March 15 witnessed a decline of over 4% in Biocon’s shares, triggered by the news of its subsidiary, Biocon Biologics, divesting its India-branded formulation business to Eris Lifesciences, a prominent player in chronic therapy drugs, for a substantial sum of Rs 1,242 crore.
The transaction, valued at an accretive multiple of 3.4 times revenue and 18 times earnings before interest, tax, depreciation, and amortization (EBITDA), underscores a significant shift in the pharmaceutical landscape. With over 430 employees expected to transition to Eris, Biocon Biologics emphasized the seamless continuity for its workforce amid the transition.
The divested business encompasses key portfolios in insulin, oncology, and critical care segments. Furthermore, Biocon Biologics has secured a 10-year supply agreement with Eris as part of the deal, ensuring ongoing collaboration post-acquisition. The completion of the transaction is slated for April 1, 2024, pending customary closing conditions, as per the company’s announcement.
Biocon Biologics has emphasized that this collaboration aligns seamlessly with its strategic objective of “unlocking value from its legacy business of branded formulations” that has been meticulously cultivated over the past two decades.
In a Strategic Move, Biocon Biologics Partners with Eris Lifesciences to Expand Patient Access to Biosimilars. Biocon Biologics has announced a collaboration with Eris Lifesciences, leveraging the latter’s strong commercial presence to extend the reach of its biosimilars across India. Notably, Biocon Biologics’ Basalog and Insugen are market leaders in their respective segments, holding over 10% market share each. With this agreement, Eris gains entry into the lucrative Rs 30,000-crore injectable market, positioning itself as a key player in the insulin segment by acquiring these well-established brands.
According to Kotak Institutional Equities, Biocon’s strategic shift away from core therapy areas like diabetes, oncology, and immunology in the domestic market is aimed at addressing its elevated leverage. However, the brokerage remains cautious about the potential impact of the supply agreement, citing execution risks and limited scope for positive surprises. As a result, it maintains a ‘reduce’ rating on the stock with a fair value (FV) set at Rs 260.
At 10:32 am on March 15, Biocon shares were trading 4.8% lower at Rs 254.40 on the National Stock Exchange (NSE). Despite a modest 15% increase over the past year, the stock has underperformed the Nifty 50 benchmark index, which surged by 30% during the same period.
Also read: Biocon Biologics Secures Long-Term Supply Agreement with Eris Lifesciences Worth Rs 1,242 Crore
Eris Lifesciences observed a slight decline of over 1% in its shares, trading at Rs 849.20 on the National Stock Exchange (NSE). Despite this, the stock has demonstrated strong performance over the past year, recording a remarkable 43% increase, outperforming the Nifty benchmark index.
In a separate development, Biocon announced to the exchanges that its Chief Financial Officer (CFO), Indranil Sen, has resigned from his position to pursue opportunities outside the organization. The company officially relieved Sen from his duties, effective as of the close of business hours on March 14, 2024.
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