Home >Markets >Mark To Market >The new drug approval will not add much to Biocon’s fortunes

While Biocon Ltd’s approval for the drug Itolizumab (branded Alzumab) is encouraging, the launch may not set the cash registers ringing in a big way. The stock, which rose 8% in early trade on Monday, retraced its gains during the day and ended flat.

The drug has been approved for the treatment of cytokine-release syndrome seen in covid-19 patients. However, analysts said the drug is likely to be used in a limited number of patients, thus restricting its revenue potential. “The drug has been approved on the back of a small, 30-patient trial, and while it adds an alternative drug to a physician’s repertoire for severe patients, we believe the use will be limited to 10-20% of patients with severe acute respiratory distress syndrome (typically 10-15% of covid-19 patients)," said analysts at Kotak Institutional Equities in a note to clients.

Graphic: Satish Kumar/Mint
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Graphic: Satish Kumar/Mint

Alzumab is priced at 7,950 per vial at the retail level and patients require about four vials. ICICI Securities analysts said its revenue potential could be 39 crore. Exports could be another growth driver . “Overall, we do not expect any material benefit from Alzumab to alter financial estimates," they added.

The drug also faces competition from Toclizumab in the immuno-modulator drug stable. This drug seems to be preferred by physicians, but Biocon’s Itolizumab has a significant price advantage. “Anecdotally, we believe physicians continue to use Actemra (Toclizumab) on top of Remdesivir for severe patients (pre and ventilation stage), with clinical evidence justifying the use for physicians in select patients, based on the clinical success seen in earlier cases. We do note that Alzumab is priced at about 32,000 per treatment versus 60,000 per treatment for Actemra," said analysts at Kotak Institutional Equities in the note.

Meanwhile, the stock has run up about 44% in 2020. Launches are expected to drive revenues, but rising costs could play spoilsport. Still, the stock is already quoting at a price-earnings multiple of about 68 times FY20 earnings. Even assuming 30% growth in profits in FY21, which analysts reckon is likely, the stock’s forward earnings seem to be more than fully pricing in the growth.

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