BIOCON
Reco price: Rs 236
Current market price: Rs 233.45
Target price: Rs 250
Upside: 7.1%
Brokerage: IDFC SSKI Biocon has signed a joint development and commercialisation agreement with Amylin, a US-based biopharmaceutical company for the development of a novel peptide hybrid. As part of this deal while Amylin would provide the technology, Biocon will lead the development and manufacturing. After the biogenerics partnership with Mylan, this deal is yet another affirmation of Biocon’s strong capabilities in the biotechnology arena, and diabetes in particular, as also its ability to partner with global players.Biocon is a unique play on four big opportunities in the global pharma space – diabetes, biogenerics, CRAMS and NCE research – which can dramatically lift Biocon’s growth trajectory in the coming years, if executed well. Despite recent outperformance, reiterate outperformer with a price target of Rs 250 (16x FY11E). Biocon may close fairly substantial outlicencing deals over the next 12-24 months as it seeks to outlicence Insulin, Glargine as well as other biogeneric products. This can provide significant upside to estimates. Although there are limited near term triggers, there are possibilities that have significant scope to unlock over a period of time. While most of these opportunities are likely to have limited financial impact in the near term earnings, the brokerage is positive on the value creating potential of Biocon’s product portfolio.
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