Biocon Gets Motilal Oswal's 'Buy' Upgrade On U.S. FDA Clearance For Malaysian Site

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Motilal Oswal Report

Biocon Ltd. has received ‘Voluntary Action Indicated’ status for its Malaysian site.

With this, Biocon now has all critical sites for biosimilars under U.S. Food and Drug Administration compliance, improving its business prospects in the U.S. market.

Regulatory compliance at the Malaysian site paves the way for commercial opportunities for B-Aspart. We believe the contractual cycle will pose a limited hurdle, as there is currently no biosimilar competition for this product.

Biocon has experienced a significant earnings decline over the past two years (a 50% compounded decline over FY22-24), led by a lack of potential approvals for the U..S market and increased financial leverage.

Biocon has implemented considerable remediation measures to overcome regulatory issues over the past two years. With compliance in place for the Biocon Park/Malaysian site, we expect product approvals/launches to boost the company’s growth outlook over the next two-three years. We expect a 21% Ebitda CAGR over FY25-27.

We re-rate the biologics business to 22 times 12 months forward EV/Ebitda (from 18 times earlier) to factor in regulatory compliance. Accordingly, we arrive at an SOTP-based target price of Rs 430 (22 times EV/EBITDA for the biologics business, 53% stake in Syngene, 14x EV/Ebitda for the generics business). Upgrade to Buy.

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