A Basalog One insulin glargine disposable pen is displayed for a photograph at the Biocon Ltd. campus in Bengaluru. (Photographer: Dhiraj Singh/Bloomberg)

Biocon Slips As Earnings Miss Estimates On Delayed Approvals For Drugs

Shares of Biocon Ltd. fell as much as 3.4 percent in the afternoon trade on Friday, after it failed to meet its January-March quarter earnings estimates.

The company, which was India’s best performing pharmaceutical company on the BSE Healthcare index in 2016, reported a net profit of Rs 127.5 crore for the fourth quarter of financial year 2016-17 on Thursday, below consensus estimates of Rs 152 crore.

Revenue for the quarter also saw a drop of 2.2 percent over the year-ago period, missing estimates of Rs 1,061 crore.

In a post-earnings call with BloombergQuint, the management attributed the muted revenue numbers to elongated approval timelines in some emerging markets, discontinuance of some in-licensed products and impact of the fire at its research arm, Syngene International in December.

Fourth quarter revenue at Syngene declined 12.8 percent over last year’s quarter, which led to Syngene’s revenue share to Biocon’s revenues dropped from 33 percent in the year-ago quarter to 29.4 percent. However, the management said that Syngene is on a recovery path.

Last quarter was very reflective of the fire impact. But they (Syngene) have done a lot of course correction. It is likely to see a pick up starting from Q1FY18 but more from the Q2FY18 onwards.
Kiran Mazumdar-Shaw, Chairperson and Managing Director, Biocon 

On revenue growth for FY18, Shaw added that the company would try to sustain the current levels of growth (18 percent revenue growth in FY17), but a lot would depend on the number of regulatory approvals coming through in emerging markets.

FY18 To Be The Year Of Key Approvals

Biocon has entered new markets in Latin America, The North American Free Trade Agreement (NAFTA) and Commonwealth of Independent States (CIS) regions with some key statins (cholestrol controlling drugs), immuno-suppressants and specialty molecules.

A few regulatory submissions for key products in some emerging and regulated markets have also been made. So while FY17 was a busy year for the company with multiple bio-similars filing in regulated markets, FY18 could be a year of those approvals coming through, Mazumdar-Shaw said.

While the December quarter of last fiscal marked the acceptance of Biocon’s applications for its proposed biosimilar Trastuzumab and insulin Glargine by the U.S. Food And Drug Administration (FDA) and European Medicines Agency (EMA), Q4FY17 had the U.S. FDA accepting its application for biosimilar Pegfilgrastim for review.

Besides, regulatory submissions for Insulin Glargine were made in the developed markets of Australia and Canada, in partnership with Mylan in the March quarter. The company intends to file for Glargine with the USFDA shortly. The company is on course to make regulatory submissions for the Adalimumab biosimilar in the current fiscal, Mazumdar-Shaw said.

Restructuring Exercise

The 24.5 percent on-year growth of its branded formulations segment in FY17 was impacted by the company’s efforts on rationalization of its drug portfolio where it shed some brands and even commoditized-divisions, such as virology, to retain its focus on specialty areas such as metabolics, oncology, immunology and nephrology.

However, the rationalization has been completed in FY17, Mazumdar-Shaw assured, adding that Branded Formulations segment can continue to see its current growth momentum.

Research and development spends for FY18 are expected to remain at the similar levels as FY17.

On her view on doctors having to prescribe only generic medicines and not branded ones, she says the government must not be in a hurry to roll out this plan, or else it could lead to high-quality drugs going out of the markets like that seen in the case of imposing price controls on stents.

Shares of the company ended 0.8 percent down at Rs 1,112 on the NSE.