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Analysts have given their thumbs up to the settlement between Mylan and Roche and are upbeat on Biocon. Collectively, they cite visibility over a launch date as well as an opportunity to capture the market.
Bank of America Merrill Lynch has reiterated its buy stance on the stock with a target price of Rs 1,170. The research firm cites better visibility over the breast cancer drug going forward. “While the launch dates are still confidential, settlement will likely eliminate any further litigation related expense that was likely to accrue on account of Herceptin,” analysts at the firm wrote in its report.
The firm also placed its bet on the company having a first movers’ advantage. “First movers among biosimilars are likely to have several advantages such as lower price erosion, better settlement terms with innovators, and option of longer term contracts with the payers (such as PBMs in the US),” it said in the report.
Meanwhile, Citi also has a buy call on the stock, but has raised the target price to Rs 1,315. The brokerage house also expects the launch date to be in the second half of the next financial year. It also feels that the product could be a meaningful opportunity. Herceptin generated global sales of USD 6.7 billion in2016, mainly from the US and the European Union (EU).
Morgan Stanley, on its part, has placed an overweight call on the stock. The brokerage house too is upbeat on clarity in the product’s launch. “The only impediment to market launch is the facility inspection and drug approval. We expect the US launch to be around mid-2019 and the EU launch to be around mid-2018 (approval by end 2017),” it said in a report. On the economics of the launch, assuming 60 percent price erosion and 15 percent market share, it estimates USD 200 million sales in two years from launch. From this, “Biocon can generate USD 40 million profits assuming 35% profit share. EM upside will be over and above this. The shift towards subcutaneous and combination therapies such as Perjeta is the key risk,” it said in its report.
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