Biocon
In the pink of health
Having scaled up its infrastructure, the company is making a series of strategic moves to capitalise on the growing opportunities in biopharmaceuticals, custom research and clinical research
|
Buy |
Biocon |
|
BSE Code |
532523 |
|
NSE Code |
BIOCON |
|
Bloomberg |
BIOS@IN |
|
Reuter |
BION.BO |
|
52-week High/Low |
Rs 532 / Rs
324 |
|
Current Price |
Rs 474 (as on 20th July
2007) |
Biocon is one of
Many of
these products have USFDA and EMEA acceptance. Biocon
launched the world's first recombinant human insulin, INSUGEN® in November 2004
using Pichia expression and
June 2007 quarter results are very
impressive-sales up 28% and PAT up 36%
Sales
for the quarter ended June 07 grew by a solid 28% to Rs 271 crore. Biopharmaceuticals
and contract research sales increased by 28% to Rs 206
crore and 52% to Rs 44 crore respectively. However, Enzymes sales declined by 5% to
Rs 21 crore. Operating
margin expanded by a healthy 250 bps to 28% catapulting operating profit to
increase by 41% to Rs 76 crore.
Other
income remains unchanged at Rs 1 crore. However, as interest cost and depreciation increased
by 50% to Rs 3 crore and 91%
to Rs 21 crore respectively,
the growth in PBT got restricted to Rs 53 crore, an increase of 26% only. However, as tax fell by 75%
to Rs 1 crore, PAT increased
by 37% to Rs 52 crore. After accounting for minority interest of Rs 1 crore, net profit increased
by 36% to Rs 53 crore.
The
highlight of the quarter was the sharp improvement in gross margins driven by
licensing income (USD 3.5 million), higher contribution from insulin and 52%
growth in the high margin Syngene/Clinigene
operations.
The
enzyme business accounted for roughly 10% of the overall business. The contract
research or the research services business accounted for approximately 20%,
while the balance 80% came from the bio-pharmaceutical
business.
Statins account for about a third of the business. The company has been reducing its dependency on statins on a q-o-q basis.
Management optimistic about future
Commenting
on the results, Kiran Mazumdar-Shaw, Chairman &
Managing Director, Biocon, said: "I am pleased that we
have delivered robust and growing profits at a time when we are challenged with
increased R&D investments, strengthening currency and rising operating
costs. This has been possible due to expanded markets for our bio-therapeutics
as well as significant licensing income from our R&D programs. We see
licensing as a strong affirmation of our innovation led business strategy and
expect to realize even greater licensing revenues in the future.
The year
ahead will be exciting but demanding. Whilst we will address the challenges
posed by a depreciating dollar as well as increased operating costs through a
series of measures that improve operating efficiency, we remain optimistic about
the future thanks to our business verticals that are balanced between products
and services."
To focus on high-growth biopharmaceuticals,
divesting enzymes for $ 115 million (Rs 460 crore)
Biocon is divesting
its Enzymes business vertical to Novozymes A/S for USD
115 million (Rs 460 crore
approx.), at 4.8x sales. This will enable Biocon to
strategically focus on its core bio-pharmaceuticals business. The enzyme
business includes a broad range of industrial enzymes, food additives and
process aids. This transaction, subject to shareholder and regulatory approvals,
is expected to be completed by the end of the 3rd quarter of CY
2007.
This
divestment will enable the company to concentrate on bio-pharma business verticals that include APIs, biologicals and proprietary molecules both commercialized
and under development.
Announcing
the new development, Ms. Kiran Mazumdar-Shaw, CMD, Biocon Limited
said: "Over the past decade we have clearly recognized the high growth
trajectory of our bio-pharma business verticals and
have progressively invested to build proprietary know-how and global scale. We
believe that this is the right time to divest our enzymes business and focus on
unleashing the full potential of our Bio-pharma
businesses.
Novozymes as the
recognized world leader in enzymes will be in a strong position to leverage our
existing enzymes portfolio built over a span of nearly 3 decades.
"
Production
and formulation will continue at the Biocon site under
lease and service agreements with Novozymes.
This deal
is a very favourable for the company as it releases
huge funds from a business which was not growing as expected and at the same
time the facilities will continue to be utilised on
behalf of the acquirer.
Cash flow will be used for acquiring
innovation-led businesses
The
company expects to use these proceeds for innovation-led businesses acquisitions
in biopharma/custom research services and also
products. However, till the time the company finalises
its acquisitions, it will earn significant profits by way of interest income or
will save interest on its debt.
Enters into an exclusive licensing agreement
for G-CSF
Biocon entered into an
exclusive licensing agreement with a global biopharmaceutical company to develop
and market a bio-similar version of G-CSF (granulocyte-colony stimulating
factor) in
Under the
terms of the agreement, Biocon will receive an upfront
licensing fee and following approval in the licensed territories, royalties from
sales.
