Biocon fails to assuage investors with earnings, stock sinks

As India’s largest biopharmaceuticals company, Biocon, had had a heady year. After it agreed to buy the biosimilars assets of US-based Viatris for $3.34 billion in a deal routed via its unit Biocon Biologics, concerns about the large bet along with the bearish sentiments in the market have led to the stock losing a fifth of its value.

The development came less than six months after Biocon Biologics acquired a step-down unit of Serum Institute of India in return for a 15% stake to the vaccine maker. Biocon Biologics is valued much more than its parent.

There has been a pullback for the Indian indices but Biocon has failed to play along. The stock also came under pressure on Thursday, after it declared its financials for the first quarter after market hours the day before.

The stock lost more than 4% of its value on Thursday morning, despite high earnings growth.

What explains the selloff?

The main reason for the decline in share price is that the company failed to meet street estimates.

Biocon came up with 23% rise in consolidated revenues at Rs 2,217 crore for the three months period ended June 30 over the year ago period. Profit after tax was up even higher, rising 71% to Rs 144 crore, while EBITDA growth was muted at 9% to Rs 478 crore.

Revenue growth was led by biosimilars business that grew 29%, followed by 19% rise in generis, partly neutralised by 8% growth in the research unit Syngene.

But analysts were expecting profit to be over Rs 200 crore and the company missed the number significantly. It also underdelivered compared to expectations over its operating profit and was marginally short of its revenue growth estimates, too.

“Our financial performance this quarter includes the impact of annual increments in personnel costs as well as increased input and freight costs, pursuant to pandemic and geopolitical disruptions of global supply chains,” said Kiran Mazumdar-Shaw, Executive Chairperson, Biocon and Biocon Biologics.

She also said that R&D investments increased significantly by Rs 87 crore this quarter reflecting pipeline progression to deliver future growth.

“All our three businesses are poised for the next phase of strong and sustainable growth which has been challenged during the two years of the COVID-19 pandemic,” she added.