Biocon Ltd’s performance in the December quarter seems dramatic at first, as its consolidated net profit rose by 187% to Rs83.2 crore.
Adjusting for exceptional items in the year-ago quarter, due to forex-related losses, its profit growth was a more sedate 11.1%. Revenue rose by 45% to Rs637 crore while expenses grew by 49%, resulting in operating profit margins dipping 200 basis points to 20.2%.
One basis point is one-hundredth of a percentage point.
Biocon’s material costs during the quarter jumped substantially, with total material cost rising by 62% to Rs 354 crore. The company management said in a conference call that material costs in the year-ago period were lower due to an increase in finished goods, leading to an element of inventory profit. Biocon’s increase in stock was about Rs7 crore for the December quarter, compared with Rs32 crore. On a sequential basis, Biocon’s material costs increased by 6% while revenue grew by 9%, indicating a healthy trend.
Biocon’s business growth was driven by branded formulations, growing insulin sales in India and the company’s focus on emerging markets such as Latin America, West Asia and Asia.
Graphic: Yogesh Kumar / Mint
A better performance from Axicorp, its German subsidiary, too helped. Emerging markets including India contributed about 40% of sales and Biocon is focusing on these markets for growth.
The contract research business also did well, with sales rising by 20% though segment profit declined by 13.5%.
In the nine months ended December, branded formulations’ revenue was up by 37% to Rs100 crore. Axicorp did quite well in the German market, securing a key tender and worked with Biocon to keep its costs lower.
The current business and geographies which contributed to Biocon’s growth are expected to shoulder that responsibility in fiscal 2011 as well.
Meanwhile, Biocon continues to work on future growth drivers, including its quest to launch biosimilars (new versions of existing medicines whose patents have expired) in developed markets, new drug discovery programmes and moving ahead on its existing strategic alliances with global pharmaceutical companies.
Steady revenue streams provide capital for its projects and keep investors happy, but they will be happier when it scores a success in one or more of these projects.
The company’s stock was down by around 4% on Thursday while the Bombay Stock Exchange Healthcare index declined by around 3%.
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