Biocon Ltd. Buy

Company Profile - 

Biocon Limited is an Indian biopharmaceutical company based in Bangalore^{[ref 1]} Within biopharmaceuticals, the Company manufactures generic active pharmaceutical ingredients (APIs) that are sold in the developed markets of the United States and Europe. It also manufactures biosimilar Insulins, which are sold in India as branded formulations and in both bulk and formulation forms. In research services, Syngene International Limited (Syngene) is engaged in the business of custom research in drug discovery while the other fully owned subsidiary Clinigene International Limited (Clinigene) is in the clinical development space. In December 2009, Biocon acquired the Active Pharma Ingredients (API) undertaking from IDL Speciality Chemicals Ltd., a subsidiary of Gulf Oil Corporation Limited.

Located with R & D in Bangalore and API unit in Hyderabad, India, Biocon has two subsidiaries— Syngene, a custom research organisation, and Clinigene, a clinical research organisation. Biocon’s presence straddles four main therapeutic areas—Diabetology, Cardiology, Nephrology and Oncology— and plans to introduce two new divisions, Comprehensive Care, and Immunotherapy, this year.

Biocon’s cardiology, nephrology, diabetology and oncology products including BESTOR, BASALOGTM, BioMAb EGFR, STATIX, NUFIL safe, INSUGEN, TACROGRAF, ERYPRO safe, and MYOKINASE are claimed to be considerably less expensive than other leading brands.^{[ref 1]} Two of its novel programs on the verge of proof-of-concept stage are IN-105, which is the only oral insulin in the world to be in long duration clinical trials, and the T1h, a novel humanised monoclonal antibody (MAb), the only first-in-class novel MAb being tested in India for rheumatoid arthritis and psoriasis.

Between 2005 and 2010, Biocon entered into more than 2,200 high-value R&D licensing and other deals within the pharmaceuticals and bio-pharmaceutical space.^{[ref 1]} It has also expanded its global footprint to emerging and developed markets through acquisitions, partnerships and in-licensing. Biocon’s Corporate Social Responsibility wing, the Biocon Foundation, is involved in numerous health and education outreach programs targeting the underprivileged sections of India.

Stock valuation - 

“Biocon delivered 16 percent revenue growth for the year ended March 31st, 2014, stood at Rs. 28773.1 mn as compared to Rs. 24853.0 mn in previous year. For the year 2014, Group EBITDA and PAT margins at 25 percent and 14 percent respectively. R&D investments for the year ended stood at Rs. 1310 mn (6 percent of Biopharma Segment sales). The biopharma segment delivered a growth of 14 percent YoY and 15 percent YoY for FY14 and Q4 FY14 respectively. The research services segment grew at 28 percent YoY in FY14 and 14 percent in Q4 FY14. The Company’s generic Insulins portfolio has delivered strong growth this fiscal. Company’s generic rh-Insulin is now approved in over 55 countries. Biocon Malaysia project is on track to be commissioned in FY15. The branded formulations vertical grew at 9 percent YoY this quarter, vis-à-vis the industry growth of 7 percent YoY, delivering revenues of Rs. 930 mn in Q4 FY14. The Company has launched trastuzumab product, CANMAb® in India in Q4 FY14. Biocon continues with the clinical development of their novel oral insulin molecule, IN 105, in USA, in partnership with BMS. The company sustained focus on optimizing their product portfolio in Small Molecules has helped to deliver a healthy set of numbers this fiscal. Biocon has witnessed good business traction in Immunosuppressants and specialty products and expect it to sustain in FY15. We expect FY15 to reflect continued business momentum with biosimilars, branded formulations and research services driving growth. The progress in Company’s development pipeline (across biosimilars and novel molecules) will see some of their molecules enter the clinic. Biocon continue to make investments in infrastructure and people to support their growth. Hence, we recommend ‘BUY’ in this particular scrip with a target price of Rs. 534.00/ 568.00 for medium to long-term.