Biocon’s biosimilar arm may raise $500 m to fund clinical development

K GIRIPRAKASH VENKATESH GANESH Bengaluru | Updated on January 09, 2018 Published on December 21, 2017

New entity likely to unlock value for Biocon shareholders

Biotechnology major Biocon is likely to take its group entity Biocon Biologics public and is expected to raise about $500 million. Sources close to the company said that the new entity will need huge investments to fund clinical development and it could go up to $500 million.

Biocon recently received shareholders’ approval to the resolution for transfer of biosimilar business by slump sale to Biocon Biologics India.

The biologic assets consists of monoclonal antibodies and recombinant insulins and novel biologics and will be a wholly-owned subsidiary.

“We decided to create a Biocon Biologics as a standalone entity like Syngene. This will enable us to go to the capital market to raise more money if we want to develop another range of antibodies,” Biocon’s Chairman and Managing Director Kiran Mazumdar-Shaw told BusinessLine. She said that to develop each molecule it costs between $150 million and $200 million and takes at least five years to develop. “The clinical development cost alone constitutes 80 per cent of the total costs. So, you can understand how expensive it is,” she said.

Mazumdar-Shaw, however, did not say the total amount of investments required for the new subsidiary. The new subsidiary is also expected to unlock value for Biocon shareholders, similar to the way it unlocked value for its contract research subsidiary Syngene, which got listed in 2015.

Biocon has already invested about $250 million to build an insulin plant in Malaysia, and for scaling up the antibodies, it will cost more. “So, obviously, these investments are going to really stand us in good stead going forward,” Mazumdar-Shaw said.

The biotechnology major sees a sizeable opportunity in the biologics space and feels that going to capital markets will help it to be a differentiator. So, in August this year, Biocon decided to transfer the company's biosimilars business to its biologics subsidiary.

The development should also be seen in the backdrop of Biocon getting a nod from the US FDA to sell its biosimilar version of cancer drug Trastuzumab, which is used to treat certain types of breast and gastric cancer at rates much cheaper than competitors such as Amgen, Merck and others. For marketing its biosimilars, Biocon has partnered with Mylan, who will market it in the US and Europe.

Shaw said that the company took big risks when biosimilars guidelines were evolving and eventually it paid off. “Our portfolio of drugs is estimated to be a $60-billion market and is growing,” she added.

In its recent quarterly results, Biocon in its guidance said that the company will touch a billion-dollar in revenues in FY-19 and biosimilars alone are expected to contribute 20 per cent.

Analysts are bullish on Biocon at a time when their view on the Indian pharmaceutical sector is not that positive due to severe price pressure as generics business are getting rapidly commoditised. According to brokerage firm Motilal Oswal, Biocon is expected to rake around $350-400 million from sales of three biosimilars in medium term. Trastuzumab approval by US FDA is an important milestone, Motilal Oswal wrote in a report.

Biocon's other two biosimilars include Pelfilgrastim and insulin Glargine are also under review by US FDA and Europe. In the US, it is estimated that 250,000 new cases of female breast cancer and 28,000 new cases of stomach cancer are expected to be diagnosed in 2017.

Approximately 20-25 per cent of primary breast cancers are HER2-positive and competitor drug Herceptin had sales of more than $2 billion for the 12 months ending September 2017 in the US, according to the IQVIA data.

Published on December 21, 2017
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