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Focus on Viatris integration

BIOS’ 3Q results included Viatris consolidation driving 35%/32% YoY growth in Revenue/EBITDA respectively albeit one-off deal expenses led to reported loss, adjusting for which the PAT was at Rs1.4bn (19% beat). Biosimilars revenue grew 54%YoY to INR 15.1bn in 3Q and is expected to further improve to INR 20bn+ in 4Q. Serum deal is expected to close in 1H24 pending Mumbai NCLT approval. Semglee, Fulphila gained further market share while Hulio continues to outperform in EU. We remain optimistic on Hulio launch which is expected to drive significant earnings growth wef Jul’23. We expect bAspart launch in FY24 with interchangebility as US FDA has accepted BBL’s CAPA for Malaysia plant whereas bBevacizumab is likely in FY25. Generic segment was driven by newer launches and is expected to sustain mid-teens growth in FY24. Syngene remains steadfast on its high teens growth. BIOS divested 10% stake in Syngene and has raised INR 12bn from Kotak to repay mezzanine finance. BIOS is taking required steps and engaging with PE investors to enable BIOS reduce their debt. We believe concerns around profitability, debt sustainability (IND AA+, Stable rating) and growth remain overstated. Given the multiple near-term levers, enviable biosimilars pipeline, strengthening of leadership teams, favourable valuation and marquee investors backing, we strongly believe BIOS is well poised to turn the tide in its favour. Maintain BUY with a Price Target of INR 365.

* Generics recovers strongly; to grow in mid-teens: The generic business grew 18%YoY (14% beat) led by immunosuppressant API, saw an uptick in sartan sales and new launches. The management guided for mid-teens growth in this business next year. BIOS signed a semi-exclusive agreement with Zentiva for supply of Liraglutide (end FY25 opportunity). BIOS has been facing capacity constraints in the API side, which hereon, will get corrected as the new facilities (Vizag; ~INR 6bn invested) gradually ramp-up and increase market share gains. Validation batches for the aforementioned facility and Bangalore peptide facility is expected to be completed by 1H24. The company hasn’t filed any other peptides so far (except Liraglutide). They plan to file Semaglutide, Tirzepatide and 10 others.

* Viatris consolidation drives BBL top-line: Biosimilars grew 54%YoY (15% beat) to INR 15.1bn as Viatris business was consolidated wef Nov’22. The management guided for INR 20bn+ BBL revenue in 4Q. Key products in the US have been gaining market share with Semglee’s ms now at 14% for new prescriptions, 11% for Fulphila and 10%+ for Ogivri. Advanced market biosimilars continued to ramp up well with Hulio gainig 17% ms in France and 18% in Italy. The recent tender win for rh-insulin and bTrastuzumab in LATAM, AFMET and CIS region will drive growth going forward. The current split between Advanced markets and EM is 60:40 which is expected to be 70:30 post Humira launch in the US. The US FDA has accepted BBL’s CAPA for Aspart, which we believe is a likely FY24 launch while the company is responding to US FDA’s CRL for bBevacizumab (FY25 launch). BIOS is confident of gaining ms in Hulio as they have good success in EU market, better drug device, citrate free drug and likely formulary access. BBL has initiated clinical trials for Hulio interchangeability and is confident of completing prior to Jul’24

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