Biocon, a global pharmaceutical company based in Bangalore, India has announced the acquisition of a US-based company- Viatris on Monday 28th February 2022 via its subsidiary Biocon Biologics.With this deal, Biocon has given a clear trajectory towards becoming a pure Biosimilar player.With this deal Biocon has achieved vertical integration by acquiring Biosimilar assets of Viatris which shall help in mitigating competition as more players pivot towards Biosimilars The company is the only Indian company in the global top 10 biosimilar players.The company is already deriving 38% of revenue from the Biosimilars segment as per FY 2021.What are the details of the deal and how this deal adds value to Biocon Biologics, let’s discuss it all in this article as we move forward.
Biocon Biologics- Viatris Deal:
- Biocon Biologics Limited (BBL), a subsidiary of Biocon Limited announced the agreement with Viatris Incorporation for $3.3 Billion or around Rs. 24,750 Cr.
- As per the agreement, BBL will acquire Viatris’s global biosimilar business whose revenue is estimated to be $1 billion (~Rs. 7,500 Cr.) by next year, along with the company’s in-licensed biosimilar assets portfolio.
- The deal between the BBL and Viatris is of the value of around $3.3 billion, where Viatris will be paid in the terms of cash and shares. Viatris will receive $2.33 Billion (~Rs. 17,480 Cr.) in cash and Compulsorily Convertible Preference Shares (PPCS) of the value of around $1 billion or Rs. 7,500 Cr. which will be equivalent to an equity stake of at least 12.9% stake in the company, on a fully diluted basis.
- Of the upfront cash payment, $1.2 billion will be funded by debt, according to the company. The remaining $800 million will come as an equity infusion from parent Biocon.
- The company said that this deal will help the company to build its commercial capability in developed markets to become a strong global brand with a direct presence in the U.S., Europe, Canada, Australia, Japan, and New Zealand.
- Viatris will provide commercial and other transition services for an expected period of two years to ensure continuity of customer service and smooth transition to BBL.
- Post closure of the deal, BBL will realize the full revenue and associated profits from its partnered products; a step-up from its existing arrangement with Viatris.
About Biocon Biologics:
- Biocon Biologics Ltd., a subsidiary of Biocon Ltd., is a fully integrated global biosimilars organization. It is leveraging cutting-edge science, innovative tech platforms, and advanced research & development capabilities to lower costs of biologics therapies while improving healthcare outcomes.
- It has a strong research pipeline of biosimilar molecules across diabetes, oncology, immunology, and other non-communicable diseases. Five molecules from Biocon Biologics’ portfolio have been taken from lab to market in developed markets like the U.S., EU, Australia, Canada, Japan, and key emerging markets.
What’s Ahead for Biocon Biologics:
- BBL will have a comprehensive portfolio comprising its current range of commercialized insulins, oncology, and immunology biosimilars as well as several other biosimilar assets currently under development.
- BBL also has access to the vaccines portfolio through its previously announced partnership with Serum Institute Life Sciences (SILS).
- BBL executive chairperson Kiran Mazumdar Shaw said that after acquiring Viatris, the company is looking to go for an Initial Public Offering (IPO) of BBL in the next 18-24 months.
- BBL which was valued at around $4.9 billion or Rs. 36,750 Cr. in the last financing round, this deal will take its valuation above $8 billion or Rs. 57,600 Cr., as stated by the company.
- This deal shall take a huge rise on the long term debt of the Biocon as initial payment of cash is to be done through debt funded from Biocon
- The deal will expand BBL’s EBITDA base and strengthen overall financials, enabling investments for sustained long-term growth.
- Potential upside from the deal rests on the performance of key assets that are up for approval in the U.S. markets like Adalimumab (used to treat inflammation of joints, skin) or bHumira (Crohn’s disease).
- Company has to remains cautious on Humira opportunity due to stiff competition for the drug from Amgen, Pfizer and Merck.
- Kiran Mazumdar-Shaw will continue as Executive Chairperson of BBL and Viatris will designate Rajiv Malik, President of Viatris, to serve on BBL Board.
- BBL currently has a portfolio of 20 biosimilars. The acquisition of biosimilars assets of Viatris significantly strengthens BBL’s position in providing affordable access to patients through its portfolio in diabetes, oncology, immunology, and other non-communicable diseases. It also prepares BBL for greater success with the commercialization of its future pipeline.
- The biotechnology sector in India is witnessing a strong growth trajectory and has proved to be highly inventive
- The Indian biotechnology industry is likely to register a CAGR of 16.4% to reach US$ 150 billion in 2025
- The Indian biologics market is expected to register a CAGR of 22% from 2019 to 2025 to reach US$ 12 billion by 2025
- Growth of biologics provides opportunity for biosimilars in the market
- Expiry of ~US$ 70 billion biologics drugs patent provides export opportunities to companies such as Biocon which already has its wholly owned R&D subsidiary Syngene