The Biggest Move of Biocon Towards Investment in Biologics Business

    Amidst the growing surge in the number of critical patients in India and a similar demand for the research and development sector to come up with innovative & effective drugs, the biologics business has naturally gained special focus.

    Owing to this, Biocon Ltd. forays into partnering with private equity firms for investment in its biologics business.

    It is in discussion with these firms regarding the matter before the venture goes public within the next two years.

    What Kiran Mazumdar-shaw Has to Say?

    In an interview with BloombergQuint’s Niraj Shah, the executive chairperson at Biocon, Kiran Mazumdar Shaw says that the business is very capital-intensive and largely depends on R&D and being vertically integrated.

    She further adds that Biocon wants to be a vertically-integrated biosimilars company in the near future, and hence, they need to make these investments.

    Talking about the private equity firms, she says that presently Biocon eyes on PE firms so that it can properly execute the capital allocations without being too leveraged.

    It is also pretty clear from Kiran’s words, that Biocon is all set to utilize these cash inflows to support its R&D pipeline.

    Recent Stakes of Private Equity At Biocon

    Tata Capital Growth Fund has invested $30 million (Rs 225 crore) in Biocon Ltd, which accounts to an equity stake of 0.85%, valuing the unit at $3.5 billion.

    In January 2020, True North acquired a 2.44%minority stake in the pure-play biosimilars firm for $100 million (Rs. 536.25 crores), which valued the subsidiary at $3 billion.

    Growth of Biocon

    Biocon witnessed a yearly rise of 12% in the revenue obtained from its research services. This is followed by an 11% growth in biosimilars and 8% in the generics business.

    However, higher research and development expenses, followed by staff costs and forex losses, tend to diminish Biocon’s profitability to a great extent.

    Decline in Profit

    Reportedly, the company’s profit declined the previous year by about 23% to Rs. 174 crore in the September quarter. Biocon’s total revenue increased by 11%, standing at Rs.

    1,745 crore. Regarding the profit decline, chairperson Kiran Mazumdar-Shaw expressed her disappointment and pointed out operational issues to be the prime reason behind such an outcome.

    Furthermore, she stressed that the company had done well but could do better.

    Future Perspectives

    According to reports, Biocon expects to recover in the biologics business and witness strong numbers in the upcoming quarters.

    It aims to achieve an annual sales target of $1 billion by the financial year 2022 and strives to list its biosimilars unit, which was hived off in March 2019, in the next two to three years.

    Biocon also visualizes the introduction of recombinant insulin in the market, admitting that it has the level and the potential to invest in the same.

    Boasting on a robust growth trajectory, the company aims at obtaining a benchmark valuation through its IPO (Initial Public Offering).

    At the same time, Biocon also likes to ensure that it doesn’t want any huge sale in private equity at the moment except the amount that would suffice to support the research and development unit.

    Final Thoughts

    From the recent talks between BloombergQuint and Kiran Mazumdar-Shaw, it is quite clear that biologics stake sale is on the cards for Biocon.

    Consequently, this would be a major step forward for the company in its biologics business.

    We are yet to unveil what exactly would be the growth figures once this landmark venture takes place.

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