New Delhi: Biocon Ltd is betting on its biosimilars and research and development (R&D) services business to raise growth, a top executive at the firm said. Bengaluru-based Biocon is expecting significant growth in 2018-19, after reporting a marginal rise in net profit in the March quarter.

“The muted FY18 performance was on account of continued pricing challenges in the generics business, coupled with a planned plant shutdown for requalification and lower licensing income in the biologics business," Biocon chief executive officer Arun Chandavarkar said on the phone. “Further, branded formulations sales were soft at 11% YoY due to operational challenges in India business. In addition, operational expenses related to our Malaysia facility impacted the bottom line. However, a positive Q4 is indicative of a normalized business trend."

Biocon posted a 2% increase in its net profit to Rs130 crore in the March quarter, against Rs127 crore a year ago.

“While Ebitda (earnings before interest, taxes, depreciation and amortization) for Q4 FY18 grew at a robust 30% as compared to last year, Ebitda margins were maintained at 24% despite a low licensing income this quarter," he said. “Additionally, the net profit growth at 2% for Q4 FY18 was muted on account of a 44% increase in interest and depreciation costs to Rs112 crore for the quarter, largely attributable to Malaysia costs impacting our P&L and increased taxes. In addition, there are the normal business pressures like the pricing challenges for our small molecule business."

Even as the dynamics for its traditional small molecule and branded formulations business remain challenging, with positive regulatory developments in the biosimilars business, the firm looks forward to a positive overall performance in FY19.

It has already got several approvals from US regulators and is expecting more from US and European regulators in the next couple of quarters.

While the firm expects to continue filings for its small molecules and active pharmaceutical ingredients, the focus will be on biosimilars. “If you look at our biosimilars where we have got our key filings in US, Europe and other key emerging markets, that’s where we are looking to see whether some of the numbers that we saw in Q4 whether we can sustain that as more of these opportunities pan out," Chandavarkar said.

“Recent approvals of our biosimilars along with the strong performance of Syngene are expected to positively impact the overall performance in FY19. The research services and biosimilars are growing at a very healthy pace and that story will continue. The growth drivers were the biologics where we are different from many of the other pharma companies. We expect these to make a bigger impact which will drive our both revenues and profitability," said Chandavarkar.

While the spending on research and development remained flat at 98 crore on a year-on-year basis, Biocon, which has been among the early movers to invest in discovery of novel drugs expect to increase its spending on research next financial year.

“We expect the amount to increase on an absolute numbers basis in FY19. While we cannot be very precise on the numbers because a lot of it depends on how our clinical trials start and what is the rate of recruitment and all of that. Roughly, we can assume our growth on research and development would typically be around 15% of Biocon revenues," added Chandravarkar.

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