enable us to expand our capabilities further. The current investment has put the post-money valuation of Biocon Biologics at ~$4.17 billion.”

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Mohamed Hassan Alsuwaidi, Chief Executive Officer of ADQ, said: “Our long-term ambition for ADQ’s healthcare and pharma portfolio is to create a provision-centred, digitally enhanced ecosystem that is anchored in world-class clinical excellence, effective population health management and resilient supply chain infrastructure.

BIOCON: THE MARKET VIEW

Brokerage Sharekhan recently released a bullish report on Biocon highlighting the biologics segment.

“Biologics segment is expected to be a significant growth driver and the company is well placed to harness the opportunities emerging in global biosimilars space. Sturdy growth prospects, strong earnings visibility, healthy balance sheet position and lower debt-equity augur well for the company. The possible listing of its wholly-owned subsidiary - Biocon Biologics Limited provides a significant value-unlocking opportunity and this bodes well for the company,” the report said.

Biologics are a type of medication derived or synthesized from living biological organisms. A biosimilar product is a biologic product which is approved based on demonstrating that it is highly similar to a biologic product (reference product) approved by regulators. Clinically, it has no meaningful differences in terms of safety and effectiveness from the reference product.

With the demand for biosimilars set to grow as patents of originator biologics expire and patients demand lower-priced drugs, Biocon Biologics is well-positioned to expand access.

BIOCON BIOLOGICS: THE ROAD TO A BIG-BANG LISTING

The company has one of the largest biosimilars portfolios globally, spanning recombinant human Insulin (rh-Insulin), insulin analogs, monoclonal antibodies and therapeutic proteins for oncology, immunology and other chronic disease areas. Biocon Biologics also has the full spectrum of insulins (regular, basal and rapid) in its pipeline for the purpose of treating diabetes patients.

According to Biocon’s latest annual report, the Biologics business ended FY20 reporting a 29 percent growth in revenue at Rs 1,951 crore.

“The market opportunity is expected to double over the next couple of years with developed market sales projected to increase in FY21 and beyond. The recent launch of Trastuzumab in the US, the upcoming launch of Insulin Glargine in the US, and Pegfilgrastim in the EU coupled with the launch of Insulin Aspart and Bevacizumab in EU and U.S. markets through Mylan in the next calendar year will be drivers of this growth,” the annual elaborated on the biologics segment.

Biocon Biologics has a “presence in the majority of the top 20 markets, which should aid expansion in MoW markets with further uptake, launch of new products and entry into new markets,” it said.

“We expect capex spends to be ~USD 200 million in FY21, split equally between Small Molecules and the Biosimilars businesses. We are well-positioned for success as an early mover in the biosimilars space with a large portfolio of products and limited competition in some of the molecules,” the report added.

According to research report estimates, the global biosimilars market size is expected to grow to $35.7 billion by 2025 from $ 11.8 billion in 2020, at a CAGR of 24.7 percent. The segment is experiencing significant growth due to rising cases of chronic diseases and the increasing demand for biosimilars due to their cost-effectiveness.

THE ADQ STRATEGY

ADQ, which was established in 2018, owns assets such as Abu Dhabi Ports, Abu Dhabi Airport and bourse operator ADX. It has also built a portfolio of food and agriculture businesses and recently picked up a 22 percent stake in Dubai-based courier Aramex. Earlier, in November, the fund had announced the acquisition of a 45 percent stake in Swiss commodities trader Louis Dreyfuss Company (LDC).

Established in Abu Dhabi in 2018, ADQ is one of the region's largest holding companies with direct and indirect investments in more than 90 companies. Its portfolio of major enterprises span key sectors across Abu Dhabi's economy, including food and agriculture, aviation, financial services, healthcare, industries, logistics, media, real estate, tourism and hospitality, transport and utilities.

The Middle East investment arm has also rolled out a new $300 million venture capital fund—Alpha Wave Incubation (AWI) Fund—to invest in startups in India and South-East Asia. Reports indicate that AWI is mulling an investment in online insurance platform PolicyBazaar.
Ashwin Mohan
first published: Jan 7, 2021 05:05 pm

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