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View: Will Adagio live up to Biocon's COVID-19 market expectation?

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View: Will Adagio live up to Biocon's COVID-19 market expectation?

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Biocon sees strong potential in Adagio drug candidate and an early recovery in the US company’s stock, while stock analysts keep a neutral position under a wait and see mode

View: Will Adagio live up to Biocon's COVID-19 market expectation?
Biocon Ltd, which factored in a huge mark-to-market loss in its third quarter results on account of its US technology partner Adagio Therapeutics’ share price impact, is hopeful of a successful addition of Adagio’s broad spectrum biologic drug into the company’s anti-Covid portfolio as well as an early recovery of the NASDAQ listed stock.
Biocon took a hit of Rs 77 crore in PBT during the third quarter on account of mark-to-market loss attributed to Biocon Biologics’ equity investment in Adagio.
Adagio stock slid 82 percent to $6.85 on December 14, after the Massachusetts-based clinical stage biological drug researcher released its trial data showing reduced efficacy of its antibody therapy against the Omicron variant. This product was core to Biocon’s anti-Covid portfolio that is being built up under the subsidiary– Biocon Biologics.
“It was a disclosure in haste that led to the big impact in Adagio share price. A few weeks later, Adagio found that their lead antibody is as efficacious as the ones developed by others, including us, GSK and AstraZeneca, against the Omicron variant,” said Biocon executive chairperson Kiran Mazumdar-Shaw in an exclusive interview.
“Adagio, which is now pursuing an adaptive trial for the prophylactic as well as curative efficacy against the Omicron variant, has already proved that a double injection regime (instead of one as trialed earlier) is highly effective against the Omicron,” she said.
Biocon Biologics, the wholly owned subsidiary of Biocon under which the company pursues its new biological drugs business, had in July last year signed a deal involving an exclusive licence to manufacture and commercialise the antibody treatment — ADG20 — for India and select emerging markets with Adagio Therapeutics. ADG20 is a clinical stage single antibody therapy, which can be used for prevention as well as treating severe Covid cases. It apparently works against all existing and future variants of coronavirus.
On December 14, Adagio's chief executive officer Tillman Gerngross said in a statement that; “Due to the highly conserved and immunorecessive nature of the epitope recognized by ADG20, we anticipated that ADG20 would retain neutralizing activity against Omicron, consistent with activity observed in in vitro models with all other known variants of concern. While the individual mutations present in the Omicron receptor binding domain were not associated with escape from ADG20 in the context of an original strain of the virus, new data show that the combination of mutations present in the Omicron spike protein led to a reduction in ADG20 neutralization that was not suggested by prior data.”
However, Gerngross added that the company is conducting additional analyses to assess the optimal path forward with ADG20 as both a prophylactic and treatment option for COVID-19.
“They (Adagio) unnecessarily suffered a big impact on the stock due to this hasty disclosure, which we had to show in our accounting,” said Mazumdar-Shaw, adding that Biocon’s third quarter results were otherwise quite robust with an EBITDA of Rs 715 crore and PBT at Rs 346 crore, mainly driven by the biologicals division, which includes the newly launched interchangeable Glargine insulin and other biosimilars in the US market and other emerging markets.
However, stock analysts have kept Biocon stock as ‘neutral’ as its big bet on new technologies such as Adagio’s are always volatile.
“We need to see the progress of the Adagio trials and wait for at least another two to three quarters to see the real impact on the US stock, though Biocon has its promising pipeline of biosimilars and the interchangeable insulin Glargine to sustain best performance,” said Siddant Khandekar, AVP (Research), ICICI Securities.
Adagio shares closed at $6.59 a unit, 7.5 percent lower than the previous day close, on NASDAQ on Thursday, while Biocon opened at Rs 362.60, up 89 percent, on NSE on Friday.
— CH Unnikrishnan is Founder & Editor at Future Medicine India. Views expressed are personal.
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