Bangalore: Biotechnology company Biocon Ltd saw a turnaround in profits in the June quarter with a 284% growth over a year earlier, essentially from a recovery in its mark-to-market provisions.
Biocon’s net profit in the first quarter grew to Rs57.6 crore from Rs15 crore in the same year-ago period. Its revenue rose 82.74% to Rs505.3 crore, including revenue from its European acquisition, AxiCorp GmbH, last April.
Mark-to-market is an accounting practice of assigning a value to a position held in a financial instrument, based on current market price and not at the price at which it was bought. In the year-ago first quarter, Biocon suffered mark-to-market losses of Rs25.5 crore.
No more hedging: Biocon chairman and managing director Kiran Mazumdar-Shaw attributed the near-quadrupling of profit to the company’s now cautious approach to foreign exchange volatility. Hemant Mishra / Mint
Kiran Mazumdar-Shaw, Biocon’s chairman and managing director, attributed the near-quadrupling of profit to the company’s now cautious approach to foreign exchange volatility. “We have adopted the insurance approach to the forex; there will be no more hedging in future,” she said.
Analysts say Biocon also gained from steady business in its biopharmaceutical division as well as good cost management and recovery in its contract services operations, Syngene and Clinigene.
“Syngene and Clinigene have shown 50% growth in revenue, with Syngene having 37% operating margin; the company knows what it is doing,” said Bhavin Shah, an analyst at equity research firm Dolat Capital Market Pvt. Ltd in Mumbai.
Shah says Biocon is “fairly poised” to do well in the next few quarters as it has a good product mix and its investments in research and development are showing signs of a pay-off.
Meanwhile, Biocon is counting on new product launches in India, expected to be more than last year. It is also anticipating milestone payments from its new partnership with Pittsburgh, US-based Mylan Inc. in this fiscal.
Announced in June, Biocon’s new agreement with Mylan, which had $5.1 billion (Rs24,684 crore) in sales in 2008, is for an exclusive collaboration on the developed, manufacturing, supply and commercialization of high-value generic biologic compounds for the global market.
This assumes significance in the context of the Obama administration in the US executing healthcare reforms and gearing up to clarify the country’s long-pending position on biogenerics—generics for biotechnology drugs.
Mazumdar-Shaw expects this to open enormous opportunities in the US market.
Biocon’s much-talked about oral insulin, initially meant for type 2 diabetics, is progressing in its phase III or late-stage trials and the company intends to share data by the second quarter of next year.
It also plans to take additional studies on this insulin so that soon after Indian trials are complete, it can garner sufficient data from other centres to apply for entry into regulated markets.