Biocon Shares Jump 4% as Jefferies Upgrades to 'Underperform' and Raises Price Target by 43%

Global brokerage firm Jefferies has upgraded its rating for pharmaceutical company Biocon to 'underperform', citing favorable developments related to regulatory approval for its Bengaluru manufacturing facility. In line with this positive sentiment, Jefferies has also raised its stock price target by 43% to ₹400, indicating an approximate 12% upside from the stock’s closing price on Monday.

This optimistic rating drove Biocon's shares up nearly 8% on January 7. By 11:01 am IST, the stock was trading at ₹382.95 on the NSE, reflecting strong investor sentiment following the positive news.

The US Food and Drug Administration (FDA) granted Biocon’s Bengaluru biologics unit a "Voluntary Action Indicated" (VAI) status after completing its inspection. This regulatory classification indicates that although minor issues were identified, they are not significant enough to trigger any regulatory action or enforcement measures. Companies receiving a VAI status can proceed with operations without needing further corrective actions, making this a favorable outcome for Biocon. The resolution of this regulatory matter is expected to have a positive impact on Biocon’s biologics production capabilities and global supply chain.

Following this approval, investor focus has shifted to the regulatory clearance of Biocon's Malaysia facility. Any favorable outcome on this front could further strengthen Biocon’s competitive positioning in the biosimilars market.

Jefferies' optimistic stance on Biocon also stems from the USFDA approval of its biosimilar Stelara, which is set for launch in February 2025. Biocon Biologics, a subsidiary of Biocon, secured the approval in December to introduce its version of Janssen's Stelara under the brand name Yesintek. Stelara, which is used to treat autoimmune disorders such as psoriasis and Crohn’s disease, was Janssen’s top-selling drug, generating $7 billion in US sales in 2023. The introduction of Yesintek could open a significant revenue stream for Biocon.

However, the biosimilar market is expected to be highly competitive, with the USFDA already having approved five biosimilars of Stelara. Among the competitors, Amgen's version is projected to be the first to enter the market in the fourth quarter of FY25, posing a challenge for Biocon’s market share. Despite this, analysts at Jefferies remain optimistic, highlighting that Biocon’s biologics portfolio is likely to benefit from increased visibility and growth, driven by its upcoming launches and recent regulatory successes.

Biocon’s ability to navigate regulatory hurdles and expand its biosimilar product lineup is crucial to strengthening its market presence. Industry experts believe that the successful launch of Yesintek will mark a significant milestone in Biocon’s journey toward becoming a global leader in the biologics and biosimilars space. Additionally, positive investor sentiment around Biocon's regulatory approvals and product launches may help mitigate concerns surrounding competitive pressures from global pharmaceutical giants.

Looking ahead, the company's focus remains on ensuring compliance across its facilities and pursuing further approvals for its biosimilar pipeline. The recent developments have reinforced confidence in Biocon’s execution capabilities, with analysts closely monitoring the progress of the Malaysia facility and future USFDA filings. A successful outcome in the Malaysia facility’s review could further bolster Biocon’s operational scalability and enhance its ability to meet global demand for biosimilars.