BL Research Bureau

Driven by higher revenues of biotechnology products such as insulin and contract research services, Biocon reported 19 per cent growth in net profit in the July-September quarter, on a consolidated basis.

Biopharmaceuticals and branded formulations were major drivers of revenues and the outlook for the same in the coming quarters remains positive.

The company’s strategy to reduce dependence on low-margin statins that are used to reduce cholesterol (30 per cent of its business) seems to be a step in the right direction.

Biocon is expecting its oral insulin programme to do well as it has already announced Phase I human clinical data at the European Association for Study of Diabetes. Oral insulin tablets may turn out to be a major positive for the company although it is yet to announce the positioning strategy for launching the product.

Development of brands in immunosuppressants (treats auto-immune disease) and oncology segments would also aid revenue growth in the coming quarters.

Operating profit margins rose by 4 percentage points to about 29 per cent from a year earlier. Margins received a boost from sale of products like insulin and licensing revenues from the biopharmaceuticals business.

The latter grew by 21 per cent on a year-on-year basis.

Revenues from research services, mainly dollar denominated, from wholly owned subsidiary Syngene sustained strong growth, despite a 3 per cent rise in the rupee during the period.

About 60 per cent of Biocon’s revenue is US dollar-denominated.

Biocon is to invest Rs 275 crore in Syngene over the next two years and expects the unit to contribute significantly in the future.

The focus on the CRAMS business (Contract Research and Manufacturing Services) augurs well for earnings, as margins are much more significant than a pure formulations-driven one.

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