Biocon arm plans to acquire Viatris' biosimilars assets; stock falls 8%

The companies will also enter into a transition services agreement. Viatris will provide certain transition services, including commercialization services for an expected 2-years

Shares of Biocon slipped 8 per cent to Rs 363.45 on the BSE in Monday’s intra-day trade after Biocon Biologics (BBL), the subsidiary of the company, announced to acquire Viatris’ biosimilars assets for up to $3.335 billion in stock and cash.

Viatris will receive cash consideration of $2 billion on closing of the transaction and up to $335 million as additional payments expected to be paid in 2024. Additionally, upon closing of the transaction, BBL will issue $1 billion of compulsorily convertible preference shares (CCPS) to Viatris, equivalent to an equity stake of at least 12.9 per cent in the company, on a fully diluted basis.

The transaction is expected to close in second half of 2022 (H2-2022). The companies will also enter a transition services agreement, in which Viatris will provide certain transition services, including commercialization services for two years. 

That apart, Viatris will also pay $50 million to BBL to fund certain capital expenditures. The cash payment of $2 billion will be funded by $800 million raised through equity infusion in BBL and the remainder by debt, additional equity or a combination of both.

"This transaction accelerates BBL’s direct commercialization strategy for its current and future biosimilars portfolio. Viatris to provide commercial and other transition services for an expected period of two years to ensure continued customer service and smooth transition to BBL. The deal will be value accretive to Biocon and BBL shareholders and is structured as part-cash, part-equity," the company said in a press release.

Technical View 

Short-term momentum in favour of bears

Downside Potential: 9.5%

Resistance: Rs 373

Biocon seems to be on an uptrend, with the stock consistently finding support around its 200-DMA in the recent past. The stock so far in intraday deals has broken below the 200-DMA placed at Rs 373-odd levels and also below its 100-DMA placed around Rs 365-odd levels.

The price-to-moving averages action continues to remain favourable for the stock on the daily charts. However, the key momentum oscillators have turned negative as a result of which the stock has been witnessing downward pressure. 

Overall, the Rs 365-level seems crucial for the stock to defend its positive undertone. Sustained trade below Rs 365-level can see the stock correct towards Rs 330-odd levels. On the positive front, the stock is likely to face resistance around Rs 373-odd levels, above which it can spurt to Rs 395.

(With inputs from Rex Cano)