Biocon posts 19% dip in Q3 net profit as generics biz takes a hit

Topics Biocon | Q3 results | generic drugs

Kiran Mazumdar-Shaw
Biopharmaceutical major Biocon Ltd has posted a nearly 19 per cent dip on a year-on-year (YoY) basis in its consolidated net profit at Rs 186.6 crore for the third quarter of FY21, owing to its generics business taking a hit along with headwinds across operational, regulatory and commercial functions. 

The third quarter of the last financial year had seen the Bengaluru-headquartered company post a net profit of Rs 230.3 crore. Biocon's consolidated revenue for Q3 of FY21 increased by 7.20 per cent at Rs 1878.9 crore as against Rs 1752.6 crore for the said quarter last year. 

The company's consolidated revenue growth came on the back of a 13 per cent rise in research services and 11 per cent in biosimilar business segments on a YoY basis, along with core earnings before interest, tax, depreciation and amortization (EBITDA) margins of 31 per cent, said Biocon's executive chairperson Kiran Mazumdar-Shaw.

The generics business, on the other hand, reported a three per cent dip in the third quarter at Rs 561 crore, as against Rs 576 crore in the corresponding period last year. 

"2020 has been one of the most challenging years for the world with an unprecedented pandemic impact on the global economy. We continue to face headwinds across operational, regulatory and commercial functions which have been deterrents to our planned market expansion. However, we expect normalization by next fiscal," said Shaw. 

A subdued performance by Biocon's generics business came as a result of moderate demand following a period of advance buying by customers in the first half of the fiscal, thereby apprehending supply disruptions in the wake of the Covid-19 pandemic, said the company's chief executive officer and managing director Siddharth Mittal.

"Growth was also impacted by delays in regulatory approvals of certain products that required physical inspection of our facilities, due to covid related travel restrictions. We achieved an important milestone during the quarter with the launch of Tacrolimus capsules in the US, which reflects our commitment to bring vertically integrated, complex finished dosages to the market. Looking ahead, as we expand our portfolio and enter new geographies, new product approvals will be a crucial determinant of our growth. We will continue to focus on the advancement of our development pipeline and capacity enhancement projects," Mittal added.

On the other hand, biosimilars segment revenue growth was driven by steady market share of our products in the US and growth in key most of the world (MoW) markets including Africa, Middle East, Turkey (AFMET) and India.

Commenting on the Q3 FY21 performance in biosimilars, Dr Christiane Hamacher, chief executive officer of Biocon Ltd's subsidiary Biocon Biologics Ltd. (BBL) said that the business continues to maintain a steady market share for bTrastuzumab and bPegfilgrastim in the US despite a tough environment, while its insulins and monoclonal antibodies (mAbs) portfolios in key MoW markets continue to do well. 

"In Malaysia, we received a one-year extension of our Off-Take Agreement (OTA) for insulins and we also received NPRA approvals for bInsulin Aspart and bBevacizumab. Despite various operational and commercial challenges, we are ensuring that we continue to address patients' needs for high quality biosimilars across diverse markets," said Hamacher.

The quarter saw an additional round of private equity (PE) investments of $225 million by ADQi and Goldman Sachs in Biocon Biologics' with the company so far raising $330 million from True North, Tata Capital, Goldman Sachs and ADQi. According to Hamacher, the valuation of Biocon Biologics has increased by $1.2 billion over the last 12 months and currently stands at roughly $4.17 billion.

Biocon Biologics continues to expand sales for recombinant human insulin (rHI) through partners in key markets like Mexico & Malaysia, and Insulin Glargine in Algeria & Malaysia, apart from continuing to be the leading player for biosimilar Trastuzumab in Brazil's private market.

However, the impact of Covid-19 on its business has been "greater than anticipated", restricting the revenue growth. 

Not only delays in the award of tenders and higher entry barriers are preventing opening of new markets, with fewer patients visiting hospitals due to uncertainty around Covid-19, there has been an impact in product off-take in critical care segments such as oncology. We are working to mitigate these operational and commercial challenges and are confident of overcoming them by next fiscal, the company stated.

The research services saw improved growth, in line with the company's guidance, with sustained performance from all divisions, said Jonathan Hunt, CEO & Managing Director, Syngene International, Biocon's custom research organisation (CRO).

Meanwhile, director of London School of Hygiene & Tropical Medicine and the Handa Professor of Global Health, Peter Piot has joined the Board of Biocon Biologics Limited as an independent director for a period of three years starting January 21, 2021. 

The company also stated that pursuant to a mutual agreement, Christiane Hamacher has stepped down as the managing director of BBL and also ceased to be a member of the Board effective January 20, 2021. "This decision was taken due to professional differences with the chairperson on strategic priorities and vision for the company," it stated. Hamacher's last working day as CEO of BBL would be February 28, 2021. 

Hamacher is succeeded by BBL's board member Arun Chandavarkar who takes over as managing director, effective January 21, 2021, for a period of up to two years, with Shaw being the executive chairperson of BBL from January 21, 2021 until March 31, 2022. 


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