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What are Biosimilars? What is the Biosimilars Market Size and Share in 2021?

Jan 12, 2021 7:31 AM 3 min read

Biocon Biologics, a manufacturer of “biosimilars”, and a subsidiary of Biocon Ltd, on Thursday secured an investment of ₹555cr ($75.7m) from Abu Dhabi-based holding company ADQ for a 1.80% minority stake.

The ADQ deal comes only two months after Goldman Sachs invested ₹1,125cr ($153.5m) in Biocon Biologics via optionally convertible debentures. It also previously raised a fairly substantial $75m from True North Fund and $30m from Tata Capital Growth Fund for 2.44% and 0.85% stakes respectively.

All in all, the biosimilars manufacturer has raised a lofty c. $255m over the past year signalling strong underlying bullish view for the sector and in turn lifting the company’s valuation to $4.17bn

Why the bullishness? And what exactly are biosimilars?


A Little Bit of Biology...

Biosimilars are like generic drugs. Well, sort of.

Just like generics, biosimilars are developed and marketed as cheaper versions of costly name-brand drugs whose patents have expired.

But there are some major differences:

  • The “reference medicine” in generics tends to be a chemical while for biosimilars they are, as the name suggests, biological organisms. (FYI: These are called “biologics”. Examples of biologics include vaccines, gene therapies, recombinant proteins, stem cell therapies, monoclonal antibodies etc.)
  • Because of the involvement of living organisms, the development of biosimilars tends to be a longer and more delicate process, which is why they are subjected to more tests and regulatory scrutiny.
  • This in turn makes them not as inexpensive as generic drugs. By one estimate, while generics can be 40-50% cheaper than the brand product, biosimilars are only about 15-20% cheaper.

Globally, the market for biosimilars is projected to grow at a CAGR of 24.7% to $35.7bn by 2025 from $11.8bn in 2020. These growth estimates perhaps have a lot more upside in a post-COVID world as vaccines, drugs, diagnostics, treatment  and pharmaceuticals in general have re-emerged with an elevated level of importance.

This industry anyway is experiencing robust growth as more number of patents of originator biologics are set to reach their expiry, due to ageing populations of developed countries, due to the rising incidence of chronic diseases, and their cost-effectiveness.

The industry is also somewhat a nascent one. The European Union developed the first set of comprehensive regulations for biosimilars only in 2006. The US approved its first biosimilar product only in 2015.

Besides Biocon, the key players in the international biosimilars market include Pfizer (US), Sandoz (Germany), Biogen (US), Dr. Reddy’s Laboratories (India), Amgen (US), Celltrion (South Korea), Samsung Biologics (South Korea), Amega Biotech (Argentina) and mAbxience (Switzerland).


A Little Bit of Biocon Biologics...

Now, coming back to Biocon Biologics. The company has one of the largest portfolios of 28 biosimilar molecules globally, spanning recombinant human Insulin (rh-Insulin), insulin analogs, monoclonal antibodies and therapeutic proteins for oncology, immunology, and other chronic disease areas. It has the full spectrum of insulins (regular, basal, and rapid) in its pipeline.

The recent raise is likely to be deployed towards brownfield capex and new product development, with two products in the insulin portfolio already in the pipeline. Biocon expects to spend $200m in capex in FY21.

According to Biocon’s 2020 annual report (link to pdf), its biosimilars business constituted about 29% of its total revenues in FY20, driven by a 29% YoY spike in segment revenues. With a promising growth outlook and fairly solid funding in place, it is perhaps unsurprising that management is keen in spinning out the Biologics business into a separate public vehicle and perhaps even offering an exit for early investors. This is from the annual report - “We intend to list Biocon Biologics on the Indian capital markets in the next two to three years.” Despite a fairly lofty trading multiple, a stand-alone biologics entity would almost certainly generate higher valuation once carved out, and demonstrate a heightened focus in the segment to investors - an old “value unlock” trick.

Biocon is positioning itself to make the most of the opportunities that lie ahead. With global demand for biosimilars likely to soar in coming years, all power to them!


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