Why Biocon’s Stock Tumbled Most In 10 Months

Shares of Biocon Ltd. fell the most since March after the drugmaker missed analyst estimates in the quarter ended December.

The company’s net profit declined 19% year-on-year to Rs 186.6 crore as expenses rose. That compares with the Rs 243.1-crore consensus estimate of analysts tracked by Bloomberg.

Its revenue rose 8% year-on-year to Rs 1,851 crore, aided by 11% and 13% growth in biosimilars and the research services business, respectively. Yet, that fell short of the Rs 1,981.1-crore forecast.

Other highlights (year-on-year)

• Ebitda rose 10% to Rs 399.5 crore, against the projected Rs 512 crore.
• Margin contracted 430 basis points to 21.6%.

“We continue to face headwinds across operational, regulatory and commercial functions, which have been deterrents to our planned market expansion,” Kiran Mazumdar-Shaw, executive chairperson at Biocon, was quoted as saying in the filing. “We, however, expect normalisation by the next fiscal.”

According to Avinash Gorakshakar, director of research at Profitmart Securities, the reaction to the stock may be because investors are choosing to book profits at higher levels. He expects things to normalise by the second half of FY22. “The listing of the biologics business will be an added value trigger for the stock,” he told BloombergQuint over the phone.

Biocon, in the filing, also said Christiane Hamacher has stepped down as managing director at Biocon Biologics Ltd., and has ceased to be a member of the board of directors of Biocon’s subsidiary, effective Jan. 20, 2021. That was due to professional differences with the chairperson on strategic priorities and vision for the company.

“This is sentimentally negative but we need to wait and see if there any significant impact on the financials. People know who the promoters of the company are and they are the ones who call the shots,” Gorakshakar said. “I don’t think this will impact the business for the longer term.”

Biocon in July 2020 had said it aimed to list its biosimilar unit in the next two to three years, depending on the market conditions. The parent is also in discussion with a few private equity firms for investment in the subsidiary before it goes public. Biocon Biologics had secured infusions by True North and Tata Capital Growth Fund in January and July 2020, valuing the biosimilar arm at $3 billion and $3.5 billion, respectively. That was followed by a $150-million investment from Goldman Sachs in November, valuing the business at $3.94 billion, and $75 million from Abu Dhabi’s ADQ in January 2021, pegging the post-money valuation at $4.17 billion.

Shares of Biocon fell as much as 8% — the biggest single-day drop since March 23, 2020 — to Rs 407.6 apiece. That’s also the lowest since Nov. 11, 2020. The stock is down for the third straight day.

Of the 26 analysts tracking the company, 15 have a ‘buy’ rating, seven suggest a ‘hold’ and four recommend a ‘sell’. The average of Bloomberg consensus 12-month price target has an upside of 6.2%.