Biocon suffers withdrawal symptoms
Scoot first and ask questions later. That’s how investors in healthcare stocks react to any regulatory scare nowadays. And, they can’t really be blamed for it, considering how the worries have snowballed at some other companies.
Biocon Ltd’s shares fell 5.9% on Wednesday on news that it has moved to withdraw (and later resubmit) its European filings for two biosimilar products, trastuzumab and pegfilgrastim.
This was an unexpected twist in an old development. In July, it became known that Biocon’s product facility for these biosimilars tripped on an inspection by the French regulator. But the company’s substance facility cleared the test. Product here means the finished product while substance is the main ingredient that goes into it.
As late as end-July, in Biocon’s post-results conference call, the company management had said it was working to correct the deficiencies spotted, and then call for a reinspection. No mention of a possible withdrawal of the dossiers was made then. The company statement says that the request for withdrawal and resubmission is part of the procedural requirements linked to reinspection. If this was always on the cards, this may have been handled better by disclosing it earlier.
Biocon has said that remedial action will be completed by the end of September, after which it will call for reinspection and resubmission. Its spokesperson clarified that the regulator will decide on the date for reinspection, and that the company cannot speculate on the potential link between the resubmission’s acceptance and the scheduling of the reinspection. That means another period of wait and watch for investors.
The cloud over the company’s European launch lends a touch of grey to its US plans as well, at least in the minds of investors.
The US drug regulator had passed observations on Biocon’s biosimilar plant and the company has said these are being addressed. The company should hear from the US regulator by 3 September on the status of its trastuzumab application.
That should give investors first clues of what lies in store. A better outcome compared to how Europe has played out will reassure them. A similar or worse outcome raises the risk that Biocon’s valuations may sag further under the weight of unfulfilled expectations.