Viatris Completes Sale of Biosimilars Biz to Biocon in $3.3-Bn Deal
As part of what it terms as a “reshaping plan,” Viatris has completed its divestment of its biosimilars assets to Biocon Biologics, a Bangalore, India-based biosimilars company and subsidiary of Biocon Ltd., , in a $3.35-billion deal, which includes an equity stake of at least 12.9% by Viatris in Biocon Biologics. The move is part of an overall plan by Viatris to achieve $9 billion in pre-tax proceeds through the Biocon Biologics transaction and the divestment of other non-core assets. The Biocon deal was first announced in late February 2022, and Viatris provided an update of its divestment plan and two recent pending acquisitions to create an ophthalmology franchise as part of its growth strategy late last month (November 2022).
Under its deal with Biocon, Viatris received $3 billion in consideration in the form of a $2-billion cash payment and $1 billion of convertible preferred equity representing a stake of at least 12.9 % (on a fully diluted basis) in Biocon Biologics. Viatris also is entitled to $335 million of additional cash payments in 2024. In addition, with the closing of the deal, Viatris and Biocon Biologics have entered a transition services agreement under which Viatris will provide commercialization and certain other transition services for an expected two-year period intended to ensure business continuity. Upon the completion of the transition services, Biocon Biologics will assume responsibility of commercial, regulatory, and other related services.
Viatris expects to report the $2 billion of cash proceeds from its deal with Biocon to be offset by the impact of certain deal-related adjustments as cash flows from investing activities. Additionally, the company expects to incur approximately $400 million of certain deal-related expenses, primarily taxes and associated transactions costs.
Viatris expects to use the net divestiture cash from the Biocon biosimilars transaction to do the following: (1) pay down additional short-term debt and accelerate its progress toward $6.5 billion of its Phase 1 debt-reduction plan; (2) in combination with cash on hand, fund two pending acquisitions of ophthalmology drug companies (Oyster Point Pharma and Famy Life Sciences) for a combined total of between $700 million and $750 million, with the deals expected to close in the first quarter of 2023; and begin to execute on its previously announced share buyback authorization in 2023.
Biocon Biologics’ position in biosimilars and holdings in the company
With the closing of the deal, Biocon Biologics has a portfolio of 20 biosimilars assets, including insulins and monoclonal antibodies spanning therapy areas such as diabetes, oncology, immunology, and ophthalmology. Prior to the deal, Viatris and Biocon have been partners in biosimilars. In 2009, Biocon formed an alliance with Mylan, Viatris’ predecessor, to develop monoclonal antibody biosimilars. In 2013, the partnership was expanded to include insulin biosimilars. Viatris was formed in 2020 through the merger of Mylan and Upjohn, Pfizer’s off-patent branded and generic established medicines business. Viatris and Biocon have collaborated for biosimilars such as Semglee (insulin glargine-yfgn), a biosimilar interchangeable of Sanofi’s Lantus (insulin glargine), a long-acting insulin to treat Type 1 and Type 2 diabetes. The companies have also partnered on biosimilars to Roche’s Herceptin (trastuzumab) to treat certain HER2-positive breast and gastric cancers, and Amgen’s Neulasta (pegfilgrastim), a drug to stimulate white-blood cell production after chemotherapy.
To fund the upfront $2-billion payment to Viatris, Biocon Biologics has secured $1.2 billion of a Sustainability Linked Loan with the balance funded through an equity infusion of $650 million by Biocon Ltd., and $150 million by Serum Institute Life Sciences, part of the Serum Institute of India, a Pune, India-based vaccine manufacturer. Biocon Ltd.’s funding comprises $230 million from existing reserves and $420 million through mezzanine financing. Biocon is in the process of securing investments to retire the mezzanine financing, post-deal closure. Post conclusion of the Viatris and Serum transactions, Biocon Ltd.’s stake in Biocon Biologics will be 68%.