Biocon - The ultimate biosimilars play!

Estimate-of-Insulin-Use-in-Type-2-Diabetes.pdf (985.2 KB)

Please read the above research document to have a feel of opportunity size of Insulin in type 2 DM

I think insulin is oldest and time tested products in biosimilars catagory for Biocon . It’s breadbutter for company (will generate cash for other biosimilars )


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Thanks Ashit for the link which estimates the requirement of Insulin…

  1. Yes, the diabetes numbers are increasing…

  2. Diabetes as a disease is as old as mankind…

  3. While Metformin and Sulphonylurea oral drugs are in use for the last 50 years and it’s efficacy duration is predictable…i.e After a long term use these drugs become ineffective forcing the patient to resort to insulin… sufficient data for durability is available and hence has been extrapolated to predict insulin requirement…

  4. However, there are newer class of oral drugs which have been discovered very recently during last 5-8 years … Their durability/efficacy has been assumed to be same as the old oral drugs of Sulphonylurea/Metformin which may be a wrong assumption…
    After all, these newer oral drugs (DPP4 inhibitors, GLP1 Agonist , SGLT2 inhibitors discovered during 2008-2018) to last longer or even life time … it is too early to predict…

(5) However, all the above 3 newer drugs are not yet available throughout the whole world …for example GLP1 Agonist oral drug not yet available in India…but it will come soon…USA already in use…

(6) Nevertheless, the assumption of accelerated increase in diabetes may not be correct… Day by day people are becoming health conscious…and peole are realising that Diabetes is more of a life style disorder which can be corrected to a great extent by A healthy diet - Eating a Low Carbohydrate diet (Grain free) , a lot of Green Vegetables, fruits, Seeds and Nuts… and Physical exercise , Yoga, Pranayam…Remaining Active and leading a stress free life…

(7) Having said that Bio-similars have a great future … Since majority of diabetes would not be able to follow the ideal life style and therefore would initially go for oral drugs and eventually may need insulin …Bio-similars insulin would be ideal…
Going by the fact that Abbott and Sanofi India’s Human Mixtard and Lantus insulin are among the top selling drugs in India…occupying no.1 and no.2 position respectively…
And Biocon needs to sell its product at a lower rate to compete eith Mixtard and Lantus…


Here is the summary of the Q1 results. This interview is really cool and gives a lot of information about how they are looking at the future

  • Recovered from the de-growth in last quarter (19% growth in biosimilars, 16% growth in generics)
  • Long term plan is to have a comprehensive insulin portfolio in US by forging partnerships such as that with Voluntis for Insulia, its digital delivery platform. Wants to be a global player in Insulin
  • Biosimilar business:
    o Targeting 8 biosimilars in US by FY22 end: Trastuzumab, Pegfilgrastim, Adalimumab, Bevacizumab, Etanercept, Insulin Glargine, Insulin Aspart, rh-Insulin.
    o 3 additional biosimilars b/w FY22 and FY25
    o 8 biosimilars developed with Mylan; few more in partnership with Sandoz; After those, Biocon has a pipeline of its own biosimilar molecules (rh-Insulin is the first one in Biocon’s name)
    o Maintains $1bn sales guidance in biologics division
    o Maintaining market share in Pegfilgrastim (although competitive pressure is increasing)
    o Increased market share in Trastuzumab
    o Mylan got FDA approval for selling biosimilar Adalimumab (in sourced from another partner) and got EU approval for Etanercept (in sourced from Lupin). Biocon will get economic benefit once these two products are launched in their respective markets
  • Novel biologics business
    o Itolizumab (a novel molecule) can be the first blockbuster drug from an Indian pharma company. Currently struggling with capacity to meet COVID demand
    o Bicara therapeutics: Developing novel immune-oncology asset (BCA101), fusion monoclonal antibody; To proceed with Phase 1/1b
  • Potential non-linear growth contributors: Biosimilars, Itolizumab, Bicara, Insulin
  • Track R&D to know future growth
  • Indian branded formulation business has been merged with biosimilars and a separate vertical for Novel Biologics has been carved out
  • Will sell 7 of its generic products in Singapore and Thailand by partnering with DKSH who will manage marketing, sales, and logistics

Q1 FY21

Biocon drug Fails to get govt approval.

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I find valuation of Biocon Biologics segment strangely undervalued/mispriced.
Biocon’s current valuation is at ~7x EV/Sales.
Now they have sold Biologics stake at EV of 30000cr. Considering TTM sales at ~2000cr, this comes at EV/Sales of 15. Fair enough

Now let’s extrapolate this for next year.
Management is guiding for $1BN sales for Biocon Biologics by FY22. Considering 15% growth in remaining businesses (this is just an approximation as per guidance), total sales would be ~4500cr+ ~7500cr= 12000cr
At current MCAP of Bicon, this will result in valuation of 4x EV/Sales for Biocon.
Let’s come back to biologics segment, Sales would be 7500 cr, and EV at 30K cr. This comes at 4x EV/Sales
Now Biocon is a holding company while Biologics is a super growth high margin business.
Why would this high growth high margin business would be valued at same valuation as of Holding company.
Nevermind the global biologics space valuation. Samsung Biologics was valued at 55x Sales, which is surely above the benchmark, but 4x forward EV/sales looks highly undervalued and mispriced to me


What will be the benefit to Biocon If Biocon-Biologics get listed in market through IPO. WHY NOT DEMERGER?

