Biocon India's Q4FY18 results (Underperformer) - Inline quarter
Q4FY18 result highlights
- Consolidated revenues at Rs11.7bn (25.6% yoy/1.3% qoq) was lower than our est of Rs12.4bn. BioPharma revenues at Rs8.2bn vs est of Rs7.2bn
- Biologics revs came at Rs2.41bn (+47%/27% yoy/qoq); recovering from the regulatory (plant requalification) led production and supply disruptions. Small molecules grew Rs4.3bn (+8%/15% yoy/qoq) led by higher uptake in statins and Rosuvastatin formulations with steady immune suppressants. Syngene reported revs at Rs4.09bn (+6% qoq)
- EBITDA of Rs2.3b (+24% yoy / +5% qoq) was marginally below our estimates of Rs2.4bn. P&L R&D spends of Rs508m vs Rs529mn in Q3FY18. Biocon capitalized Rs467mn (Rs413m in Q3FY18) of R&D.
- Other income stood higher at Rs675mn (Rs339mn in Q3FY18) vs est of Rs413mn; Tax rate was higher at 21% (24.1% in Q3Y18) vs est of 15.2%
- Led by higher other income reported PAT was stood higher at Rs1.3bn (+2% yoy / +42% qoq) vs est of Rs1.14bn
Key positives: Pegfilgrastin TAD date of June 4th, 2018
Key negatives: higher other expenses
Impact on financials: We have maintained our FY19E/FY20E estimates.
Valuations & view
Overall Q4FY18 financial performance was broadly inline and fairly uneventful. Biocon’s FDA approval for biosimilar Trastuzumab provides comfort on the company’s ability to secure approvals for other biosimilar drugs in its portfolio. Going forward, Biocon-Mylan’s ability to compete with fairly formidable competitors /innovators will determine the scale of their success. Given that commercialization revenues from the US/EU will accrue FY20/21 onwards and a fairly muted core business, we believe the current stock price factors in most positives and doesn’t account for the uncertainties inherent in monetization of biosimilars in developed markets. We value Biocon’s core business at Rs246/sh (20x FY19E EBITDA) and biosimilar portfolio at Rs224/sh (~$2.4bn). Maintain Underperformer with a SOTP-based TP of Rs470. Biocon’s ability to secure US FDA approval for its Pegfilgrastin (FDA decision by June’4, 2018) will be the key monitorable.
Biocon is an Indian biopharmaceutical company. Through its subsidiaries, Co. manufactures biotechnology products and is engaged in research and development in biotechnology. Co. provides a range of products from fermentation derived small molecules to recombinant proteins and antibodies. It has developed and taken a range of novel biologics, biosimilars, differentiated small molecules and recombinant human insulin and analogs from 'Lab to Market'. In research services, Co., through Syngene International Limited, is engaged in the business of custom research in drug discovery while the other subsidiary Clinigene International Limited (Clinigene) is engaged in clinical development.
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