Biopharmaceuticals major Biocon on Monday said its wholly-owned subsidiary Biocon Biologics (BBL) will acquire Viatris Inc’s biosimilars business for $3.33 billion (about Rs 24,990 crore) in a cash-and-stock deal. The transaction, which is one of the largest in the pharma and healthcare space, will see Biocon Biologics create a fully integrated global biosimilars enterprise.
As part of the deal, Viatris will receive $2.33 billion in cash and compulsorily convertible preference shares (CCPS) in BBL valued at $1 billion, equivalent to an equity stake of at least 12.9% in the company on a fully diluted basis. Out of the cash component, Viatris will receive a consideration of $2 billion on closing of the transaction and up to $335 million as additional payment expected in 2024. The acquisition will help the company to have a comprehensive portfolio, comprising its current range of commercialised insulins, oncology and immunology biosimilars as well as several other biosimilar assets under development.
BBL will fund the $2-billion cash component via an $800-million fundraising through an equity infusion and the remainder to be funded by debt, additional equity or a combination thereof. The company said that it has received expressions of interest from financial institutions for debt financing and equity commitments from existing shareholders.
Biocon shares posted their biggest single-day fall since August 2015. The shares closed down 11.47% at Rs 348.95 a piece on the BSE, as the Street raised concerns over debt raising and Biocon’s execution of commercial marketing of biosimilars globally, including in the US and European markets.
The transaction is expected to close in the second half of 2022, subject to conditions, including certain regulatory approvals. The companies will also enter into a transition services agreement, pursuant to which Viatris will provide certain transition services, including commercialisation for an expected two-year period. Viatris also will pay $50 million to BBL to fund certain capital expenditures.
Kiran Mazumdar-Shaw, executive chairperson, Biocon, said, “This strategic combination brings together the complementary capabilities and strengths of both partners and prepares us for the next decade of value creation for all our stakeholders. The deal will enable BBL to attain a robust commercial engine in the developed markets of the US and Europe and will fast-track our journey of building a strong global brand. It will also make us future-ready for the next wave of products. This development takes our partnership with Viatris to the next level to realise our shared purpose of impacting global health by providing affordable access to high quality essential and life -saving Biosimilar drugs”.
Mazumdar-Shaw will continue as the executive chairperson of BBL and Viatris will designate its president Rajiv Malik to serve on the BBL board. “We see minimal overlap of roles in the two organisations due to the complementary nature of our teams thereby facilitating seamless integration of the two businesses,” the statement said.
Meanwhile, as part of the transaction, BBL will acquire Viatris’ global commercial infrastructure in developed and emerging markets. It will also get Viatris’ global biosimilars business with an estimated revenue of $875 million and Ebitda (earnings before interest, tax, depreciation and amortisation) of $200 million for calendar 2022. Viatris’ global biosimilars business’ revenue is estimated to exceed $1 billion next year. It will also include Viatris’ rights in all biosimilars assets, including its in-licensed portfolio and an option to acquire Viatris’ rights in Aflibercept.
Post the closure of the deal, BBL will realise the full revenue and associated profits from its partnered products; a step-up from its existing arrangement with Viatris. The deal will expand BBL’s Ebitda base and strengthen overall financials, enabling investments for a sustained long-term growth.
BBL currently has a portfolio of 20 biosimilars, and the acquisition of biosimilars assets of Viatris significantly strengthens its position in providing affordable access to patients through its portfolio in diabetes, oncology, immunology and other non-communicable diseases. It also prepares BBL for greater success with the commercialisation of its future pipeline. By integrating Viatris’ portfolio, BBL will have one of the broadest and deepest commercialised biosimilars portfolio in the industry, it said in the statement.
Allegro Capital served as the financial advisor to BBL. Goodwin Procter and Shardul Amarchand Mangaldas served as BBL’s legal advisors to this transaction.