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Minority shareholders will lose out if IPO happens. Only way to win is demerger when you get value in an entity which shareholders have supported all these years… Hope management doesn’t short change…


IPO is certain given that with Syngene also they went through IPO route. I don’t think existing shareholders will loose out a lot here because even before the IPO, they will be doing few more P/E rounds and that will unlock value within Biocon Limited.

And shareholders interested in Biologics business will either way get a separate shareholder quota during the IPO.

Dear Sir,

Pls see the value a shareholder quote creates versus demerger. Its not Even comparable. Biocon would be reduced to largely holding company, with some standalone business.

You incubate a business for 10-15yers and then see your value being lost like this… And then talk about corporate governance really. Happy to disucsss if am missing a point.


Absolutely agree to this point. Minority shareholders wont get anything but a holding company Biocon and there will always be big holding company discount and price will definitely correct accordingly.

Even separate share holders quota will be available to all those people who will hold just 1 share before DRHP gets finalized and there is no differentiation between people who have held Biocon for years because of entire Biologics and small molecule space and they will not get a good deal. In all likelihood Biocon will go for IPO rather than demerger route as they demonstrated in case of Sygnene.

P.S : Please report/delete this post if its not adding any value.

At Syngene IPO time also was the same sentiment there? did the Investors get any Syngere stock offer?

Looking in that way it is a case of shareholder unfriendliness.

But looking at the bigger picture it has greater importance. By going the IPO route they will get access to the necessary equity capital (without dilution of equity shareholding of Biocon) which will be judiciously used for future growth. A plain demerger won’t create any growth funds to the company for which they will then have to go for equity dilution or debt financing. Equity dilution will reduce your shareholding and debt financing will weigh on the EPS due to the interest burden.

As a shareholder of Biocon I have no problem with this steps as long as they focus on growing the company and creating value for the real world.

Ironically, we never seem to question this decisions in a financial organizations (HDFC AMC & Life went the IPO route too) probably because money is the RM there, but we also need to understand that an innovative biopharma needs growth capital in regular junctures as the need for r&d spend is huge.


Fund raise can and is happening before separate listing. IPO is more like an exit most likely to the likes of True North etc.

Demeger still gets the new entity listed but yes agree that buyers have to be found for the exiting shareholders.

Which is not a difficult thing - countless people have done that through block deals. Not liking this personally but cannot do anything about it.

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The issue of demerger vs IPO has been discussed before in this thread. I am copy pasting my reply in the past

  • cant be bothered to write an essay…copy pasted below

Demergers are usually done if no “new capital” is required for the demerging business and to focus on the core business…

The main point is that Biologics business needs “new capital” to fund its R&D and this will be a significant recurring expense. They are raising the money from PE investors and the likes by means of stake sale at “premium valuations”. This is not possible with demergers.

Existing shareholders will not pay premium valuations for new investments in the business they already own (rights issue, share purchase plan etc - money raised using these methods are usually at a discount) and hence this method of raising new capital is also not the optimal one for biocon.

So the biologics ipo will be similar to Syngene ipo. Biocon shareholders might get preferential allocation…

I also feel that Biocon are raising the money in the best possible way for all stakeholders in the company. I have no doubts about their corporate governance

Discl - Biocon shareholder since 2016, continuing to add


At the cost of small repetitions, here’s my take:

Objectives for Biologics business:

  • Fund raise
  • Exit to such PE investors who help fund raise

#1 above is happening already. Biologics is a separate entity and hence can and is raising equity. Rightly so

Next comes the question of exit to such guys and creating value.

If a demerger happens, PE Guys shareholding becomes liquid and ready to be sold but they cannot really sell like an IPO OFFER FOR SALE.

This is the reason IPO needs to be done. No choice really. Unless PE guys hold small stake and okay to sell later vide block sale on the exchange.

Guess can do nothing as a Biocon shareholder. Perhaps buy stake in new entity when it lists.

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I don’t think PE firms and other investors who have invested in Biocon Biologics at a premium recently would want an exit so early - they want to be part of a growth story for medium to longer term.

The primary aim of Biocon biologics IPO is to unlock the value (higher valuation as a standalone listed entity), and to raise funds from new investors at a premium.

Biocon shareholders will get preferential allocation (similar to what happened during Syngene IPO). Let us rest this topic and time to move on…