Shares of Biocon Ltd. gained as much as 5 percent on Wednesday after positive commentary from two brokerages.

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Both Bank of America (BofA) and Bernstein Private Wealth Management advised investors to buy the Biocon stock, hinting at an upside potential of around 40-50 percent from current levels.

BofA on Wednesday gave a ‘buy’ call on Biocon shares, but cut the price target to Rs 330 from Rs 390 earlier. It mentioned that the risk-reward ratio seems favourable for Biocon investors at the current levels.

The brokerage also said that concerns of the biosimilar market being like generics in the US are unwarranted. Notably, Indian drug makers supplying generic drugs to the US market have been under severe strain of late largely because of increased competition, pricing pressures and increased regulatory oversight.

BofA also estimated that Biocon’s Syngene stake and the generics business are together contributing Rs 150 per share. Syngene International is Biocon’s research arm.

Meanwhile, Bernstein continued its ‘outperform’ rating on the Biocon stock with a price target of Rs 299.

Sharing some highlights from a webinar with Biocon Biologics, Biocon’s biosimilars manufacturing arm, Bernstein said that the company’s rationale behind the Viatris deal was to play the biosimilars market for the long-term.

In November 2022, Biocon Biologics had announced the acquisition of the global biosimilars business of its partner Viatris for $3 billion. Bernstein informed that the integration of the two units did not require much rationalisation.

It also said that the Biocon Biologics management is looking to raise funds, but with the right partner and at the right price. Biocon has clarified that further stake sale in Syngene International is not in the mix now. Biocon had recently divested 10 percent stake in Syngene in February to raise Rs 2,250 crore.

The management is also rethinking and redrawing contours of the partnership with Serum Institute of India, given the demand for the Covid vaccines is coming off, said Bernstein.

On March 27, IIFL had also upgraded Biocon to Add from Reduce, calling valuations "reasonable" but "not cheap." It cited better execution in the upcoming launches and equity fund raise in Biocon Biologics as the key to the stock's performance hereafter. The stock is now trading near IIFL's price target of Rs 230.

Incidentally, all of these upgrades have come soon after Biocon Executive Chairperson Kiran Mazumdar Shaw told CNBC-TV18 in an interaction on March 17 that the company's stock is not well analysed and understood.

"I for one, believe that our stock is not well analysed and understood. Investors need to dive deeper into what we're doing. Our recent spin-off, the novel spin-off that we have in Boston, Bicara Therapeutics was oversubscribed. I think we have a uniquely differentiated business in India and I hope that investors recognise that," she had said.

Two days after her comments, the stock plumetted to a 52-week low of Rs 191.55 and has rebounded from those levels.

Shares of Biocon are trading 4.3 percent higher at Rs 225.20.

(Edited by : Rukmani Krishna)

First Published:Apr 12, 2023 12:45 PM IST