Biocon's R&D arm to see margin expansion

Bangalore-based biotechnology firm, Biocon Ltd is hopeful of witnessing margin expansion in its contractual research units, Syngene and Clinigene in the coming quarters on the back of milestone payments from the research clients.

The company witnessed some strain in the operating profit during April-June quarter on the back of higher costs associated with integrated drug development programme.

“The strain in the operating profit is basically due to timing. Many of the milestone payments from clients come with a lag effect after certain amount of research being conducted by Biocon,” a top company executive said.

He also said the company had to invest in the research programme in the initial phases. Syngene and Clinigene posted together revenues of Rs 72 crore in the first quarter of FY11. However, operating profit in this segment dropped by 43 per cent to Rs 14.62 crore as compared to the corresponding period last year.

However, the company hopes to compensate for the drop in the coming quarters of this fiscal.

“Operating profit for the two research units will be higher as income flow increases in the coming quarters,” he added.

Earlier, Biocon reported a 33 per cent rise in net profit to Rs 76.40 crore during April-June period of the present fiscal on the back of sound business growth in its bio-pharmaceuticals and contract manufacturing services.

Total income of the company rose 32 per cent to Rs 671. 77 crore in Q1. The biotech firm had also hinted at starting discussions to out-licence its insulin by the end of this year.

“It is difficult to unlock value from out-licencing till we have some good clinical data,” Kiran Mazumdar-Shaw, chairman and managing director, Biocon, said recently in an analyst call.

The company had also received approval to initiate Phase-III clinical trials in Europe. Meanwhile, Biocon has initiated the Phase-1 study in Type-1 diabetics for IN-105 programme with the beginning of Phase-III clinical trials for Anti-CD6 programme.

It has also entered into a long-term supply agreement with US-based Optimer Pharmaceuticals for manufacturing of active pharma ingredients during last quarter.