Triggers falling into place for Biocon

May start monetising its biosimilars by FY19, 30-40% jump in profit likely

The positive news regarding Biocon’s biosimilars programme has infused a fresh feeling in the stock, reacting to which it hit a lifetime high on Friday.

Biocon has received approval from the European Medicines Agency for its marketing authorisation application for oncology biosimilars trastuzumab and pegfilgrastim.

The Street’s sentiment, positive since the start of 2016 on expected monetisation of biosimilars, and which had hit a pause due to regulatory hiccups in mid-2017, seems to have changed now.

The product applications earlier had been withdrawn by Biocon following an audit conducted by the European inspecting authority of the firm’s facilities that resulted in certain observations in July 2017. The company now says it has completed the corrective and preventive actions pertaining to earlier audits.

Analysts expect re-inspections to be held in January 2018. In case of a positive outcome, final approval for the drugs can be expected by the first quarter of FY19.

This comes at a time the company has received an establishment inspection report (EIR) or a go-ahead for its Bengaluru facility by the US drug regulator. The clearance now paves the way for approval of Biocon’s biosimilars in the US.

Analysts at Kotak Institutional Equities said the EIR had minimised the possibility of further quality-related issues, and raised the probability of approvals for biosimilars Herceptin (trastuzumab) and Neulasta (pegfilgrastim). This will still be contingent on the status of the March-April 2017 inspection, which has resulted in additional data submission requirements for both the products.

These two products have  a market size of $6.8 billion and $4.4 billion, respectively. The target action date for review of Biocon/Mylan’s (Biocon’s partner) biosimilar version of Herceptin (trastuzumab) by US drug regulators is December 3. This will be the first biosimilar version of Herceptin, and Mylan has already settled with the innovator Roche for the launch. Hence, December 3 seems to be a big day.

Analysts expect the launch of biosimilar Herceptin by the March quarter if more data is not sought for now.

The company had also filed for insulin Glargine from its Malaysian plant for both the US and Europe. Since the European Union has cleared the Malaysian plant, analysts expect this approval to also come by mid-FY19.

Analysts at Morgan Stanley in November had indicated that the company is gearing up for monetisation of its biosimilar assets from 2018 onwards, which should drive a significant earnings recovery. 

Many feel that the launches, if they happen by mid-FY19, can boost the company’s earnings by 30-40 per cent.