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Biocon (BIOS)
Pharmaceuticals
In-line results. Sales were in line with estimates while PAT was 2% lower than our
estimate due to lower EBITDA margin. We estimate 17/12% EPS growth in FY2012-13E
with (1) total sales ex-Axicorp, licensing income up 13/17% in 4Q/FY2011, (2) research
services rebounding in 4QFY11 with 20% yoy growth versus 10% in 1HFY11, and (3)
higher R&D expenses being compensated via licensing income. We maintain our BUY
rating with our target price rolled forward to Rs480 (was Rs445); we revise FY2012-13E
EPS down by 5% due to lower margin assumptions with sales assumptions remaining
intact..
Sales at Rs7 bn in line with our estimate; contract research higher than our estimate
Sales were in line with our estimate at Rs7 bn with (1) bio-pharma sales excluding licensing income
and Axicorp at Rs3.5 bn, 4% lower than our estimate, (2) Axicorp at Euro38 mn, 7% higher than
our estimate, (3) contract research grew 20% yoy to Rs887 mn, 9% higher than our estimate, and
(4) licensing income at Rs320 mn was lower than our estimate of Rs452 mn.
PAT at Rs1 bn, 2% lower than our estimate due to lower margin; tax lower, other income higher
(1) Lower-than-expected licensing income of US$7 mn versus our estimate of US$10 mn, and (2)
higher R&D expense of Rs223 mn versus our estimate of Rs200 mn, resulted in reported EBITDA
being 11% lower. However, with higher R&D/lower licensing income versus our estimate, we look
at EBITDA margin excluding these two items which at 20% was 70 bps lower than our estimate
largely due to higher material cost. Tax rate at 10% was lower than 15% estimate.
We reduce FY2012-13E EPS by 5% due to lower margin assumption
We reduce our FY2012-13E estimate by 5% due to lower margin assumption with sales
assumptions largely intact. We expect EBITDA margin at 30.7% in FY2012E, up 120 bps yoy due
to increasing licensing income (US$55 mn in FY2012-13E). With (1) total sales ex-Axicorp, licensing
income up 18% in FY2012E versus 17% in FY2011, (2) pick-up in research sales to 20% in
FY2012E versus 13% yoy in FY2011, (3) higher R&D expenses at Rs1.7 bn in FY2012E being
compensated through licensing income, we estimate EPS of Rs21.6 (from 22.7) in FY2012E and
Rs24.2 (from Rs25.9) in FY2013E, down 5% from our previous estimate.
We maintain BUY with PT rolled forward to Rs480 (from Rs445); 18X core FY2013E EPS
We maintain BUY with PT at Rs480 (18X FY2013E core EPS). (1) Oral insulin out-licensing, (2)
Phase IIII clinical data for T1h, (3) Fidoxamin US FDA approval in June 2011E, are key stock triggers
in FY2012E.
18% growth in biopharma business in FY2011 shows growth is intact
We remain conservative and factor in muted growth for biopharma business in FY2013E on
account of looming patent expiry of Atorvastatin and its impact on generic Simvastatin sales.
Statin API supplies account for around 25% of Biocon’s total sales ex-Axicorp with a
majority coming from Simvastatin supplies. However, we note that Biocon is a participant in
the API opportunity for atorvastatin. According to the company, it has tied up with generic
players in US/Europe. However, we remain conservative and factor in muted 10% dollar
growth in the statin portfolio in FY2012-13E.
Key takeaways from conference call
Biocon plans to increase employee strength by 1,000 on account of overall expansion
across business divisions
78% stake in Axicorp will be divested for Euro40 mn and transaction is likely to be
completed by May 2011E
Pfizer has received approval for insulin in India and will be launching in all dosage forms
in 2QFY12E. Biocon and Pfizer have listed certain emerging markets as priority markets
which will be targeted for launch first as and when registrations are received for Pfizer’s
products
Biocon believes Simvastatin sales will get impacted by looming patent expiration of
Atorvastatin. Biocon has partnered for Atorvastatin in US and Europe and believes overall
statin sales will continue to grow
First MAB product from Mylan deal will enter clinics in near future
Tax rate is expected to be higher going forward at upwards of 20% due to (1) expiration
of EOU benefits, (2) only 50% tax exemption from SEZ versus full exemption earlier
BIOS’s second novel molecule for Psoriasis (T1h) is undergoing phase III trials in India with
clinical data expected in 1QFY12E. Biocon will apply for RA study in India
On oral insulin, Biocon is completing US IND trials in US and has started discussions with
global partners
Phase III trials for Biocon’s biosimilar version of insulin are underway in Europe. Biocon
expects to complete trials in 2012E
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Biocon (BIOS)
Pharmaceuticals
In-line results. Sales were in line with estimates while PAT was 2% lower than our
estimate due to lower EBITDA margin. We estimate 17/12% EPS growth in FY2012-13E
with (1) total sales ex-Axicorp, licensing income up 13/17% in 4Q/FY2011, (2) research
services rebounding in 4QFY11 with 20% yoy growth versus 10% in 1HFY11, and (3)
higher R&D expenses being compensated via licensing income. We maintain our BUY
rating with our target price rolled forward to Rs480 (was Rs445); we revise FY2012-13E
EPS down by 5% due to lower margin assumptions with sales assumptions remaining
intact..
