Biocon Biologicals to tap IPO market in next 18 months

Biocon Biologics, the biosimilar unit of the Biocon group, is planning an IPO in the next 18 to 24 months. However, prior to the IPO, Biocon Biologicals plans to substantially expand its valuations by acquiring the biosimilars business of Viatris Inc. This acquisition will be done for a consideration of $3.34 billion. The chairperson of the Biocon group, Kiran Mazumdar Shaw has confirmed that once the deal is done, the company will plan its IPO.

Biosimilars is one of the big growth engines for pharma companies in recent times and Biocon derives most of its valuations from its biosimilars unit, which is Biocon Biologicals. The idea is to leverage the biosimilar opportunity globally. Biocon Biologics will be in an eminent position to script a new chapter in biosimilars with this deal in place. This deal includes the option to buy the Aflibercept injection before the end of FY25.

Kiran Mazumdar Shaw estimates that in the next 10 years, the global biosimilars business would be worth $75 billion and Biocon Biologicals will have a first mover advantage in the business. The beauty of biosimilars is that there is a huge opportunity to make it more affordable and India is best poised to tap the opportunity. This is a new era with 58% of biosimilars approved in the European Union happening only between 2017 and 2019.

Biocon has been trying to hive off its valuable businesses into separate units to get a better sum of total parts (SOTP) valuation. It recently separated and listed its research arm, Syngene. Biocon Biologicals will be the biggest part of Biocon and may eventually leave Biocon as the holding company. However, the acquisition of Viatris biosimilars business is likely to make Biocon Biologics a global leader in this particular vertical.

The reason Biocon wants to push the Viatris deal first is that it would make a substantial difference to the valuation of Biocon Biologics. In its last round of funding, Biocon Biologics was valued at $4.9 billion, but by combining with Viatris, the valuation of the combined entity straightaway moves up to above $8 billion. The Viatris deal is expected to be completed by the second half of calendar year 2022.

As of now not much is known about the proposed IPO of Biocon Biologics but the expected valuations would be in the range of $8 billion to $10 billion as a base case. By default, the biosimilars business tends to be richly valued business globally. It is in this context that Biocon Biologics would get the full benefit of the deep investments made by Viatris. Of course, that would only be clear once the actual IPO is announced in the next 18 months.

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