Bangalore: India’s largest biotechnology company, Biocon Ltd, saw its profit for the December quarter fall around 90% compared with the corresponding quarter in the previous fiscal year on account of foreign exchange losses and so-called mark-to-market provisions.
The company’s revenue in the period rose 83.86% to Rs436.19 crore from Rs237.24 crore in the corresponding quarter in the previous fiscal year, on the back of high growth in its core businesses of contract research and biopharmaceuticals. The numbers for 2008 include those of German firm AxiCorp GmbH, in which Biocon acquired a stake last April.
Biocon’s chairman and managing director (CMD) Kiran Mazumdar-Shaw said the mark-to-market provisions were reflected in the profit-and-loss account. Mark-to-market is an accounting practice of valuing financial assets in accordance with their market value and not the cost at which they were acquired.
Opportunities available: Biocon CMD Kiran Mazumdar-Shaw says the company has not been hurt by the global slowdown. Harikrishna Katragadda / Mint
“We do not feel the impact of slowdown but will wait and watch,” she said in an analyst call. The company said that exceptional charges relating to forex hedging in third quarter had resulted in a loss of Rs46 crore. In the first nine months of the year, Biocon lost Rs106 crore on account of mark-to-market provisioning and cancellation of certain longer-term forward cover.
In the nine months ended December, revenue rose 46% to Rs1,187 crore from Rs811 crore for the corresponding period in the previous fiscal year.
And net profit was Rs68.2 crore compared with a profit of Rs398.6 crore in 2007.
Contract research services grew 21% to Rs157 crore in the nine months to December from Rs129 crore in the year-ago period. The biopharmaceuticals business, excluding revenue from the German generic acquisition of AxiCorp last April, grew 13% and the retail health care business grew 42% in the nine-month period.
“The sequential progress in Biocon’s core segments has been good. Last quarter saw a spike in biopharmaceutical business, this quarter shows a spike in contract research,” said Bhavin Shah, sector analyst at Mumbai-based equity research firm Dolat Capital Market Pvt. Ltd. Shah, who finds “more positives than negatives” in the third quarter numbers, added that the core business will improve in the fourth quarter.
Biocon also announced that it had received approval from the Indian drug regulator to market a basal insulin analog, Glargine, which constitutes around a Rs40 crore market in India and is currently served by the French drug maker Sanofi-Aventis. Biocon’s flagship product in the pipeline, oral insulin IN105, will soon enter phase III trial, for which the company has recruited 264 patients. The company hopes to launch the drug for type II diabetes next year.
Justifying the decline in Biocon’s licensing revenue, Mazumdar-Shaw said there’s a growing trend where companies are paying milestone payments rather than striking outright licensing deals.
“Clearly companies are cost-cutting; they want to do co-development of molecules, but we’ll still have some good licensing opportunities,” she added.
Biocon’s shares ended the day at Rs113.35 on the Bombay Stock Exchange (BSE), up 0.98% compared with its previous close. BSE benchmark index, the Sensex, lost 321.38 points to close at 8,779.17.