Biocon Biologics to acquire Viatris’ biosimilars business for up to $3.3 billion in stock and cash

Biocon Biologics Ltd (BBL), a subsidiary of Biocon Ltd has announced that it has entered into a definitive agreement to acquire Viatris’ biosimilars for a consideration of up to $3.335 billion, including cash up to $2.335 billion and compulsorily convertible preference shares (CCPS) in BBL, valued at $1 billion. The Board of Directors of both companies have approved the transaction.

Biocon in a release said that the combined business will be a unique fully integrated global biosimilars enterprise. 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).

In a press release Kiran Mazumdar-Shaw, Executive Chairperson, Biocon Biologics, said: “This acquisition is transformational and will create a unique fully integrated, world leading biosimilars enterprise. Our long-standing global partnership with Viatris has enabled us to achieve many firsts, setting new benchmarks for the global biosimilars industry. This strategic combination brings together the complementary capabilities and strengths of both partners and prepares us for the next decade of value creation for all our stakeholders.”

“The deal will enable BBL to attain a robust commercial engine in the developed markets of U.S. & Europe and will fast-track our journey of building a strong global brand. It will also make us future-ready for the next wave of products. This development takes our partnership with Viatris to the next level to realize our shared purpose of impacting global health by providing affordable access to high quality essential and life-saving Biosimilar drugs,” she added.

Dr Arun Chandavarkar, Managing Director, Biocon Biologics, said: “By combining the biosimilars business of Viatris to create a global, vertically integrated business in BBL, we are confident of unlocking significant value for our stakeholders. This deal gives BBL full ownership of Viatris’ rights in biosimilars assets, enabling us to recognise combined revenues and profits. To ensure a seamless transition and continued service to patients and customers, Viatris will provide commercial and other transition services to BBL for an expected period of two years.” 

‘Will help in mitigating pricing pressures’

“This deal provides several advantages, including strategic agility and operational efficiencies, which will help us mitigate pricing pressures in a competitive global biosimilars landscape. We remain committed to sustainable growth with a strong financial profile, expanded geographical reach and continued investments in R&D to build a world-leading biosimilars franchise. We believe that as a fully integrated global company, we will be able to enhance patient access and reduce healthcare inequities worldwide,” he added

Robert J. Coury, Viatris’ Executive Chairman said: “Our unique collaboration with Biocon began more than a decade ago, even before a biosimilars pathway was defined in most countries. During that time, we have experienced many successes, and today is no exception as we join together to create a new, uniquely positioned world class vertically integrated biosimilars leader. This transaction will allow Viatris to continue to participate in the global biosimilars space in a more optimized way, while also allowing us to accelerate our own financial priorities.”

Explaining the strategic rationale for the acquisition BBL said 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. The deal will expand BBL’s EBITDA base and strengthen overall financials, enabling investments for sustained long- term growth. It will also lead to operational efficiencies across the complete value chain and build agile capabilities in development, manufacturing, regulatory, supply chain and commercialization in developed and emerging markets.

BBL said the combined entity would have expanded global reach and would accelerate the build out of their commercial capability in developed markets in order to become a strong global brand with a direct presence in U.S., Europe, Canada, Japan, Australia and New Zealand. 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. By integrating Viatris’ portfolio, BBL will have one of the broadest and deepest commercialised biosimilars portfolio in the industry.

Viatris will receive cash consideration of $2 billion on closing of the transaction and up to $335 million as additional payments expected to be paid in 2024. Additionally, upon closing of the transaction, BBL will issue $1 billion of Compulsorily Convertible Preference Shares (CCPS) to Viatris, equivalent to an equity stake of at least 12.9% in the company, on a fully diluted basis.

The transaction is expected to close in second half of 2022, subject to satisfaction of closing conditions, including certain regulatory approvals. The companies will also enter into a transition services agreement, pursuant to which Viatris will provide certain transition services, including commercialization services, for an expected two-year period. Viatris also will pay $50 million to BBL to fund certain capital expenditures.

In return, BBL will acquire Viatris’ global commercial infrastructure in developed and emerging markets, its global biosimilars business with an estimated revenue of $875 million and EBITDA of $200 million for CY 2022 and estimated to exceed $1 billion in revenue next year.

Viatris’ rights in all biosimilars assets including its in-licensed portfolio and an option to acquire Viatris’ rights in Aflibercept. Transition services for an expected two-year period will ensure a seamless transition with partners and continued services to patients and customers

The cash payment of $2 billion by BBL is to be funded by $800 million raised through equity infusion and the remainder to be funded by debt, additional equity or a combination thereof. BBL said it has received expressions of interest from financial institutions for debt financing and equity commitments from existing shareholders.

Kiran Mazumdar-Shaw will continue as the Executive Chairperson of BBL. Viatris will designate Rajiv Malik, President of Viatris, to serve on the BBL Board. The company also said that it sees minimal overlap of roles in the two organizations due to the complementary nature of their teams thereby facilitating seamless integration of the two businesses.

Allegro Capital served as the financial advisor to BBL. Goodwin Procter and Shardul Amarchand Mangaldas served as BBL’s legal advisors for the transaction. 

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