For Biocon, regulatory nod to give boost to biosimilar monetisation

Biocon’s recent announcement of it receiving good manufacturing practice (GMP) certificate from European Union’s drug regulator for its Bengaluru-based sterile manufacturing facility should ease concerns. 

The latest clearance to this plant, which had received some observations after inspection by UK MHRA in March 2018, paves the way for drug approvals and launch of the company’s biosimilar in Europe. 

Two biosimilar approvals of oncology drugs, Trastuzumab and Pegfilgrastim, are already awaiting clearance for launch in Europe. Biocon had resubmitted the market reauthorisation applications for both the products in November 2017 and is awaiting the European Medicines  Agency's (EMA) and the Committee for Medicinal Products for Human  Use (CHMP) opinion, which should come by the end of CY18.

Analysts say, with the plant compliance in place, there are fair chances of getting favourable opinion as the products are already approved by the US FDA. For Trastuzumab, two competitors (Pfizer and Allergan/Amgen) have received positive CHMP opinions (approvals yet to come) and a delay on account of compliance could have resulted in Biocon not being able to participate in the first wave of launch and thereby, reducing the overall gains for the company. 
Thus, a favourable opinion now would pave the way for launch of these products by the end of FY19 and FY20.

“The EU CGMP certification removes a major overhang on both the biosimilars as the approvals appear more certain and the likelihood of Biocon participating in both the biosimilar opportunities at market formation increases significantly,” said analysts at Citi.

Improving product launch visibility enhances the company’s earnings growth prospects. With the approval for its insulin, Glargine in Europe and in-licensing arrangement of its autoimmune disorder biosimilar, adalimumab, already in place, the company may be able to monetise the two in Europe during FY19 itself along with biosimilar, Pegfilgrastim (both in Europe and US). Consequently, the company’s biosimilar revenues could grow multi-fold from current levels. Analysts at Morgan Stanley estimate biosimilar revenues to surge from $120 million in FY18 to $475 million by FY21.

The stock, which is trading at rich valuations, has seen some correction in the last one month. But, given the one-year price targets of Citi and Morgan Stanley, there is a potential upside of 15-25 per cent from the current levels.

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