Hi All,
I have few basic questions:
How would IPO of Biocon Biologics benefit existing shareholder ?
After demerging Syngene and Biocon Biologics would would remain with Biocon ? I mean what would be the revenue source ?
Would Biosimilar drug be able to take market share from existing players ? As in developed markets drugs are sold through prescription. Why would doctor jeopard his existing relationship with Innovator andIf innovator also drops price then ?
Profits down driven by large interest costs mainly.
Biocon has 2024 as the year of transition as the acquire viatris business. THE YOY numbers are not comparable so these Sales and EBITDA comparisons are not relevant, and they don’t produce x viatris numbers because it was not a truly separate business, rather a marketing and front office and client owner as product owner and Biocon was a contract manufacture partner.
PAT is also lower because of one time REBATE in US for Viatris client contact with a managed service provider for USD 20 M /INR 170 CR
Hi @harsh.beria93 , I find you as one of the investors who follows the Pharma sector and has a high allocation there. With the stunning Q2 Earnings growth of Biocon, and share price being attractive in terms of historical P/E, any comments on Biocon as a long term investment opportunity?
The Biosimilars market is expected to grow at CAGR of 25%
Biocon released its consolidated financial results for the fiscal second quarter ending on September 30, 2023:
These financial results are categorized into different business segments for Q2FY24:
Income: Biocon made money from different parts of its business.
Total Revenue from Operations: Biocon made a total of Rs 3,462 Crore from its various activities, which is a big 49% increase from last year.
Other Income: Biocon also made Rs 158 Crore from other sources, which is a big 145% increase from last year.
Total Revenue: In total, Biocon’s earnings for the quarter were Rs 3,620 Crore, which is an impressive 52% increase from last year.
R&D Expenses: Biocon invests in research and development.
EBITDA: Biocon’s EBITDA, a measure of profitability, was Rs 900 Crore for the quarter, which is a 68% increase from last year. The EBITDA margin, a profitability ratio, was 25%, up from 22% last year.
Core EBITDA: This is EBITDA excluding certain expenses. It was Rs 1,100 Crore, which is a 35% growth, and it had a good operating margin of 32%.
Profit Before Tax: The profit before tax was Rs 238 Crore (excluding exceptional items), which is a 3% decrease from last year. The total profit before tax was Rs 214 Crore, which is a 6% decrease from last year.
Net Profit: The profit that Biocon made after all expenses was Rs 126 Crore, a big 168% increase from last year.
From a purely stock movement, Biocon has not done anything for the last couple of years. I am not able to understand why simply from the data which seems positive. Have been holding for several years - in fact it was the Biosimilar’s story that attracted me in the first place
True. Appears to be very attractively valued when one looks at sum of parts (three biz) valuations
Syngene - Listed
Generic - Look at Concord Biotech
These two itself should justify current valuations. Biosimilars seems to be free.
With such a well researched stock, Market not showing much love to Biocon is because of multiple reasons. My personal views on the key reasons:
There is more, but I would stop here…Many of us (including myself) bought into the narrative of Biosimilars and then saw the stock price correcting further or doing nothing over last 3-4 years. While the potential is still there, it is not converting into reality and that is why market does not want to give it any premium…Would request anyone planning to buy into Biocon to study concall over last 6-8 qtrs and they will find answers themselves…It is complex business (especially in the main market of US)
Disclaimer: No recommendation, please do your own due diligence…I exited some time back with losses…if situation improves in future, will relook at it…
Hello The Seeker …
Sorry to see you exit… Frankly if you are a seeker you should keep the faith …
Many thanks
Malolan
Well, Most of the investors fell prey to the rosy narratives of being a first mover in a niche area with a visionary approach.
The problem is that not much deep dive was attempted on part of individual investors to evaluate the actual commercial/biz performance of those niche products commercially.
Even if we keep debt for acquistion apart giving mgmt a benefit of doubt or the grace period to excel in knitting a niche biz, the actual products for which all these concessions r being given needs an evaluation.
The problem with biocon is that the biosimilar products are niche in india and they r 1st mover but when it comes to the sales area i.e. US, they r not so niche and they have to compete with many established players with fat wallets.
The outcome of all this is their r 8~10 players competing for the mkt share.
The result is huge price erosion upto 50% to grab mkt share.
But the irony with Biocon is that even if they r the cheapest but still they are not in top in mkt share
So, something is really not working on the commercial realization of products the way it ought to be .
Result of all this not syncs well for long term margins and revenue front.
Mkt somehow works on actual profits at the end then the narratives.
Ogivri is biocon
Ogivari eroded 45% in 2 years
It got 9% mkt share in 2 years
The nearest cheap competitor got 44% mkt share in 2 years
Eroded 40% in 2 years
Biocon was 1st to get approval
2 years down the line it eroded 45% with 9% mkt share
Ye sirf ek biosimilar ka example hai.
This is siruation when only 5 players r there
Imagine when 10~15 player will be there.
After 2~4 years
How much we will erode ?
70%
How much mkt share we expect ?
20%
-70% * 20% = opportunity size ?
Thanks for sharing this perspective, most of the databases I have seen points to much higher price erosion in biosimilars (upto 70-80%) rather than only 50%. I also try to keep track of their US market shares at different points of time.
Pegfilgrastim (Fulphila) market share
Trastuzumab (Ogivri) market share
Insulin Glargine (Semglee) market share
Basically, they have struggled to get beyond 15% market share sustainably. For context, Indian generic cos generally get 30%+ market shares in small molecules, and thats when economies of scale start kicking in. Lets see if Biocon can improve this going ahead.
Sorry but this is incorrect, in India Zydus has a larger biosimilar portfolio than Biocon. Biocon has never focused on Indian market.
Disclosure: Not invested (no transactions in last-30 days)
Thanks.
Yes i know zydus is better positioned in indian mkt but it never focused on US mkt because of issues i mentioned above.
My point was w.r.t US mkt biosimilar scenerio.
Although in 1st cut rosy stories it’s touted as a niche area which gives impression of monopolies and high margins and so on so on.
The fact is that pharma has changed a lot from 2007 when indian companies are plucking the low hanging fruits.
Now even biosimilars are converting into commodity at a fast pace although not same pace like generics.
But the situation is challenging and its difficult to have all the ingredients which were there in 2007.
Less competition and hence less erosion
Higher margins
Scale of economy * Higher margins for substantial time
Golden era of indian pharma.
In my view, we will have growth duration in coming years where biosimilars will play the same role as that of generics in 2007.
But how much margins * scale of economy * mkt share is a key area to watch/forecast.
Thanks
Knowing when to exit is great… Otherwise at times we fall in love with out thesis. Congrats
Biocon stock value fell based on the heavy debt and questionable returns from Viatris. Although, it seems to have been executed efficiently by the newer but more experienced management. I expect topline and bottomline to shoot up accordingly.
Did the shareholders benefit out of Syngene demerger? I could not find much information online in this. Did biocon shareholders get shares of Syngene? Biocon biologics demerger should be expected on similar lines and Biocon will get valued with holding company discount. Unless, Biocon decides to reward shareholders with shares of biocon biologics.
These overhangs are what has brought the share down since most investors look at future returns. I do see value but whether Mrs. Shaw and management can unlock it efficiently remains to be seen.
Biocon since its listing has been an underperformer. It may remain the same for more time to come. Looks like they are looking to sell off some business - APIs.
Also, the Intas USFDA fiasco has cost them dearly, it was 400+ Cr annual business.
Syngene seperately listed right from beginning
and once they hive off Biologics… yes they need a Business plan for the parent … If there is no viable plan…
we end with a holding company discount…
Malolan
