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Biocon shares fall after deal with Viatris; here’s what brokerages say

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Biocon shares fall after deal with Viatris; here’s what brokerages say

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Biocon share price: Biocon shares traded lower on Wednesday on dull brokerage commentary after subsidiary Biocon Biologics entered into a definitive agreement with Viatris to acquire the US-based company's biosimilars business.

Biocon shares fall after deal with Viatris; here’s what brokerages say
Biocon shares traded lower on Wednesday as lukewarm commentary from brokerage firms weighed on the stock price of the biopharmaceutical company.
At 11:55 IST, shares of Biocon were trading 0.8 percent lower at Rs 346.2 on BSE. The stock has shed around 12 percent during the last two days.
A dull commentary comes after Biocon subsidiary Biocon Biologics entered into a definitive agreement with Viatris to acquire the US-based company's biosimilars business.
The deal is worth up to $3.335 billion in stock and cash, said the Biocon arm, which aims to create a unique fully integrated global biosimilars enterprise.
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Here's what the brokerage firms say:
CLSA
The brokerage firm has retained its ‘sell’ call on the stock with a target price of Rs 310 as it sees execution challenges in the biosimilar segment. Biosimilars are an extremely competitive market and market share gains have been difficult for Viatris, CLSA pointed out. The company gets direct market presence but limited front-end experience which is a concern, CLSA said.
ICICI Securities
Post the deal, the arm’s net debt level will jump to $1.5 billion and net debt/EBITDA would be around 4 times. The transaction is expected to close in H2FY23. While the subsidiary gets access to an established front end in the developed market, it heavily weighs on the near-term financials, according to ICICI Securities. ICICI Securities retained a ‘hold’ on Biocon shares with a cut in target price to Rs 353 from Rs 374.
Jefferies
The positives from the deal with Viatris drove Jefferies to upgrade its rating on the stock to ‘buy’ from ‘hold’ and raise target price to Rs 413 from Rs 362. The brokerage firm believes incremental revenue from Viatris deal will continue to bring core margin of 30 percent and the deal will not be margin dilutive for the company. However, Jefferies sees execution risks and high leverage as key challenges.
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