Biocon is well placed to monetise global Biosimilar opportunity with key launches from H2FY20: the management has highlighted its confidence on monetising opportunities from Trastuzumab launch in the US by Q3FY20, approval of insulin glargine in the US by March 20 and scaling-up in Peg-Filgrastim market share in the US from Q4FY20 given ongoing capacity expansion.
Investing for next growth cycle: Expects filing of bevacizumab in the US and the EU by end FY20 and approvals by FY22, Development of Insulin Aspart for EU and US, and developing a basket of biosimilars/NCEs in partnership and also under own label.
EBITDA margin expansion from FY21: Higher gross R&D and staff expenses (ramping up talent pool via global hires) would keep FY20 EBITDA margin under check, but improve from FY21 with scale-up in market share from Peg-Filgrastim, Trastuzumab and Glargine in the US.
Additional upside, unlocking biosimilars value via monetisation: Expects private equity infusion in biosimilar SPV in near term and later IPO in 12-24 months. China market entry: Biosimilars – given the recent Upjohn-Mylan merger, Biocon’s biosimilar molecules under Mylan partnership could get better access to the Chinese market given Upjohn’s strong foothold in China.
Biocon recently entered into a licensing agreement with CMS for commercialisation of 3 small molecule generic formulations.
Current correction (26% in 6 months) unwarranted as management remains confident of overcoming concerns on Peg-Filgrastim market share. Biocon is well positioned given strong earnings growth visibility (amid pharma sector volatility) on multi-product biosimilar portfolio and pipeline (own and partnered – Mylan, Sandoz) and NCE assets. ‘BUY’ with TP of Rs 300 (30x FY21E EPS).