Bio-pharmaceutical company Biocon’s Q1FY19 numbers were good but largely in line with estimates.
The company released its numbers on Thursday evening and reported a revenue growth of 20 percent led primarily by its biologics and research services segment.
The biologics segment, which comprises of the biosimilar and insulin business recorded a sales growth of 36 percent to Rs 250 crore year-on-year (YoY).
Biocon's contract research and manufacturing arm, Syngene International, reported a 39 percent YoY growth.
Small molecules that comprises of the company’s active pharmaceutical ingredient (API) business and generic formulations grew 10 percent YoY with recent launches such as cholesterol drug Rosuvastatin gaining market share in the US.
Branded formulation that comprises of India and UAE business, grew a little over 10 percent this quarter, with country reporting a double digit growth.
Coming to operating leverage, margins were at 21 percent, which was a marginal improvement from the 20.6 percent in the same time last year and 19 percent in previous quarter.
Profit was supported by better operating leverage and a low base. Profit in Q1FY18 had slumped over 50 percent YoY.
While Q1FY19 numbers enthused investors, it seems that developments outside the profit and loss overjoyed them.
Most important was Biocon announcing that Mylan has launched biosimilar drug for cancer treatment –pegfilgrastim in the US.
Mylan and Biocon are partners for multiple biosimilars and share economic interest.
Biocon–Mylan received approval for two biosimilar drugs pegfilgrastim and trastuzumab in the past seven months, marking their entry in to the coveted US biosimilar market.
Biocon received approval for Trastusuzumab or the biosimilar version of Herceptin used for breast cancer in December 2017, which is still to be launched by Mylan in the US.
Biocon–Mylan received approval for pegfilgrastim or biosimilar of Neulasta in June 2018 and launched it within a few weeks of the approval.
Mylan-Biocon launched pegfilgrastim under the brand name Fulphila.
In fact, some sales of the biosimilar were recorded this quarter already.
While pegfilgrastim will eventually see competition in the US by next year, the launch was around a quarter earlier than anticipated and finally marked Biocon’s entry with a launch into the American biosimilar market.
Staying with the biosimilars business, the company said that it was confident of achieving $200 million of sales from the biologics segment in FY19.
This confidence stems from the upside generated from profit share with Mylan on biosimilars such as pegfilgrastim and launches of insulin glargine in the European Union (EU) and Australian markets.
Biocon’s application for insulin glargine is currently under review by the EU authorities.
At the same times, Biocon also got EU regulatory approvals in place for their Bengaluru plant.
The other trigger the market has its eye on is an eventual restructuring of the business.
Biocon in April 2016 had announced restructuring its legal entities in order to ‘unlock value for respective businesses at an opportune time’.
The restructuring includes consolidating the company’s biosimilar business under Biocon Biologics, a new unit in the UK and a subsidiary of Biocon in India.
The company chose UK due to its proximity to developed markets like US and EU.
While the restructuring is still awaiting some regulatory approvals, the street might be sniffing out an opportunity of a possible listing of the biologics business.
When the company was asked in the conference call on whether a listing on the biologics business would be on the cards, the management said that there is no firm plan and the aim of the restructuring was to monetise the business if needed in any way they deemed fit, which could include a possible listing as well.
The thought of Biocon listing its biologics business has stirred up sentiment.
This is especially if the biologics business continues to perform the way it is and if past performance of both Biocon and Syngene stocks are anything to go by.
Let me leave you with a few stats and if they are anything to go by, then when one can assess the keen interest in a possible third listing from the Biocon stable.
Biocon was listed in 2004 and the company has recorded compound annual growth rate (CAGR) return of over 12 percent to investors and the market capitalisation swelling to $5 billion from $1 billion 14 years ago.Syngene, its research arm, has less history. From its IPO in August 2015, the stock at current price has given returns of over 130 percent.