Kotak fund invests $129m in India's Biocon
Kotak Mahindra Advisors (KIA), the alternative assets arm of Kotak Mahindra Group, has committed INR 10.7bn (USD 129.4m) to Indian pharmaceuticals manufacturer Biocon to support the latter’s acquisition of a biosimilar business from global healthcare player Viatris.
KIA is investing through the Kotak Special Situations Fund, which closed in 2019 at USD 1bn. Abu Dhabi Investment Authority (ADIA) participated as the anchor LP, putting in USD 500, with additional contributions coming from unnamed sovereign wealth funds and a large Indian family office.
Biocon said in a filing that it would issue 107,000 non-convertible debentures to the fund priced at INR 100,000 apiece. The debentures have a five-year tenure and will generate a 12% IRR with the possibility of some upside.
The Viatris deal was executed by Biocon Biologics, a subsidiary of Biocon. The company has previously received substantial private equity funding. In 2020, Goldman Sachs invested INR 11.2bn at a post-money valuation of USD 3.94bn. This followed commitments of INR 5.36bn from True North in January of the same year and INR 2.25bn in August from Tata Capital Growth Fund.
True North’s investment coincided with an internal restructuring at Biocon, which saw the company’s drug discovery and research division – which had previously collaborated with Mylan on a biosimilars programme – merge with Biocon Biologics.
Viatris said the sale of its biosimilars business to Biocon Biologics, which closed last November, would create “a unique fully vertically integrated global biosimilars leader.” The company received USD 2bn in cash and USD 1bn in convertible preferred equity, which equates to a stake of at least 12.9% in Biocon Biologics on a fully diluted basis. It is also entitled to an additional USD 335m in cash in 2024.
The upfront payment of USD 2bn was funded through a USD 1.2bn debt package raised by Biocon Biologics, a USD 650m equity infusion by Biocon, and a USD 150m commitment from Serum Institute Life Sciences. In May 2022, regulators signed off on a deal that saw the Serum Institute take a 15% stake in Biocon Biologics and transfer its Covidshield Technologies business to the company.
Biocon raised USD 420m in mezzanine financing to cover part of its equity infusion. The company said that the additional investment from KIA as well as the partial divestment of contract development manufacturing organisation (CDMO) Syngene would help reduce its debt load. Approximately 15% of Syngene has been sold across two tranches. Biocon retains 54.9%.
The company noted in its latest earnings call that Biocon Biologics is in discussion with private equity investors regarding an additional capital raise that would pare down the acquisition debt.
Based on monoclonal antibodies, biosimilars are drugs with nearly identical effects to medications already on the market. They offer opportunities to increase access to biologics by stimulating price competition and may lower healthcare costs.
Biocon Biologics has a pipeline of 20 biosimilar molecules spanning insulins, monoclonal antibodies, and conjugated recombinant proteins with a strong focus on diabetology, oncology, and immunology. It claims the addressable market for these products will be worth more than USD 70bn by 2027.
Eight treatments are fully commercialised. One of them, Insulin Glargine, is the first interchangeable biosimilar globally to win approval from the US Food & Drug Administration (FDA).
Biocon Biologics has invested over USD 1bn to date in R&D and global scale manufacturing. It has end-to-end capabilities across multiple sites in India and Malaysia, and it claims to be one of the top 15 biopharma companies worldwide by installed capacity.
Even before the Viatris transaction, biosimilars had emerged as Biocon’s primary revenue driver. The division contributed INR 34.6bn in revenue for the 12 months ended March 2022, up 24% year-on-year. Overall revenue – the rest came from generics and research services – rose 14% to INR 83.9bn while net profit fell 12% to INR 6.48bn.
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