Biocon shares gain 6.5% after Viatris sells its stake in a block deal

Biocon shares climbed 6.5 per cent after reports of Viatris unit Mylan's planned stake sale, with analysts saying the move is a financial decision that removes a long-standing overhang

Shares of biopharmaceutical company Biocon on Tuesday rose nearly 6.5 per cent on the BSE after Mylan, a unit of Viatris, sold its stake in the firm through a block deal. 

Analysts described the move as a logical financial transaction rather than a reflection of Biocon’s underlying business prospects. According to the exchange data, Mylan sold a 5.64 per cent stake in Biocon for ₹3,679 crore. As of March, Mylan held a 5.64 per cent stake in the company. 

ICICI Prudential Mutual Fu­nd, HDFC Mutual Fund, Kotak Mahindra Mutual Fund and Morgan Stanley Asia Singapore were among the key buyers. 

The block deal was launched following the expiry of the lockin period of the shares Mylan had received as part of the consideration for the Biocon Biologics transaction, according to market participants. Investors appeared to view the sale as the removal of a long-anticipated overhang on the stock, they added. Biocon’s shares closed at ₹437.30 apiece. 

Nirali Shah, research analyst at Ashika Investment Managers, said the stake sale was a natural outcome of Biocon’s restructuring exercise. 

“Viatris’ shareholding in Biocon was created as part of the consideration for the Biocon Biologics transaction and, with the lockin period having expired, monetisation is a logical capital allocation decision,” Shah said. 

She added that the transaction should not be interpreted as a change in Biocon’s business outlook or growth prospects.

“For Biocon and its shareholders, with a known overhang now behind them, the focus can shift back to the underlying business performance and the company’s ability to deliver,” Shah said. 

Analysts say the sale is unlikely to alter the strategic relationship between Biocon Biologics and Viatris, which continue to have commercial arrangements following the biosimilars business transaction.

 

The positive market reaction suggests that investors are looking beyond the change in shareholding and focusing instead on Biocon’s execution in its biosimilars and speciality businesses.

 

The removal of a large shareholder overhang could also improve investor sentiment by eliminating uncertainty over a substantial secondary share sale.

 

Business Standard reached out to Biocon and Viatris for comments but did not receive a response till the time of going to press.