Bangalore: Impressive growth in research services helped biotechnology firm Biocon Ltd post a fourth quarter profit of Rs62.03 crore, a growth of 31.16% from Rs47.29 crore in the same quarter last year.
The company’s net sales in the quarter that ended 31 March, however, declined 5.92% to Rs219.75 crore and total income fell by 1.09% to Rs236.71 crore compared with the same quarter last fiscal.
Its total income for fiscal 2007-08 increased 19% to Rs1,090 crore, up from Rs990 crore in the previous year, and net profit increased by 3% to Rs225 crore.
“It’s the highest profit we have ever posted despite 11% appreciation in rupee, divestment of our enzymes business and rising salary and operations costs,” said chairman and managing director Kiran Mazumdar-Shaw.
Biocon announced one free share for each held and a 100% dividend, 40% of which is due to divestment of its enzymes business last year.
The overall result, say analysts, is according to their expectations, but the high operating margins at 31% that improved 2% over the previous year is “unexpected.” They attribute this to the better margins in research services.
The two research services arms of Biocon, Syngene International Pvt. Ltd and Clinigene International Pvt. Ltd, registered a growth of 29% in their revenues, contributing 16% to the total revenue in fiscal 2008. Since rise of the rupee and capacity demand for future expansion kept operating margins flat, analysts fear Biocon will have to “work very hard” to maintain this growth.
“This kind of growth would require an operating margin of 30-35% which is difficult to maintain as the currency risk will continue,” said a life sciences analyst at a securities firm in Mumbai, who declined to be named.
Mazumdar-Shaw, however, is optimistic that an imminent slowdown in the US would mean more work for Indian research services firms, and Biocon in particular.
In a move to tap the growing cardiology market in India, which at Rs3,200 crore constitutes 10% of the Indian pharma market, Biocon has split its cardio-diabetes division into two separate segments. “We want to build world-class brands in these segments and hence need to focus more with a larger field force,” said Rakesh Bamzai, president of marketing at the firm.
The company’s research and development revenue expenditure increased by 26% to Rs48 crore in 2007-08 and is expected to increase to Rs70 crore in the current fiscal year. This is because several preclinical products are moving into clinical trials, which are one of the most expensive parts of drug development, the company said.
Biocon’s European acquisition of Axicorp GmbH for €30 million (Rs173.4 crore then), announced in February, will be completed this month.