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Axicorp divestment, long term positive …
Biocon’s Q4FY11 results were slightly below our expectation. Net sales
grew only 7% YoY to | 701.6 crore against our expectation of | 731 crore
due to lower growth of 13% in its biopharmaceutical business (excluding
Axicorp and licensing income) and lower licensing income. EBITDA
margins were at 20.7% as against our expectation of 23%. However, net
profit increased 25% to | 100.8 crore in line with our estimates due to
lower taxation and higher other income. We believe divestment of
Axicorp is positive for Biocon. We maintain our BUY rating on the stock.
�� Divesting stake in Axicorp
Biocon has decided to sell its 78% stake in Axicorp for €40 million to the
existing group of promoters. It acquired Axicorp in February 2008 for €31
million mainly to market its biosimilar Insulin and Glargine in the German
market. We believe the divestment is a good move considering 16% flat
rebate emphasised by the German market for three years for all pharma
companies and the recent global supply agreement with Pfizer, which
may fulfil the marketing requirements in Germany.
�� Biocon sole API supplier to Optimer for Fidaxomicin drug
US Company Optimer has received USFDA approval for the drug NCE
Fidaxomicin. The drug is used to treat diarrhoea and intestinal diseases.
Optimer is planning to launch the drug by the end of the current quarter.
Biocon is the sole API supplier to Optimer for Fidaxomicin. The market
size is expected to be around US$350 million. We expect Biocon to fetch
higher margins from this deal as Fidaxomicin is a newly filed product.
Valuation
Biocon is currently trading at ~18.7x FY12E EPS of | 19.8 and 15.4x ~
FY13E EPS of | 24. We expect Biocon to start supply of Recombinant
Human Insulin and Glargine to Pfizer for India and some of the emerging
markets in FY12 and for EU in FY13 under the Pfizer deal. Divesting the
low margin business (Axicorp) is a good move for the company to
concentrate more on its core biopharma business. We have valued the
stock at 18x FY13E EPS of | 24 i.e. | 432 maintaining our BUY rating. We
also recommend that investors who have bought the stock at the time of
the earlier result update at | 367 should continue to hold the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Axicorp divestment, long term positive …
Biocon’s Q4FY11 results were slightly below our expectation. Net sales
grew only 7% YoY to | 701.6 crore against our expectation of | 731 crore
due to lower growth of 13% in its biopharmaceutical business (excluding
Axicorp and licensing income) and lower licensing income. EBITDA
margins were at 20.7% as against our expectation of 23%. However, net
profit increased 25% to | 100.8 crore in line with our estimates due to
lower taxation and higher other income. We believe divestment of
Axicorp is positive for Biocon. We maintain our BUY rating on the stock.
�� Divesting stake in Axicorp
Biocon has decided to sell its 78% stake in Axicorp for €40 million to the
existing group of promoters. It acquired Axicorp in February 2008 for €31
million mainly to market its biosimilar Insulin and Glargine in the German
market. We believe the divestment is a good move considering 16% flat
rebate emphasised by the German market for three years for all pharma
companies and the recent global supply agreement with Pfizer, which
may fulfil the marketing requirements in Germany.
�� Biocon sole API supplier to Optimer for Fidaxomicin drug
US Company Optimer has received USFDA approval for the drug NCE
Fidaxomicin. The drug is used to treat diarrhoea and intestinal diseases.
Optimer is planning to launch the drug by the end of the current quarter.
Biocon is the sole API supplier to Optimer for Fidaxomicin. The market
size is expected to be around US$350 million. We expect Biocon to fetch
higher margins from this deal as Fidaxomicin is a newly filed product.
Valuation
Biocon is currently trading at ~18.7x FY12E EPS of | 19.8 and 15.4x ~
FY13E EPS of | 24. We expect Biocon to start supply of Recombinant
Human Insulin and Glargine to Pfizer for India and some of the emerging
markets in FY12 and for EU in FY13 under the Pfizer deal. Divesting the
low margin business (Axicorp) is a good move for the company to
concentrate more on its core biopharma business. We have valued the
stock at 18x FY13E EPS of | 24 i.e. | 432 maintaining our BUY rating. We
also recommend that investors who have bought the stock at the time of
the earlier result update at | 367 should continue to hold the stock.
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