Multiple growth levers for Biocon; ramp-up, new biosimilars to boost profit

Ramp-up and new biosimilars should help boost profit

The Biocon stock continues to outperform its pharma peers, gaining 20 per cent since its September lows. The stock added 3 per cent to its returns on Wednesday after a decent December quarter performance, ramp-up of certain products, and fresh launches in the biologics space. The growing small molecules business, rising investments, and regulatory go-ahead for its plants are the additional triggers.

The company’s December quarter growth was led by the biologics segment, which reported a 31 per cent growth year-on-year (YoY). The segment accounts for a third of its sales. The rising sales of key biosimilars, such as Ogivri (a biosimilar to oncology drug Trastuzumab) helped. 

The approval to the company’s new manufacturing facility for oncology drug Pegfilgrastim in Bengaluru will help Biocon Biologics scale up capacity multifold and address the growing market opportunities in the US and other global markets. The company also received zero observations during a pre-approval inspection of the Bengaluru oral solid dosage facility. However, a recent inspection at Bengaluru intermediates facility has resulted in five observations. Overall analysts feel regulatory compliance of the company has significantly improved.

Better traction shown by Pegfilgrastim, a ramp-up of Ogivri,  and commissioning of incremental capacities, along with new launches, such as biosimilar to insulin glargine in the US, would aid growth, feel analysts. The company targets a revenue of $1 billion (Rs 7,100 crore by FY22. It should achieve this, given the FY20 estimated revenues at around Rs 6,900 crore).

Growth of small molecules remains strong (16 per cent YoY in Q3), helped by increased sales of immunosuppressants in key geographies, as well as stable demand for cholesterol-control statins and speciality active pharma ingredients. With more filings and investments, the segment will be a significant growth driver.  

Meanwhile, research services arm Syngene is growing in double digits. Intensifying competition and pricing pressure in developed markets will lead to more outsourcing by pharma companies which, in turn, will benefit Syngene.