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Investor sentiment for Biocon softens as US FDA defers drug approval

Biocon’s Kiran Mazumdar-Shaw says the synergistic partnership will enable us to scale up our capabilities for an end-to-end play in the global biosimilars space. Photo: Hemant Mishra/MintPremium
Biocon’s Kiran Mazumdar-Shaw says the synergistic partnership will enable us to scale up our capabilities for an end-to-end play in the global biosimilars space. Photo: Hemant Mishra/Mint

  • The delay is mostly due to procedural issues, which should allay some investor concerns. US FDA has noted that an inspection of the manufacturing facility is required as a part of the standard review process

MUMBAI: Shares of Biocon Limited fell nearly 4% on Monday, having scaled fresh all-time highs last week. The decline is largely the result of the Street's disappointment following deferment of target action date related to approval for the launch of a biosimilar product in the US.

Biocon and its partner Mylan, have been informed by the US Food and Drug Administration (US FDA) of a deferred action on the Biologics License Application (BLA) for a proposed biosimilar to Avastin® (bevacizumab). Bevacizumab, an oncology treatment drug, has a market size of almost $6 billion in the US and Biocon after the launch can garner up to $200-300 million per annum in sales, said an analyst at a domestic brokerage.

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The deferment of approval and launch thereby is likely to impact the forward earnings estimates. There are no additional observations related to the application, the company’s spokesperson has clarified. Hence, the delay is mostly due to procedural issues, which should allay some investor concerns.

US FDA has noted that an inspection of the manufacturing facility is required as a part of the standard review process. However, due to restrictions on travel related to covid-19, the agency has been unable to do so during the current review cycle, said the company.

Biocon awaits the dates for the inspection.

The Street's expectations from Biocon have remained high ever since the company started commercialisation of its biosimilar range in developed markets. While pandemic-led disruptions had hit product supplies earlier in the year leading to some corrections in the share price, the stock has nevertheless rebounded almost 90% since the lows seen in March.

The launch of insulin Glargine for diabetes in the US during the second quarter too has boosted investor confidence. Glargine was the third biologics launch in the US by Biocon/ Mylan, and the earlier two launched oncology biologics have been gaining steady market share.

Analysts at Credit Suisse Asia Pacific Equity Research in a 20 December note note had said the company’s volume share in Insulin Glargine is to have increased from 0.8% in the prior week to 1.4%, indicating a significant jump in volumes.

Improved commercial execution of launches remains the key to earnings growth. Also, new launches are important for the company to achieve the FY22 sales target of $1billion.

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