Pick-up in biosimilar launches driving Biocon's prospects; stock rises 7.8%

As US launch of Insulin addresses a large market, improved visibility for more launches will keep sentiment elevated

The news of Biocon with its partner Mylan launching Semglee (insulin glargine injections) in the US market boosted Street sentiment. Biocon's stock gained 7.8 per cent on Tuesday adding to almost 49 per cent gains since March lows.

While the company had received US drug regulator’s approval for the launch of diabetes treatment product in vial and pre-filled pen forms during the month of June 2020, the launch was eagerly awaited looking at its large addressable market. The target market size is around $2.2 billion, which is divided between Sanofi’s Lantus and Eli Lilly/Boehringer Ingelheim’s Basaglar.

As the opportunity is huge amid increasing demand for cheaper insulin products in the US, there is ample capacity at Biocon's Malaysia-based insulin plant to meet market demand too, say analysts. It was the prudent execution strategy that had been awaited for helping Biocon’s product gain market share. The company has not disappointed and made Semglee available at a 65 per cent discounted list price, the lowest for a long-acting insulin glargine in the market. Earlier in December 2016, Basaglar was launched at 15 per cent discount to list price of Lantus and had achieved $876 million sales by CY2019, suggests HSBC data. Amidst public criticism of rising insulin prices in the US and to gain market share, Biocon/Mylan have followed prudent pricing strategy, say analysts.

 

The company’s low-price strategy is likely to help it gain market share, and it is also confident about receiving interchangeability that could be another key positive, say analysts. Mylan/Biocon have continued to be in active discussion with the US FDA to obtain an ‘interchangeable’ designation for Semglee, which if received could help it in automatic substitution of prescriptions with Lantus at pharmacies. As the same will be watched for, Biocon/Mylan remain confident about achieving their target of $1billion in sales from biologics by FY22 ($256 million in FY20) and the triggers are many.

While Semglee is the third biologics launch in the US by Biocon/Mylan, the earlier launched oncology biologics are gaining market share. Trastuzumab market share saw a positive trend during June quarter while that for Pegfilgrastim was steady at 6 per cent despite higher competition, say analysts at Motilal Oswal Securities. Mylan/Biocon are likely to receive another biologic drug approval in the US for oncology treatment (Pertzumab). Further, FDA had accepted application for biosimilar bevacizumab (oncology treatment) in Q4FY20, and the review goal date of December 2020 raises hopes of another approval in FY21. Bevacizumab application is under review in Europe too while launch of an auto-immune treatment drug biosimilar in Europe is anticipated soon (approval in place).

Analysts at HSBC have given target price of Rs 475 for stock trading at Rs 406, while MOSL estimates earnings growth of 39 per cent annually over FY20-22.