Biocon is evaluating a plan to sell its generic active pharmaceutical ingredient (API) business – estimated to be worth $1.5 billion – to reduce its overall debt, though it is yet to take any concrete action, people familiar with the matter told ET.
“Discussions with investment banks have taken place but the plan (for sale of generic API business) is still on the drawing board,” one of the sources said.
The generic API business, which was once Biocon’s mainstay, has seen its contributions to the firm’s consolidated financials fall over the years as the company has moved strategically towards its ambition of becoming a global biosimilars major. Biosimilars contributed nearly 50% of Biocon’s topline of ₹11,550 crore for 2022-23.
The Kiran Mazumdar-Shaw helmed company made a huge bet on biosimilars by acquiring a portfolio of drugs from global drug major Viatris for $3.34 billion in November last year.
That deal was funded by debt taken both by Biocon Ltd and its biosimilars arm Biocon Biologics. Biocon Biologics took loans of $1.2 billion to fund the acquisition.
‘Big push into biosimilars’
The company has also sold some stake in Syngene to finance the acquisition of Viatris’ biosimilar assets, a person familiar with Biocon’s thinking said.
“At a mature stage of her (Mazumdar-Shaw’s) entrepreneurial journey, she has decided to make a big push into biosimilars and made a heavy investment,” the person said. “The company has taken on debt. Any move to hive off the API business will be seen as credit positive.”
Biocon dismissed ET’s queries about the sale plans for the API business. “Biocon would not like to comment on baseless rumours and market speculation,” a company spokesperson told ET in an emailed response.
Biocon’s API portfolio consists of ingredients that go into making medicines used for treatment of diabetes, cardiac ailments, multiple sclerosis, immune system reactions occurring from organ transplants, and anti-cancer drugs.
The API and generic formulations business of the company contributed about Rs 2,600 crore to its annual sales for FY23. This was a little less than a fourth of the company’s total sales. “They are contemplating the move (to sell the API business). But there have been regulatory issues at one of the API manufacturing plants as well. Let us wait and watch,” said a third person who has been briefed about the company’s thinking.
Biocon has gradually built up a portfolio of biosimilars – a term for drugs that are copies or are similar to biologic drugs. Biologic drugs are different because they are derived from living organisms unlike chemical drugs which are made by synthesising chemicals.
The company has also announced its intent to get into innovation of new biologic drugs through the acquisition of the portfolio from Viatris.
Biocon’s chemical drugs business – which comprises APIs and generic formulations such as Atorvastatin, a popular cholesterol-lowering medicine – may not fit in perfectly with its new strategy, market watchers said.
The company, though, has publicly refuted this line of thinking.
At its most recent earnings announcement, Biocon chief executive officer Siddharth Mittal said it was looking to grow its generics business, buoyed by the huge opportunity for making copycat versions of original products whose patents would expire over the next decade in the US and other developed countries.
