Biocon Ltd plans to scale up investment in its small and complex drug molecules vertical over the coming years using proceeds from a proposed initial public offering of its biologics operations, said a senior company official.
This will mark a shift in Biocon’s strategy as the company had tapped capital from its small molecules operations over the past decade to fund growth of its then-fledgling biologics business, Siddharth Mittal, chief executive and joint managing director of Biocon said in an interview.
He said the firm plans to invest a part of the funds it collects from private equity (PE) firms and the IPO of subsidiary Biocon Biologics India Ltd back into the small molecules operations. “The funds which we raise from the PE investment and IPO (of Biocon Biologics) will be used to reinvest back into the business including small molecules. That business had actually funded the entire biosimilar journey. Small molecules is a two-decade old business which needs fresh investments," Mittal said.
Biocon Biologics plans to go for an IPO in about two years, its chief financial officer M.B. Chinappa said in an interview earlier this month. Biocon’s business spans manufacturing of both active pharmaceutical ingredients (APIs) and generic formulations.
The small molecules business was the largest business for Biocon, accounting for over one-third of 2017-18 revenue. At the time, the biologics business contributed only 17% of revenue. However, with biologics reporting faster growth than the small molecules business over the last two years, the newer operation is now larger than small molecules.
In April-December, the biologics business clocked ₹1,594 crore in sales compared with ₹1,553 crore of small molecules. In the small molecules operations, Biocon will focus on complex APIs, as well as use them to make generic formulations, Mittal said.
“We want to do things that are complex and where, hopefully, we will see limited competition," he said, adding the firm plans to scale up in areas like injectables to grow profits.
Sales of the small molecules business is expected to rise about 10-15% over the next couple of years, Mittal said.
He expects the biologics business to touch $1 billion in sales by 2021-22 from the nearly $300 million it is expected to post this fiscal year. In April-December, Biocon Biologics posted ₹1,594 crore, or $223 million, in sales. Biocon announced its earnings on 23 January.
As a precursor to the IPO, Biocon Biologics had raised around $75 million earlier this month from True North, giving the PE fund a 2.44% stake. The deal is part of a larger $200-300 million round Biocon Biologics plans to raise over the next few months. The infusion was the first equity dilution by the parent since the biologics business was hived off last year.