Bold bet! Biocon Biologics buys Viatris biosimilars assets for $3.33 billion

Biopharmaceutical company Biocon Biologics said it has entered into an agreement to acquire biosimilars business of US-based healthcare firm Viatris in a cash and stock deal.

The Kiran Mazumdar-Shaw-led company will pay $3.33 billion – which includes cash up to $2.33 billion and compulsorily convertible preference shares (CCPS) in Biocon Biologics valued at $1 billion, according to an exchange filing.

The Board of directors of both the companies approved the deal, the filing said.

The cash payment of $2 billion will be funded by around $800 million raised through equity infusion in Biocon Biologics, the drugmaker said, adding that the remainder will be funded by debt, additional equity or a combination of both.

As per the filing, Viatris will receive $2 billion in cash and up to $335 million as additional payments expected to be paid in 2024. Upon closing of the transaction, Biocon Biologics will issue $1 billion of compulsorily convertible preference shares (CCPS) to Viatris, equivalent to an equity stake of at least 12.9% in the company, on a fully diluted basis.

The transaction is expected to close in the second half of calendar year 2022, subject to regulatory approvals.

With this acquisition, Biocon Biologics said it will have a comprehensive portfolio comprising its current range of commercialised insulins, oncology and immunology biosimilars as well as several other biosimilar assets currently under development. It also has access to the vaccines portfolio through its previously announced partnership with Serum Institute Life Sciences (SILS).

While Kiran Mazumdar-Shaw will continue as the executive chairperson of Biocon Biologics, Viatris will designate Rajiv Malik, president of Viatris, to serve on the BBL Board.

"The deal will enable BBL to attain a robust commercial engine in the developed markets of U.S. & 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," said Kiran.

Commenting on the acquisition, Arun Chandavarkar, managing director at Biocon Biologics, said the deal provides several advantages, including strategic agility and operational efficiencies, "which will help us mitigate pricing pressures in a competitive global biosimilars landscape".

"This deal gives BBL full ownership of Viatris’ rights in biosimilars assets, enabling us to recognize combined revenues and profits. To ensure a seamless transition and continued service to patients and customers, Viatris will provide commercial and other transition services to BBL for an expected period of two years," he added.

The companies will also enter into a Transition Services Agreement as part of which Viatris will provide certain transition services, including commercialisation services, for an expected two-year period. Viatris also will pay $50 million to BBL to fund certain capital expenditures.

"We see minimal overlap of roles in the two organizations due to the complementary nature of our teams thereby facilitating seamless integration of the two businesses," the company said in a statement.

After the acquisition, Biocon Biologics will get Viatris' rights in all biosimilars assets and realise the full revenue and associated profits from its partnered products, a step-up from its existing arrangement with Viatris. The deal is expected to expand BBL's EBITDA base and strengthen overall financials.

Viatris was formed through the merger of Mylan and Upjohn, a division of Pfizer, on November 16, 2020. Its global biosimilars business is expected to clock revenue of $875 million and EBITDA of $200 million for calendar year 2022. It is estimated to exceed $1 billion in revenue next year.