Q3FY19 result highlights
Key positives: Higher biosimilar sales led by Pegfilgrastim launch in US and higher biosimilar sales in EMs; higher sales across most segments;
Key negatives: Higher SG&A cost and R&D cost
Impact on financials: We have broadly maintained our earnings estimate.
Valuations & view
With commencement of Pegfilgrastim revenues in the US, Biocon’s biosimilar portfolio commercialization has well and truly begun. Going forward, Biocon-Mylan’s ability to compete with fairly formidable competitors/innovators will determine the scale of their success. We believe that while Biocon is best positioned amongst Indian players to leverage on the global biosimilar theme and will have the best earnings growth amongst peers over the next 2-3 years, the same is already adequately captured in current valuations. Given that meaningful biosimilar revenues are yet to accrue and a fairly muted core business, the current stock price factors in most positives and doesn’t account for uncertainties inherent in monetization of biosimilars in developed as well as emerging markets. Sharp increase in biosimilar linked selling expenses underline the possibility of negative surprises on the profitability front. Maintain Underperformer rating with a SOTP target price of Rs537. ​
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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