Biocon shares fall as generic sales disappoint
- Investor expectations from Biocon have remained very high ever since the company started commercialization of its biosimilar range in the developed markets
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Street sentiments on Biocon Ltd took a sharp beating as the company reported a 17% decline in net profits during the quarter that ended in December.
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The expectations of investors have remained very high since Biocon started commercialization of its biosimilar range in the developed markets. Biocon and its partner Mylan N.V. have launched multiple products in the regulated markets such as Europe and the US and there are more in the pipeline awaiting approval for launches.
The biologics segment reported a 11% growth during the quarter gone by. Nevertheless, generic sales declined 3% year-on-year (y-o-y) limiting revenue growth. The revenues from operations grew just 8% y-o-y, while the research services segment clocked a 13% growth.
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Generic sales were impacted since active pharmaceutical ingredients (API) orders slowed down as customers stockpiled, according to analysts.
As operating profits declined 11% y-o-y, other incomes also played spoilsport and registered a decline, resulting in the 17% drop in net profit. This was much below the expectations of 16% increase in net profits and 14.7% growth in revenues that analysts at Motilal Oswal Financial Services had expected the company to post.
The company’s biosimilar range is progressing well. It is also tapping developing markets for its biosimilars. During the December quarter, Biocon saw approvals for launches of biosimilar Trastuzumab (oncology treatment) and Insulin Glargine in two more countries.
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There was some disappointment earlier with the Food and Drug Administration of the US deferring the action on Biologics License Application (BLA) for biosimilar Bevacizumab (oncology treatment), citing the inability to inspect the facility due to travel restrictions put in place because of covid-19. The drug has a market size of almost $6 billion in the US and Biocon post-launch could have sales of $200-300 million per annum, acccording to analysts. The street will thereby be watchful on developments pertaining to the inspection of the company’s facilities for the drug getting approval for launch. The street also remains watchful on sales ramp-up from recent launches.
Meanwhile, the company is also working on covid-19 treatment options.
More than 100 patients, out of a total of 300, have been enrolled in Phase 4 clinical studies for Itolizumab in treating cytokine release syndrome in moderate to severe acute respiratory distress syndrome because of covid-19, said the company.
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However, the street will be watchful on the management changes taking place in the Biologics divisions and the mpact. The present MD of Biocon Biologics. Dr Christiane Hamacher is stepping down and will be replaced by Dr Arun Chandravarkar who was Chief Operating Officer at Biocon Ltd. Also, Biologics entity though will continue preparing for an eventual IPO, nevertheless, the IPO date may stand delayed.
The company was targeting achieving $1billion in revenue for Biologics business by FY22. With a challenging FY21, the company now expects achieving the milestone at a later date. Analysts at Jefferies say that their FY22/23 biologics revenues are at $547million and $632 million and the same have been adjusted downwards only by 7% Also they have trimmed their FY22/FY23 margin expectation by 206bps/148bps and their EPS estimates for FY21/22/23 by 25%/18%/18% respectively.
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