Sales at Rs7 bn in line with our estimate; contract research higher than our estimate
Sales were in line with our estimate at Rs7 bn with (1) bio-pharma sales excluding licensing income
and Axicorp at Rs3.5 bn, 4% lower than our estimate, (2) Axicorp at Euro38 mn, 7% higher than
our estimate, (3) contract research grew 20% yoy to Rs887 mn, 9% higher than our estimate, and
(4) licensing income at Rs320 mn was lower than our estimate of Rs452 mn.
PAT at Rs1 bn, 2% lower than our estimate due to lower margin; tax lower, other income higher
(1) Lower-than-expected licensing income of US$7 mn versus our estimate of US$10 mn, and (2)
higher R&D expense of Rs223 mn versus our estimate of Rs200 mn, resulted in reported EBITDA
being 11% lower. However, with higher R&D/lower licensing income versus our estimate, we look
at EBITDA margin excluding these two items which at 20% was 70 bps lower than our estimate
largely due to higher material cost. Tax rate at 10% was lower than 15% estimate.
We reduce FY2012-13E EPS by 5% due to lower margin assumption
We reduce our FY2012-13E estimate by 5% due to lower margin assumption with sales
assumptions largely intact. We expect EBITDA margin at 30.7% in FY2012E, up 120 bps yoy due
to increasing licensing income (US$55 mn in FY2012-13E). With (1) total sales ex-Axicorp, licensing
income up 18% in FY2012E versus 17% in FY2011, (2) pick-up in research sales to 20% in
FY2012E versus 13% yoy in FY2011, (3) higher R&D expenses at Rs1.7 bn in FY2012E being
compensated through licensing income, we estimate EPS of Rs21.6 (from 22.7) in FY2012E and
Rs24.2 (from Rs25.9) in FY2013E, down 5% from our previous estimate.
We maintain BUY with PT rolled forward to Rs480 (from Rs445); 18X core FY2013E EPS
We maintain BUY with PT at Rs480 (18X FY2013E core EPS). (1) Oral insulin out-licensing, (2)
Phase IIII clinical data for T1h, (3) Fidoxamin US FDA approval in June 2011E, are key stock triggers
in FY2012E.
18% growth in biopharma business in FY2011 shows growth is intact
We remain conservative and factor in muted growth for biopharma business in FY2013E on
account of looming patent expiry of Atorvastatin and its impact on generic Simvastatin sales.
Statin API supplies account for around 25% of Biocon’s total sales ex-Axicorp with a
majority coming from Simvastatin supplies. However, we note that Biocon is a participant in
the API opportunity for atorvastatin. According to the company, it has tied up with generic
players in US/Europe. However, we remain conservative and factor in muted 10% dollar
growth in the statin portfolio in FY2012-13E.
Key takeaways from conference call
Biocon plans to increase employee strength by 1,000 on account of overall expansion
across business divisions
78% stake in Axicorp will be divested for Euro40 mn and transaction is likely to be
completed by May 2011E
Pfizer has received approval for insulin in India and will be launching in all dosage forms
in 2QFY12E. Biocon and Pfizer have listed certain emerging markets as priority markets
which will be targeted for launch first as and when registrations are received for Pfizer’s
products
Biocon believes Simvastatin sales will get impacted by looming patent expiration of
Atorvastatin. Biocon has partnered for Atorvastatin in US and Europe and believes overall
statin sales will continue to grow
First MAB product from Mylan deal will enter clinics in near future
Tax rate is expected to be higher going forward at upwards of 20% due to (1) expiration
of EOU benefits, (2) only 50% tax exemption from SEZ versus full exemption earlier
BIOS’s second novel molecule for Psoriasis (T1h) is undergoing phase III trials in India with
clinical data expected in 1QFY12E. Biocon will apply for RA study in India
On oral insulin, Biocon is completing US IND trials in US and has started discussions with
global partners
Phase III trials for Biocon’s biosimilar version of insulin are underway in Europe. Biocon
expects to complete trials in 2012E
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