Biocon bets on R&D, biosimilars business to boost growth in FY19

Biocon Ltd is betting on its biosimilars and research and development (R&D) services business to raise growth, a top exec at the firm said. Bengaluru-based Biocon is expecting substantial growth in 2018-19, after reporting a minor within net profit in the March quarter.

“The muted FY18 performance was due to continued pricing difficulties in the generics business, in conjunction with a planned herb shutdown for requalification and lower licensing income in the biologics business, ” Biocon chief executive police officer Arun Chandavarkar said on the phone. “Further, brand formulations sales were soft at 11% YoY credited to operational challenges in India business. In addition, operational expenses related to our Malaysia facility afflicted the bottom line. However, a good Q4 is indicative of the normalized business pattern. ”

Biocon posted a 2% increase in its net profit to Rs130 crore in the 03 quarter, against Rs127 crore a year ago.

“While Ebitda (earnings before interest, taxes, depreciation and amortization) for Q4 FY18 expanded at a robust thirty percent in comparison with last year, Ebitda margins were maintained at 24% despite a low licensing income this one fourth, ” he said. “Additionally, the net profit progress at 2% for Q4 FY18 was muted due to a 44% increase in interest and depreciation costs to Rs112 crore for the quarter, largely applicable to Malaysia costs impacting our P&L and increased taxes. Additionally , there are the normal business challenges like the pricing challenges for our small chemical business. ”

Even as the dynamics for its traditional small molecule and branded formulations business remain challenging, with positive regulating developments in the biosimilars business, the firm appears forward to a positive overall performance in FY19.

That has already got several approvals from US regulators and is expecting more from US and Western european regulators in the next couple of quarters.

While the firm expects to continue filings for its small molecules and active pharmaceutical drug ingredients, the focus will be on biosimilars. “If you look at our biosimilars where we certainly have got our key filings in US, Europe and other key emerging markets, that’s where we are looking to see whether some of the numbers that we found in Q4 whether we can sustain that as more of these opportunities skillet out, ” Chandavarkar said.

“Recent approvals of our biosimilars along with the strong performance of Syngene are required to positively impact the general performance in FY19. The study services and biosimilars are growing at a very healthy pace and that story will continue. The growth drivers were the biologics where we have been different from many of the other pharma companies. We expect these to make a bigger impact that may drive our both revenues and profitability, ” said Chandavarkar.

While the spending on research and development continued to be flat at Rs 98 crore on a year-on-year basis, Biocon, which has been among the early movers to invest in discovery of novel drugs expect to increase its spending on research next financial yr.

“We expect the amount to increase on an absolute numbers basis in FY19. While we are not able to be very precise on the numbers because a lot of it is determined by how our clinical trials start and what is the rate of recruiting and all sorts of that. Roughly, we can assume our development on research and development would typically be around 15% of Biocon revenues, ” added Chandravarkar.