Biocon: Is Now the Time to Reevaluate Post $3.3bn Viatris Acquisition?

Biocon, historically a stable player in the Indian pharmaceutical landscape, appears to be at a significant turning point following its $3.3 billion acquisition of Viatris Biologics. The company's revenue has increased significantly, with a 4.5x rise in the past decade underpinned by an expansion in biosimilars, acquisitions, and contract research growth. Despite the impressive top-line growth, Biocon's operating margins have remained constant due to increased R&D spending and integration costs. However, the acquisition has not been well-received by the market, affecting Biocon's share price. Today, Biocon's operations encompass three main business segments: biosimilars, contract research, and generics. While the company has ambitious plans for biotechnology and biosimilars, only time will reveal if its comprehensive value chain strategy will lead to greater profitability and margins. The company's path to overcoming high debts involves raising Rs 4,500 crore through Qualified Institutional Placement (QIP), with an eye on strengthening its financials. Additionally, Biocon's valuation approach suggests a potential 26% undervaluation when subtracting debt from its enterprise value. Future prospects include regulatory approvals and potential IPOs, which might alter Biocon’s financial structure and market perception.