Biocon stock falls 4% after subsidiary sells branded formulations biz to Eris Lifesciences

Shares of Biocon fell over 4 percent on March 15 after its subsidiary Biocon Biologics’ India-branded formulation business was acquired by Eris Lifesciences, a chronic therapy-focused drug firm, for Rs 1,242 crore.

The transaction value represents an accretive multiple of 3.4 times revenue and 18 times earnings before interest, tax, depreciation, and amortisation (EBITDA). As part of the deal, over 430 employees associated with the business are expected to transition to Eris, Biocon Biologics said.

This acquired business includes portfolios in insulin, oncology, and critical care. “Biocon Biologics has signed a 10-year supply agreement with Eris as part of this deal. The transaction is expected to take effect on April 1, 2024, subject to customary closing conditions,” the company said.

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Biocon Biologics said this collaboration lines up with its strategy to “unlock value from its legacy business of branded formulations” built over the past two decades.

“As part of this collaboration, Biocon Biologics will continue to leverage Eris’ strong commercial footprint to significantly expand patient access to its world-class biosimilars in India,” it said.

Notably, Biocon Biologics’ Basalog and Insugen are the largest Indian brands in their respective segments, with market shares of over 10 percent. The deal would enable Eris to enter the Rs 30,000-crore injectable market, positioning it as a major player in the insulin segment with the acquisition of these two brands.

According to Kotak Institutional Equities, Biocon’s decision to divest from core therapy areas such as diabetes, oncology and immunology in the domestic front-end market has been necessitated by its elevated leverage.

The brokerage does not expect a significant contribution from this supply agreement. “Amid execution risks, we believe there is limited scope for positive surprises,” it said while retaining a ‘reduce’ rating on the stock with fair value (FV) pegged at Rs 260.

At 10:32 am on March 15, Biocon shares were trading 4.8 percent down at Rs 254.40 on the National Stock Exchange (NSE). In the last one year, the stock has risen around 15 percent, underperforming benchmark Nifty 50 which has risen 30 percent during this period.

Also Read | Eris Lifesciences’ insatiable appetite for growth is driving up its debt

Eris Lifesciences shares fell over 1 percent to Rs 849.20 on NSE. In the last one year, the stock has risen 43 percent, outperforming Nifty.

Separately Biocon informed exchanges that Indranil Sen, the Chief Financial Officer (CFO) of the company has resigned to pursue opportunities outside the organization. The company relieved Sen from his duties w.e.f. the close of business hours of March 14, 2024.

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