Biocon Q3 Results Review - Aggressive Capital Allocation Led To Suppressed Return Ratios: Axis Securities
The capital allocation on two fronts R&D, acqustion of Viatris has diluted return ratios to below ~10% despite growth in business.
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Axis Securities Report
Biocon Ltd.’s reported revenue grew by 35.3% YoY, which was majorly driven by the Biosimilars (up 53.5% YoY) and generics (up 18.1% YoY). The Biosimilars segment included Viatris’ Sales in the last quarter.
The company’s gross margins decreased by 52 bps YoY due to changes in the product mix and price erosion in the business while Ebitda margins fell by 55 basis points due to an increase in the research and development costs.
Adjusted profit after tax stood at Rs 251 crore, increasing by 14.2% YoY after adjusting for the one-time cost of Rs 271 crore, which arose due to the Viatris deal.
In the U.S. market, Biocon’s market share stood stagnant at ~10% in gPegfilgrastim, gTrastuzumab, and gGlargine due to stiff competition from peers. However, the company has launched existing and new products (bAdalimumab, bBevacizumab, and bAspart) in Europe and emerging markets, adding growth in the last quarter.
Biocon has a healthy pipeline of biosimilars like bAdalimumab, bDenosumab and bUstekinumab.
In generics, geographical expansions (Liraglutide and Immunosuppressan) and the launch of new products added healthy growth which is expected to continue in the upcoming quarters. However, the capital allocation on two fronts R&D and acqustion of Viatris has diluted return ratios to below ~10% despite growth in the business.
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