Buy Biocon; target of Rs 1030: ICICI Direct

Biocon and Mylan have received European Medicines Agency’s (EMA) acceptance to review Mylan’s marketing authorisation application (MAA) for a proposed biosimilar Trastuzumab used to treat certain HER2-positive breast and gastric cancers. This is the second biosimilar submission developed by the partnership that has been accepted for review in Europe. In July, Mylan’s MAA for the proposed biosimilar Pegfilgrastim was accepted for review by EMA.

Encouraging developments on the biosimilars front over the last six months have demonstrated the capability in the biosimilars space. What has cemented Biocon’s position as perhaps the best placed candidate among Indian companies is the series of positive outcomes from developed markets, be they approval and launch of Glargine in Japan or presentation of Trastuzumab data to ASCO or review acceptance from EMA. The launches in emerging markets are also getting momentum. This is likely to improve the share of biosimilars in total revenues from 10% in FY16 to 20% by FY19. With the Malaysian facility getting ready for global filings, we believe the future bodes well for the company on the biosimilars front. It will also provide an extra lever for growth besides Syngene and branded formulations. Although the actual biosimilar launches in EU (and US) are some distance away, we believe the acknowledgement from developed market regulators is likely to improve the valuation perspective. We have introduced FY19 estimates (both for Biocon and Syngene) on account of better visibility and proven capability. Our SOTP target price is now Rs 1030.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.