Biocon Biologics to go for IPO in 18-24 months: Kiran Mazumdar-Shaw

Biocon arm buys Viatris biosimilars biz for $3.2 billion

After acquiring Viatris’ biosimilars business for a whopping $3.3 billion, Biocon Biologics (BBL) is looking to launch an initial public offering in the next 18-24 months, said BBL executive chairperson Kiran Mazumdar-Shaw on Monday.

The cash payment of $2 billion to be funded by $800 million raised through equity infusion in BBL and the remainder will be funded by debt, additional equity or a combination of the two, the firm said.

“The debt that BBL is taking on to finance this transaction will be financed by equity infusion by existing shareholders and the IPO. This deal will be value accretive for all our shareholders,” said Mazumdar-Shaw.

Biocon, which is the majority shareholder in BBL, saw its shares dive 11.5 per cent to Rs 349 apiece on Monday as the Street tried to gauge the consequences of the deal.

A Mumbai-based analyst said the key is execution. “Biocon has paid about 15-16 times Ebitda, which is high. Because the deal is about commercialising the portfolio in the US, which means Biocon would now have to also bear the frontend costs, cost of litigations if any etc,” the analyst said.

“The market needs to understand the magnitude of this deal. We are acquiring the complete economic benefits of Viatris and it makes us a vertically integrated global biosimilars player,” said Mazumdar-Shaw in a press conference.

The deal will expand Biocon’s biosimilars portfolio of 20 treatments by adding therapies used for treating diabetes, tumors and autoimmune diseases and commercialising them for developed markets, the company said.

While Biocon Biologics was valued at $4.9 billion in its last financing round, this deal takes its valuation to over $8 billion, according to the company.

“Combining Viatris’ biosimilars business with BBL accelerates the build out of our commercial capability in developed markets in order to become a strong global brand with a direct presence in US, Europe, Canada, Japan, Australia and New Zealand,” the company said.

Mazumdar-Shaw highlighted that the deal will potentially bring two important drugs in the US market to the Biocon Biologics stable — in-licensed bAdalimumab and an option to acquire Viatris’ rights in bAflibercept in the autoimmune segment.

Viatris will receive cash consideration of $2 billion on closing the transaction and up to $335 million as additional payments expected to be paid in 2024. Additionally, upon closing 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.

“We are very comfortable with the debt as it is a high growth company with good Ebitda support. This deal leapfrogs into the commercial space in developed markets. It is a risk free model of creating that commercial engine,” said Mazumdar-Shaw.

“Biocon has always meant to be a company that will have a broad offering and our investors will benefit from this sum of parts business. In effect, Biocon serves a menu of diversified businesses,” she added.