Plenty of catalysts for Biocon over the next few months, say analysts

Progress in biologics, projects in the pipeline driving prospects

Rising almost 10 per cent in intra-day trade, shares of Biocon scaled an all-time high of Rs 455 apiece on Monday, before closing the day with minor gains. The Drug Controller General of India’s (DCGI’s) nod for the launch of Covid-19 treatment biologic Itolizumab (ALZUMAb) in an injectable form for emergency use, coupled with the company’s claim of its efficacy, constituted major triggers. 

Analysts say Biocon’s product has an advantage and is to be used for patients suffering from moderate- to severe-respiratory distress. While many players have launched drugs for emergency use in Covid cases, actual sales will depend on a successful response to the drugs. Further, while these products may give some immediate revenue mileage, given that their use is limited to hospital emergencies for now, major sustainable benefits can only be seen once companies can establish their efficacy after extensive trials.

For now, the outlook for Biocon hinges on its biologics pipeline for developed markets such as the US and Europe, and that remains healthy.

 

 

Though the March quarter (Q4) performance remained soft due to supplies being impacted by the lockdown, Biocon has remained confident of achieving its target of $1 billion in sales from biologics by financial year (FY) 2022. The stock, too, has seen strong gains of 26 per cent since Q4 results, with additional triggers coming from its partner, Mylan, which recently received approval for the launch of insulin glargine in the US, which validates steady progress in biosimilars.

The insulin glargine’s market in the US is significant, with sales of $1.3 billion reported by Lantus (Sanofi’s product) in calendar year (CY) 2019, point out analysts. Opportunities are abundant for Biocon-Mylan amid increasing demand for cheaper insulin products in the US. There is also ample capacity at Biocon’s Malaysia insulin plant, which has already received an EIR (establishment inspection report) in April, easing concerns over US FDA inspections.

While the launch of insulin glargine is expected shortly, there are other triggers too. As sales of already-launched oncology biologics in the US (Ogivri and Fulphila) could drive growth, Mylan is expected to launch the biosimilar etanercept in the European Union during the second half of CY 2020. Etanercept is used to treat autoimmune diseases. The approval of biosimilar bevacizumab (oncology), aspart (rapid-action insulin) and recombinant human insulin (rh-insulin), which are other products in the pipeline for developed markets are also awaited.

On the whole, there are multiple catalysts for Biocon over the next few months, say analysts at HSBC, who have increased their FY21-23 earnings estimates by 1.8-7.7 per cent in view of a visible improvement in execution of biosimilars. They expect FY21 and FY22 earnings growth of 50.6 to 57.5 per cent, respectively.