Biocon Biologics on Monday announced a transformational deal to acquire partner Viatris’ global biosimilars business for up to USD 3.335 billion in cash and stock. The acquisition of the business, which is estimated to generate revenues of USD 1 billion next year, will create a unique, fully integrated global biosimilars enterprise.

Kiran Mazumdar-Shaw, Executive Chairperson, Biocon and Biocon Biologics spoke to Nisha Poddar, CNBC-TV18 Anchor & Editor and Moneycontrol Corporate Bureau Chief following the announcement.

In the interview, Ms Mazumdar-Shaw said that this well researched and well thought out transaction will catapult Biocon Biologics into the global big league, adding that it is a huge inflection point for Biocon as a company, as well as for the biosimilars business housed in Biocon Biologics.

She said the transaction plays to the strengths of both Viatris and Biocon Biologics, making it a “win-win transaction” for both.

Ms Mazumdar-Shaw said the Serum Institute transaction for vaccines in 2021 and the Viatris transaction now gives Biocon Biologics a very large tapestry, in terms of both biosimilars and vaccines, to play with. “This deal now brings together the entire business under one umbrella,” she said.

She said that this transaction makes Biocon a very “attractive investment opportunity” as there are strong growth drivers for all its businesses: Small Molecules, Biosimilars and Research Services.

“I think this is really a very, very attractive investment opportunity for any shareholder … It’s a story about all the businesses driving growth in a very, very robust way. The biggest growth story is going to be the biosimilars growth story. But you know, close on the heels it is also going to be a strong growth pace of growth for both the Generics and Research Services businesses. So I think that Biocon as a diversified portfolio is a very, very interesting investment opportunity,” Ms Mazumdar-Shaw said.

On market concerns over the debt Biocon Biologics will have to raise to fund the deal, she said: “We leveraged the (acquisition of the Viatris) business as we believe that financing growth through the kind of debt that we are planning to raise is very comfortable and very necessary. I think we can actually get a payback of acquiring this business and this debt within less than five years. That’s how confident we are about the growth trajectory. The EBITDA margins that we will enjoy over time will enable us to really pay back the debt in a very short period of time.”

“Overall, I think this is a great deal. We are very conservative, as you know, about debt. Despite that, I think we have managed to take this bold decision to leverage the business because of the growth potential,” she added.

Responding to concerns that the deal could be dilutive for Biocon Biologics’ EBITDA margins, Ms Mazumdar-Shaw said: “We’ve looked at all aspects of value accretion and cost competitiveness and cost savings. So we believe that bringing these businesses together does unleash a lot of cost savings and I think that’s what gives us the confidence that we will be able to maintain and sustain the present core EBITDA margins (of Biocon Biologics).”

On the future prospects of the Generics business, she said: “It is a hugely scalable business. I think you’re already seeing Biocon rolling out many of its generic molecules into the U.S. market. It has a pipeline of very, very important ANDAs in the approval stage. I can tell you that the next few years are going to be hugely growth oriented for the Biocon business.”

Credit: This interview was aired on CNBC TV18 on Monday, February 28, 2022

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