Biocon Q2 net profit falls 53% on muted sales, higher expenses
Mumbai: Biocon Ltd on Thursday reported a lower-than-expected profit of Rs68.8 crore for the quarter ended September, a decline of 53% from Rs146.7 crore a year ago, as sales growth slowed and expenses increased.
The Bengaluru-based company’s revenue rose 1.5% to Rs968.6 crore from a year earlier, aided by growth in research services and branded formulations segments.
A Bloomberg poll of 10 analysts had estimated the company’s profit at Rs111.6 crore, and sales at Rs1,022.4 crore for the September quarter.
“Our overall earnings performance was muted on account of several specific factors. In particular, plant modifications undertaken to comply with regulatory requirements led to production disruptions. Additionally, we experienced regulatory and tender delays in some emerging markets for our biosimilars business. Malaysia facility costs and pricing pressures in our APIs (active pharmaceutical ingredients) business continue to weigh. We expect these headwinds to ease by the end of this fiscal,” chairperson and managing director Kiran Mazumdar-Shaw, said in a press release.
Earlier this year, the US Food and Drug Administration (FDA), as well as the European Medicines Agency (EMA), had inspected Biocon’s manufacturing facility in Bengaluru and made observations related to non-compliance of good manufacturing practices.
The firm has since been taking measures to address the concerns raised by the regulators. Biocon’s total expenditure rose 13.2% to Rs893.7 crore during the quarter, leading to a narrowing of operating margin to 17.4% from 24.5% a year ago.
The research services business, which is under its listed-subsidiary Syngene International Ltd, grew 11% to Rs335 crore, while small molecules revenue fell 13% to Rs351 crore. Branded formulations sales rose 29% to Rs176 crore, while revenue from biologics business was little changed at Rs156 crore in the September quarter.
“The small molecules business was impacted by a lower offtake of certain products as a result of pricing pressure faced by some of our clients. However, we were able to increase market share for some of our specialty APIs in key markets,” the firm said. On the biologics front, Biocon’s partner Mylan NV filed application for insulin glargine with the US FDA. It is one of the six biologic products co-developed by the companies, as part of an exclusive partnership.
Shares of Biocon fell 0.31% at Rs365.60 on BSE, while the benchmark Sensex index rose 0.32% at 33,147.13 points.
“Biocon’s earnings were below expectations. Remediation work at their plant led to some revenue loss in the biologics business and also affected margins. While some pressure is likely to continue in Q3 due to regulatory issues, we expect Q4 to show improvement,” Surya Patra, analyst at PhillipCapital India, said.
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