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Morgan Stanley has upgraded its rating on Biocon to overweight from underweight and raised target price to Rs 622 (from Rs 459 earlier), saying 2016 could be a turning point for the biopharmaceutical company. The stock surged more than 7 percent intraday Tuesday.
The brokerage sees Biocon as a strong re-rating story given that markets have hardly priced in its biosimilar pipeline.
It believes that company's (and its partner Mylan) four potential product filings each in the US and EU would add credibility to its pipeline and bring market recognition. Emerging market monetisation is under way, but the US and EU opportunities will take at least two years, according to report.
Four lead compounds of Biocon are glargine, trastuzumab, pegfilgrastim, and adalimumab.
By 2020, Morgan Stanley says it expects USD 244 million (and growing) revenue, which, at 30 percent margins, implies a doubling of current profits, adding the company has a follow-on pipeline of another five products in early stages which together give growth visibility over longer term.
Key risks, according to the brokerage, are regulatory setbacks (three out of four phase 3 trials are non-US), legal delays, innovator strategies (for example, shifts to new, improved products), and market challenges.
At 10:17 hours IST, the scrip of Biocon was quoting at Rs 525.85, up Rs 34.85, or 7.10 percent amid high volumes on Bombay Stock Exchange.Posted by Sunil Shankar Matkar
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