for Biocon in view of…
o Steady base business fundamentals—lower statin dependence and domestic formulations scaling up—gives visibility of midteen earnings CAGR, FY14-16.
o Prospects of global biosimilar opportunities coming to fruition in ensuing years (2015-25).
o Biocon’s steady preparedness to monetise its biosimilar assets— human insulin phase III trials, steady drawdown in capex for dedicated Malaysian facility, partnership with significant global generic player (Mylan) …although these positive factors also imply challenges:
o Monetising biosimilar assets – These include clinical trials, regulatory approval, manufacturing scale-up and market acceptance. First EU filing (human insulin) in 2015.
o Base business is in large part API sales to institutional customers (i.e., limited retail branding) which carry risk of sudden loss of sales and/or margins.
Key downside risks to our price target include: Delays in development and regulatory approvals—especially human insulin and analogs for EU, and biosimilars in India and EM; litigation risk on pen devices; and failure of lead compounds in the proprietary pipeline. Manufacturing scale-up market access in EU for biosimilars are other credible. Slowdown in RoW sales of insulin and immunosuppressants is the key risk to earnings, in our view.