US launch of second oncology biosimilar to boost Biocon's earnings

Even as the Street will monitor product ramp-up, commercialisation of more biosimilars will drive prospects further

Biocon, with its partner Mylan, launched the much awaited oncology biosimilar of Trastuzumab in the US, the world’s largest healthcare market. It marks the second biosimilar launch in the US after the company’s launch of oncology drug Pegfilgrastim earlier.  

The Trastuzumab launch is likely to give good mileage to Biocon being the first biosimilar launch of Roche’s Herceptin, which is a $ 2.9 billion brand. Further, Biocon/Mylan will be launching both the strengths (420 mg and 150 mg) of biosimilar Trastuzumab. However, though the opportunity remains big, analysts are awaiting progress on the ramp-up and market share gains by Biocon.

Some analysts say that unlike the rapid penetration of earlier product, Pegfilgrastim that was a supplement protein in cancer treatments, Trastuzumab is likely to see a staggered ramp up as it is a complex product. Further, four other companies are expected to launch the drug over time and competition may increase. Analyst at PhilipCapital factoring a price erosion of 40 per cent and market share of 10 per cent estimate Trastuzumab to earn incremental sales of $165 million and $190 million for Biocon-Mylan in FY21 and FY22, respectively (five per cent incremental earnings in FY21). 

Biocon‘s prospects continue to be driven by the launch of biosimilars, which is also a key reason for its stock price gaining more than 30 per cent since September lows. The September quarter had seen the Biologics segment revenue grow 40 per cent year-on-year led by a robust performance of its key biosimilars portfolio in developed and emerging markets, sales of biosimilar Pegfilgrastim in the US and Europe, biosimilars such as Adalimumab (arthritis treatment), Trastuzumab and few more in Europe. The company has been targeting emerging markets which are witnessing strong sales, and has also commercialised both insulin and Trastuzumab biosimilars in Australia.

Analysts at Anand Rathi had earlier said that they continue to expect the company to get benefits of the first wave of biosimilar commercialisation in the next two years which should lead to higher revenues and margins. The launch of Insulin product in the US by March 2020 is seen as the next trigger for Biocon. For now, the target prices of Anand Rathi and PhilipCapital suggest up to 41 per cent gains for the stock trading at Rs 283.05.