Biosimilars will have a huge impact on global healthcare – Kiran Mazumdar Shaw, CMD, Biocon

Biosimilars will have a huge impact on global healthcare – Kiran Mazumdar Shaw, CMD, Biocon

Edited excerpts of an interview with Kiran Mazumdar Shaw, Chairperson and Managing Director of Biocon Ltd.; dated 1st April 2020. The interview aired on CNBC-TV18.

• Biocon received an Establishment Inspection Report (EIR) with Voluntary Action Indicated for it’s Malaysian unit in respect of production of glargine. Insulin glargine is a long-acting, manmade version of human insulin.
• This is an important EIR for Biocon and with that, the management is confident that the approval will come in sooner than later. Inspection went well but in terms of launch, management needs to keep track of current crisis as US is going through a very bad phase.
• Post the crisis, there will be a huge effort to bring down healthcare costs. Biosimilars will be extremely important in this effort. Insulin therapies are also going to play a very important role in cost cutting and biosimilar glargine, insulins and others are going to be extremely important.
• In terms of opportunity, biosimilars business is a USD 7 bn business globally and USD 4 bn business in the US. With biosimilars, the access to insulin glargine is much larger. Biocon has a very important role to play in providing affordable access to glargine.
• Including the private labs in testing for the current crisis has been a good move on part of the government. The issue regarding less number of approved kits is resolved and more kits are now being produced. The challenge now is that state governments are now restricting private labs from testing. Maharashtra, Telangana, Gujarat, West Bengal have put heavy restrictions on private labs. If private labs are restricted from conducting tests in large numbers, the purpose of including them in the testing arena is defeated.
• Biocon has a turnover target of USD 1 bn in Biologics by FY22E. There is a lull created by the logistics issues currently. However, the target is still 2 years away and management hopes that the crisis will pass soon. This is a time when biosimilars will have a huge impact on global healthcare and that’s why Biocon will have a very big role to play.
• The private sector is in close cooperation with government on various fronts including research, private testing, vaccine development, therapy developments and antibody based serological testing. This crisis has shown that we have to focus on these areas and our public health system has to be improved and there is a lot of opportunity for us to build a very robust healthcare ecosystem.

Consensus Estimate: (Source: market screener website)

• The closing price of Biocon was ₹ 319/- as of 7–April–2020. It traded at 42.5x/ 31.9x/ 24.5x the consensus EPS estimate of ₹ 7.5/ 10.0/ 13.0 for FY20E/ FY21E/ FY22E respectively.
• The consensus target price of ₹ 311/- implies a PE multiple of 23.9x on FY22E EPS of ₹ 13.