G-CSF is
an haematopoietic growth
factor that works by encouraging the bone marrow to produce more white blood
cells. Therapeutic G-CSF is primarily used for the treatment of neutropenia, the lowering of the white blood cells that
fight infections.Biocon has received regulatory
approval from the Indian DCGI for the treatment of neutropenia in cancer patients and intends to launch the
product in India through its Oncotherapeutics
division.
The
biological activity of Biocon's G-CSF used in clinical
trials was evaluated by NIBSC (National
Signs
exclusive agreement with Invitrogen Corporation to
market Insulin for cell culture
The
company has also signed an exclusive agreement with Invitrogen Corporation, a provider of essential life science
technologies for disease research and drug discovery, to market pharmaceutical
grade insulin to the global cell culture market. The cell culture market is a
large opportunity for Biocon’s
Insulin.
Files IMPD for IN 105 to conduct Phase I
Clinical Trials in Europe
Biocon has filed an
Investigational Medical Product Dossier (IMPD) for IN105 to conduct a Phase I
Clinical Trial in
Future to reflect good strategic and financial
progress
Over the
past couple of years the company has invested over Rs
550 crore for expansion of its fermentation and
chemical synthesis infrastructure, the full benefits of this expansion will
continue to accrue in future
The
company is also spending heavily on R&D. Biocon’s
Oral Insulin program has successfully completed Phase I Human clinical trials
and will soon enter the Phase II Human Clinical Trials. The company has been
investing aggressively in R&D cost. With insulin entering the Phase 2
clinical trial production, R&D cost will rise further. This in turn will
create new growth avenues for the long term.
Entering the neighbouring markets
Biocon has signed MOU
to enter into JV with NMC group in
Biocon has granted an
exclusive license to Ferozsons Laboratories Limited
for marketing BIOMAb EGFR in
Also eyeing the North American and European
markets
The
The
company is in the final stages of establishing a
Valuation
In FY
2008, we expect the company to register sales and net profit of Rs 1167.66 crore and Rs 245.06 crore respectively. On
equity of Rs 50 crore and
face value of Rs 10 per share, EPS works out to Rs 23.9. At current price of Rs
474, P/E works out to 19.8.
|
|
0503(12) |
0603(12) |
0703 (12) |
0803 (12P) |
|
Total Operating income |
713.00 |
788.00 |
986.00 |
1167.66 |
|
OPM (%) |
31.4 |
29.1 |
28.7 |
29.2 |
|
OP |
224.00 |
229.00 |
283.00 |
340.96 |
|
Other income |
15.00 |
5.00 |
4.00 |
19.00 |
|
PBIDT |
239.00 |
234.00 |
287.00 |
359.96 |
|
Interest |
2.00 |
2.00 |
10.00 |
12.00 |
|
PBDT |
237.00 |
232.00 |
277.00 |
347.96 |
|
Depreciation |
22.00 |
29.00 |
67.00 |
90.00 |
|
PBT |
215.00 |
203.00 |
210.00 |
257.96 |
|
Tax |
18.00 |
31.00 |
17.00 |
12.90 |
|
PAT |
197.00 |
172.00 |
193.00 |
245.06 |
|
Minority interest |
1.00 |
2.00 |
6.00 |
6.0 |
|
Net profit |
198.00 |
174.00 |
199.00 |
239.06 |
|
EPS (Rs)* |
19.7 |
17.2 |
19.9 |
23.9 |
|
* Annualised on current
equity of Rs 50 crore.
Face Value: Rs 5 each | ||||
|
Biocon: Consolidated
Results |
|
|
0706 (03) |
0606 (03) |
Var. (%) |
0703 (12) |
0603(12) |
Var (%) |
|
Sales |
271.00 |
212.00 |
28 |
986.00 |
788.00 |
25 |
|
OPM (%) |
28 |
25.5 |
|
28.7 |
29.1 |
|
|
OP |
76.00 |
54.00 |
41 |
283.00 |
229.00 |
24 |
|
Other income |
1.00 |
1.00 |
0 |
4.00 |
5.00 |
-20 |
|
PBIDT |
77.00 |
55.00 |
40 |
287.00 |
234.00 |
23 |
|
Interest |
3.00 |
2.00 |
50 |
10.00 |
2.00 |
400 |
|
PBDT |
74.00 |
53.00 |
40 |
277.00 |
232.00 |
19 |
|
Depreciation |
21.00 |
11.00 |
91 |
67.00 |
29.00 |
131 |
|
PBT |
53.00 |
42.00 |
26 |
210.00 |
203.00 |
3 |
|
Tax |
1.00 |
4.00 |
-75 |
17.00 |
31.00 |
-45 |
|
PAT |
52.00 |
38.00 |
37 |
193.00 |
172.00 |
12 |
|
Minority Interest |
1.00 |
1.00 |
0 |
6.00 |
2.00 |
200 |
|
Net profit |
53.00 |
39.00 |
36 |
199.00 |
174.00 |
14 |
|
EPS (Rs)* |
21.2 |
15.6 |
|
19.9 |
17.4 |
|
|
* Annualised on current
equity of Rs 50 crore.
Face Value: Rs 5 each | ||||||