Biocon: Street to keep an eye on CY21 launches, market share gains

Launch of a cancer drug was delayed due to Covid-19

The Biocon stock was down 3.4 per cent after the US Food and Drug Administration (FDA) deferred its decision on the company’s application to launch a biosimilar of Bevacizumab in the American market. The market for the drug, which is used in treating some cancers and eye diseases, is pegged at $3 billion.

The US drug regulator was unable to inspect the company’s manufacturing facility because of travel restrictions on account of Covid-19. The application for approval was filed by Biocon’s subsidiary, Biocon Biologics.

While analysts have not modified their FY21 earnings estimates because of the delay in the approval process, they believe that if the process is delayed by a couple of quarters, it may impact revenues in the next financial year. Shrikant Akolkar of Ashika Institutional Equities says: “We are not factoring in a bevacizumab biosimilar opportunity for Biocon in FY21. The drug accounts for about 7 per cent of Biocon’s biosimilar segment’s revenue in our estimates for FY22, hence any delay in getting approval in the next financial year will mean a risk to our FY22 forecasts.”

While the small molecules and research services (Syngene) segments are expected to do well, the progress on recent launches and market share gains in the biologics segment is what the Street will watch out for. In addition to bevacizumab, among the near-term triggers is the launch of insulin aspart, with global sales of $4.2 billion of which more than half is contributed by the US and the EU. 

The company is hoping to hit the $1-billion sales mark in FY22, from the current $350 million for the biologics segment. This is expected to be driven by traction in revenues from biosimilars trastuzumab and pegfilgrastim, used in treating cancers in the US and the European Union, as well as ramp-up of insulin glargine in developed markets. Revenues of the biosimilar segment were impacted during the last three quarters due to Covid-19 and increasing competition for some products.

CLSA in a recent report put out a “sell” call on the stock, highlighting the mixed bag in market share, with the share of pegfilgrastim dropping to September levels and gains in trastuzumab. Consistent gains from these key products, as well as new launches, will be the key for the stock, which is trading at 40x its FY22 net profit estimates.