MOSL: BIOCON (Sell)-Weak results-monetization of Biosimilars key catalyst
​Biocon: Weak results; monetization of Biosimilars key catalyst
(BIOS IN, Mkt Cap USD3.0b, CMP INR1105, TP INR900, 19% downside, Sell)
- Revenue (Ind-AS) fell 2% YoY to INR9.3b, driven by lower income from Syngene and Small Molecules. EBITDA fell 1.7% YoY to INR1.8b (est. of INR2.8b), with the margin flat at 19.7%, primarily due to muted revenue and forex loss of INR170m above EBITDA. PAT (Ind-AS) declined 62% YoY to ~INR1.3b (est. of INR1.8b). FY17 revenue grew 14% to INR40.8b, while EBITDA margin expanded to 24.1% (+13bp YoY) led by strong growth in Biologics and Licensing Income. R&D expense stood at INR9,700m in 4Q (including capitalization of INR320m).
- Syngene: Biologics remained flat YoY in 4Q due to delay in approvals in some emerging markets. In FY17, Biologics sales stood at ~USD75m, with management maintaining its segmental sales guidance of USD200m by FY19E (primarily driven by Ems). Syngene (~29% of revenue) declined 14% YoY due to temporary disruptions led by fire in Dec-16. Small Molecules declined 2% YoY due to pricing pressure, partially offset by launches in new geographies. Branded Formulations delivered ~25% YoY growth, led by recovery in domestic business and pick-up in tender business in the Middle East.
- Malaysia plant commissioning update: Biocon will stop capitalizing against this plant from 1QFY18. It has spent ~USD250m to develop this plant. Depreciation expense will increase by ~USD18m p.a. from FY18 due to this (a part of this will be borne by Mylan). Operating expense is expected to go up by USD30m p.a. Biocon expects Malaysia plant to incur marginal PAT loss in FY18. Profitability will improve as contribution from developed markets starts.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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