Biocon Ltd’s biopharmaceutical business did well during
the March quarter, with sales rising by 46%, but contract research income grew by only 9%, pulling down overall growth to 41%. Contract research income growth is expected to improve in fiscal 2011, as a key contract is expected to see a ramp-up of operations. Though overall sales growth was still healthy, a 43% increase in material costs, and higher expenditure on power, employees and research contributed to lower profitability. Biocon’s operating profit margin declined by over a percentage point as a result. The company sees material costs being influenced by the rupee-dollar exchange rate and the product mix.
In its insulin business while growth was at 11%, during fiscal 2011 the company will be expanding to newer markets. Sales of immunosuppressants grew by 28% and will continue to drive growth in the current year as well.
Graphic: Yogesh Kumar/Mint
In statins, Biocon expects atorvastatin sales to contribute to growth in the current fiscal. Its German acquisition AxiCorp GmbH is doing well. On the contract research front, licensing income has become a key component of profits, with the December and March quarters seeing credits of Rs18 crore and Rs21 crore, respectively.
Biocon’s profit before tax and exceptional items rose by 35% to Rs99 crore in the March quarter.
A good year of performance saw its net worth increase and debt-to-equity ratio fall to 30% from 35%. There has been a sharp improvement in its cash balance, to Rs140 crore from Rs12 crore. This will come handy as the company has outlined a sizeable capital expenditure of Rs250 crore for fiscal 2011, compared with Rs80 crore in the previous year. It also plans to spend around Rs200 crore on research and development (gross basis), compared with Rs125 crore. Part of its research expenses are shared with its partners.
At the same time, Biocon’s licensing revenue is rising. A ramp-up of its contract research business, growing portfolio of products and widening geographical presence in emerging markets should contribute to higher growth too.
Biocon is also seeking partnerships for its research programmes and if it succeeds, upfront payments will give a boost to its performance too. The outlook for 2011 looks good, contingent on its plans playing out as expected.
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