Biocon to exit enzymes business, reports 36% rise in Q1 profit

Biocon to exit enzymes business, reports 36% rise in Q1 profit
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First Published: Thu, Jul 19 2007. 12 49 AM IST
Updated: Thu, Jul 19 2007. 12 49 AM IST
Bangalore: India’s largest biotechnology company Biocon Ltd said it would exit its enzymes business by selling it to Denmark’s Novozymes AS for $115 million (Rs464.6 crore) and focus on the high margin bio-pharmaceuticals business, including branded drugs.
Biocon also said its first quarter profits rose 36% to Rs53 crore, from higher income associated with licensing molecules to companies in the US and Europe. Revenue grew 28% to Rs272 crore on increasing business from contract research, the work it does for global drug makers.
The results were “in line with expectations despite the rupee appreciation,” said Rahul Sharma, an analyst at Karvy Securities in Mumbai.
Biocon generated about Rs100 crore of its Rs990 crore annual revenue from enzymes, the proteins used in food ­products such as beer, cakes and biscuits, and biological detergents.
Novozymes will pay Biocon $102 million in cash by October, when the sale is completed, with the remaining $13 million on committed services fees and lease of the factories over 10 years.
The Danish firm would absorb 150 of the 160 staff at Biocon’s enzyme facility.
“It is a good exit strategy. Enzyme is a small part of Biocon’s business. The sale is around five times multiple of revenue,” said Karvy’s Sharma
Biocon began as an enzyme maker in 1978, founded by Kiran Mazumdar Shaw, India’s first female brewer, and diversified into statins or cholesterol reducing drugs, offering clinical trial and research services and also drugs for diabetes and cancer.
“It is an emotional issue but, in business, you can’t be tied to that,” said Shaw, who is managing director of Biocon. “It is better to focus your energies on the bio-pharma business that is growing and needs attention and investment than enzymes that increasingly became a smaller part.”
Biopharmaceutical drugs have clocked strong growth rates because they address clinical needs thought unmanageable as recently as two decades ago, and also command premium prices. Examples range from medicines that pinpoint and target cancer cells much more accurately than sledgehammer-like chemical drugs, or red cell boosters and human growth hormones.
The Biocon facility would be managed by Novozymes South Asia Pvt. Ltd, a local arm of the Danish company.
Novozymes expects annual sales to grow at over 15% in India, a market where enzyme use is “still in its infancy,” the company said in a statement. It will leverage Biocon’s “pectinase” product line to increase sales of enzymes for the juice and wine industries in India.
Shares of Biocon on Wednesday closed at Rs461.9 each, up 0.28%, on the Bombay Stock Exchange.
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First Published: Thu, Jul 19 2007. 12 49 AM IST