Shares of Biocon Ltd surged as much as 5 per cent during the trading session on Monday after the United States Food and Drug Administration (USFDA) cleared the Malaysia unit, ending regulatory hurdles for the pharma player. The stock has seen upgrades and target price hikes following the same.
The USFDA has classified Biocon Biologics’ insulin facilities in Johor Bahru, Malaysia, as Voluntary Action Indicated (VAI), which has opened the doors for the company to go ahead and file products from that facility. The US health regulator conducted a GMP inspection of the facilities between September 15 and 27, 2024.
Following the announcement, shares of Biocon surged 4.75 per cent to Rs 377.75 during the trading session on Monday, commanding a total market capitalization of more than Rs 45,000 crore. The scrip had settled at Rs 360.65 in the previous trading session on Friday.
Motilal Oswal Financial Services (MOSL), which upgraded the stock to 'buy' rating, said that delayed compliance at the Biocon Park/Malaysian site and increased debt, led to a significant earnings decline for Biocon over the past two years. Compliance at Biocon Park also provides potential opportunities for it from Liraglutide, it said.
"The Malaysian site enhances the scope for broadening Biocon's biosimilar offerings in the US market. Overall, we expect a 16 per cent CAGR in biologics sales and 21 per cent Ebitda CAGR over FY25-27. Considering the efforts toward compliance and potential business from upcoming products, we increase the EV/Ebitda multiple for the biologics business to 22 times on 12 months forward basis. We further add 53 per cent stake of Syngene and value the generics business at 14 times EV/Ebitda to arrive at an SOTP-based TP of Rs 430," MOSL added.
The FDA’s VAI classification indicates minor, non-critical issues that do not require further regulatory action, allowing the facility to continue operations smoothly. Interestingly, the move comes after the unit had been slapped with an official action indicated (OAI) status in October 2023. The facility had also received five observations when the US regulator inspected it in September 2024.
Malaysia follows the Bengaluru facility as aUSFDA clears both. It shall increase confidence for upcoming biosimilar launch pipeline, with annualized revenue to increase from $1 billion in H1FY25 to $1.2 billion in FY26, BofA Securities said. "Deleveraging and new launch performance now in focus," it added, maintaining a 'buy' on the stock with a revised target price of Rs 435 (from Rs 400).