Biocon unit’s $3.34bn Viatris deal

May 2022 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2022 Issue

Biocon Biologics, a division of Indian drug manufacturer Biocon Ltd, has agreed to acquire US-based Viatris Inc’s biosimilars business in a deal worth $3.34bn.

Under the terms of the deal, Viatris will receive up to $2.34bn in cash on closing and up to $335m in additional payments, which are expected to be paid in 2024. Viatris will also receive convertible shares in Biocon Biologics worth $1bn, which is equivalent to an equity stake of at least 12.9 percent in Biocon Biologics on a fully diluted basis. The companies will also enter into a transition services agreement under which Viatris will provide certain transition services, including commercialisation services, for a two-year period. Viatris also will pay $50m to Biocon Biologics to fund certain capital expenditures.

The boards of both companies have approved the transaction, which is expected to close in the second half of 2022, subject to closing conditions.

The combination of Viatris’ biosimilars business with Biocon Biologics is expected to accelerate the expansion of Biocon Biologics’ commercial capability in developed markets, including the US, Europe, Canada, Japan, Australia and New Zealand.

“By combining the biosimilars business of Viatris to create a global, vertically integrated business in BBL, we are confident of unlocking significant value for our stakeholders,” said Arun Chandavarkar, managing director of Biocon Biologics. “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.”

“This deal provides several advantages, including strategic agility and operational efficiencies, which will help us mitigate pricing pressures in a competitive global biosimilars landscape. We remain committed to sustainable growth with a strong financial profile, expanded geographical reach and continued investments in R&D to build a world-leading biosimilars franchise. We believe that as a fully integrated global company, we will be able to enhance patient access and reduce healthcare inequities worldwide,” he added.

“The Board of Directors has worked closely and strategically with the management team to develop a future direction for Viatris that will not only unlock immediate value but will also create a simpler, stronger and more focused company,” said Robert J. Coury, executive chairman of Viatris. “The Board is extremely pleased with the initiatives being announced today, which are consistent with our strategy of returning value to shareholders.”

“As promised, while delivering strong financial performance in our first year, we spent 2021 conducting a comprehensive strategic review of our entire business,” said Michael Goettle, chief executive of Viatris. “Through that process, we have identified opportunities that we believe will generate up to approximately $9 billion in pre-tax proceeds, through the Biocon Biologics transaction and the divestment of assets that are non-core to our future. We believe that unlocking this value will give us significant financial flexibility to further reshape the Company, simplifying and optimizing our business, building a more durable higher-margin portfolio focused on three key therapeutic areas – ophthalmology, gastrointestinal, dermatology – and maximizing total shareholder return.”

Biocon and Viatris have partnered together extensively in biosimilars over the years. For more than a decade the companies have created commercialised biosimilars, including Trastuzumab, Pegfilgrastim, Bevacizumab and Adalimumb. Under the terms of the companies’ partnership agreement, Viartris has exclusive commercialisation rights in the US, Canada, Australia, New Zealand, the European Union and European Free Trade Association countries. Biocon Biologics has exclusive commercialisation rights for Japan and certain emerging markets. Viatris and Biocon Biologics have co-exclusive commercialisation rights in the rest of the world. The collaboration is a cost-share and profit-share model.

Richard Summerfield