ET Bureau Updated: Aug 21, 2019, 07.27 AM IST
Mumbai/New Delhi: Singapore’s investment company Temasek and homegrown private equity fund True North along with Canadian Pension Plan Investment Board (CPPIB) are separately in discussions to invest $300 million in Biocon Biologics India Ltd (BBIL) for a minority stake, said people aware of the matter. The company is a wholly owned subsidiary of Biocon Ltd.
One of the sources said the unit may be valued upwards of $4 billion (Rs 28,000 crore) but this could not be independently verified. That would peg it higher than the listed Biocon’s market cap of Rs 26,190 crore at the Tuesday close, when the share ended 1% up at Rs 218.20.
Biocon Ltd kicked off a recast by housing biologic assets in Biocon Biologics UK in 2016. That was followed by its first-ever approval to sell the biosimilar version of mega cancer drug Trastuzumab in the US through partner Mylan. In FY18, the board and shareholders of BBIL approved the acquisition of biosimilars from Biocon Ltd for Rs 578 crore, subject to regulatory approvals. As of March 31, BBIL hadn’t commenced commercial operations and had capital work-in-progress of Rs 408.7 crore.
The restructuring was aimed unlocking value in the future with a listing or PE investment, much like Syngene, Biocon’s listed subsidiary for contract drug manufacturing.
Both Temasek and True North have been Biocon backers, having invested in the parent as well as Syngene. If the investment cited above takes palce, this will be the third time that True North is backing a Kiran Mazumdar-Shaw entity.
Shaw, chairman and managing director of Biocon, said she wouldn’t comment on speculation.
“The parent Biocon is increasingly becoming a holding company as it seeks to unlock value across its arms through demergers and listings,” said an executive. “With expansion plans, new greenfield units, the growth capital is for future earnings and the pipeline… Both the funds have made handsome IRRs (internal rates of return) with Syngene and that gives an extra confidence.”
The biologics business consists of biosimilars that include monoclonal antibodies and recombinant insulins and novel biologics. Biosimilars are identical copies of original biologic drugs that have active properties similar to the reference biological product requiring large clinical trials on patients to ensure safety before approval by regulatory agencies, unlike small generic molecules that can be launched by doing bioequivalence studies.
These drugs are typically administered via injection and are mainly used to treat cancer, immunological diseases such as rheumatoid arthritis, multiple sclerosis and other debilitating chronic illnesses. Insulin for diabetes is another example of a biologic. As a business, biologics are more complex structurally -- highly sensitive to their manufacturing and handling conditions, making them more difficult to characterise and produce than chemical drugs. They are also more expensive compared with chemical drugs due to their complex structure, advanced research requirements, complexities in manufacturing but have a superior efficacy rate.
Biologics has been the fastest growing division within Biocon, registering a 97% growth in revenue to Rs 1,516 crore in FY19 from the previous year. The arm had hired Roche veteran Christiane Hamacher as its chief executive officer with an aim to become a global leader. In the June quarter, margins in the business improved to 38% from 33% in the preceding one. It contributes 32% of Biocon’s sales.