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Biocon (BIOS)
Pharmaceuticals
PAT miss due to cost-licensing income mismatch. Lower EBITDA margin due to costlicensing
income mismatch despite in-line sales was the main reason behind PAT miss of
7% versus our estimate. We believe correction of this in 2HFY12E coupled with
sustenance of sales momentum of 2QFY12 will lead to a better 2HFY12E. FY2013E
presents upsides to our estimates due to Atorvastatin, Fidaxomicin supplies. We leave
our core EPS unchanged, lower reported EPS due to lower licensing. BUY; PT at Rs445.
Total sales at Rs5 bn in line with our estimate, up 19% yoy on a like-to-like basis
Total sales excluding licensing income was up 19% yoy and 10% qoq to Rs4.7 bn, in line with our
estimate. Contract research showed strong growth at 19% yoy for the third quarter in a row, 3%
above our estimate, and biopharma sales excluding licensing at Rs3.7 bn grew 19% yoy, in line
with our estimate driven by (1) 35% growth in branded formulations, (2) growth in statins, and
(3) growth in immunosuppresants (around 10% of biopharma sales).
PAT at Rs857 mn, 7% below our estimate of Rs922 mn
Despite in-line sales and lower tax and interest cost, lower EBITDA margin was the main reason for
PAT miss. EBITDA margin (including other income of Rs160 mn) was at 28.5%, down 70 bps qoq
and lower than our estimate of 31% due to higher development costs from Pfizer-related work
reflected across all cost items at Rs260 mn against income of Rs365 mn in 2QFY12 versus Rs40 mn
against income of Rs144 mn in 1QFY12. Also gross margin was flat qoq despite (1) higher
proportion of sales from branded business, and (2) higher off-take of Fidaxomicin. Lack of gross
margin expansion coupled with sharp increase in (1) staff costs, up 38% yoy and 12% qoq to
Rs724 mn, and (2) higher other expenses at Rs351 mn, up 45% qoq, led to lower EBITDA margin.
We largely leave F2012-13E core EPS (excluding R&D, licensing income) unchanged
We leave our FY2012-13E core EPS largely unchanged. We reduce FY2012-13E reported EPS by
6-9% due to lower licensing income (Rs1.6 bn in FY2012E versus Rs2 bn earlier). We estimate
sales ex-licensing to grow at 13-14% in FY2012-13E (see Exhibits 3,4), versus 16/17% growth
seen in 1HFY12/FY2011. We expect EBITDA margin (including other income) at 30.5% in FY2012E
versus 29.2% in 1QFY12 and 28.5% in 2QFY12 due to (1) pick-up in high-margin Fidaxomicin in
2HFY12E, and (2) higher EBITDA contribution from licensing which we estimate at Rs1.6 bn in
FY2012E, in line with guidance. We estimate reported EPS (see Exhibit 6) of Rs17.6 in FY2012E
(versus Rs19.4 earlier, Rs7.8 in 1HFY12) to increase by 14% to Rs20.2 (versus Rs21.4) in FY2013E.
We maintain BUY with PT at Rs445, unchanged (18X core FY2013E EPS)
We expect sales momentum of 2QFY12 to sustain and expect mismatch of higher development
costs versus licensing to correct in 2HFY12E. We value stock at Rs445 at (1) 18X FY2013E core EPS
of Rs20.2, (2) cash/share of Rs26, and (3) Pfizer deal NPV/value of Rs57.
Key takeaways from conference call
Pfizer has launched insulin and glargine at same price points as Biocon in 1QFY12 in India
under different brand names. Registrations in emerging markets are underway. Biocon is
targeting 40% plus growth in FY2012E and Rs5 bn of sales from branded formulations in
India by FY2014E versus Rs1.6 bn in FY2011. We estimate sales of Rs4 bn in FY2014E.
Biocon is supplying Atorvastatin API to 4 partners in Europe and has tied up with 2
partners in US who are likely to launch in FY2013E.
Significant numbers from Fidaxomicin supplies for Biocon are expected in FY2013E.
Recently Optimer increased its peak sales forecast to US$2 bn from US$1.5 bn earlier.
Biocon has also tied up as the exclusive supplier for Europe where launch is planned in
2012E with Astellas as marketing partner. Optimer received positive response from CHMP
(Committee for Medicinal Products for Human Use) in September 2011. The European
Commission generally follows the recommendations of the CHMP and delivers its final
decision within three months of the CHMP opinion.
Licensing income was Rs511 mn in 1HFY12, however, only Rs220 mn of this flowed to
EBITDA and Rs110 mn to bottom line versus entire amount of Rs437 mn which went to
bottom line in 1HFY11. Biocon expects licensing income to pick up in 2HFY12E to touch
FY2011 levels of Rs1.52 bn.
Contract research delivered PAT of Rs240 mn in 1HFY12 versus breakeven position in
1HFY11
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Biocon (BIOS)
Pharmaceuticals
PAT miss due to cost-licensing income mismatch. Lower EBITDA margin due to costlicensing
income mismatch despite in-line sales was the main reason behind PAT miss of
7% versus our estimate. We believe correction of this in 2HFY12E coupled with
sustenance of sales momentum of 2QFY12 will lead to a better 2HFY12E. FY2013E
presents upsides to our estimates due to Atorvastatin, Fidaxomicin supplies. We leave
our core EPS unchanged, lower reported EPS due to lower licensing. BUY; PT at Rs445.
Total sales at Rs5 bn in line with our estimate, up 19% yoy on a like-to-like basis
Total sales excluding licensing income was up 19% yoy and 10% qoq to Rs4.7 bn, in line with our
estimate. Contract research showed strong growth at 19% yoy for the third quarter in a row, 3%
above our estimate, and biopharma sales excluding licensing at Rs3.7 bn grew 19% yoy, in line
with our estimate driven by (1) 35% growth in branded formulations, (2) growth in statins, and
(3) growth in immunosuppresants (around 10% of biopharma sales).
PAT at Rs857 mn, 7% below our estimate of Rs922 mn
Despite in-line sales and lower tax and interest cost, lower EBITDA margin was the main reason for
PAT miss. EBITDA margin (including other income of Rs160 mn) was at 28.5%, down 70 bps qoq
and lower than our estimate of 31% due to higher development costs from Pfizer-related work
reflected across all cost items at Rs260 mn against income of Rs365 mn in 2QFY12 versus Rs40 mn
against income of Rs144 mn in 1QFY12. Also gross margin was flat qoq despite (1) higher
proportion of sales from branded business, and (2) higher off-take of Fidaxomicin. Lack of gross
margin expansion coupled with sharp increase in (1) staff costs, up 38% yoy and 12% qoq to
Rs724 mn, and (2) higher other expenses at Rs351 mn, up 45% qoq, led to lower EBITDA margin.
We largely leave F2012-13E core EPS (excluding R&D, licensing income) unchanged
We leave our FY2012-13E core EPS largely unchanged. We reduce FY2012-13E reported EPS by
6-9% due to lower licensing income (Rs1.6 bn in FY2012E versus Rs2 bn earlier). We estimate
sales ex-licensing to grow at 13-14% in FY2012-13E (see Exhibits 3,4), versus 16/17% growth
seen in 1HFY12/FY2011. We expect EBITDA margin (including other income) at 30.5% in FY2012E
versus 29.2% in 1QFY12 and 28.5% in 2QFY12 due to (1) pick-up in high-margin Fidaxomicin in
2HFY12E, and (2) higher EBITDA contribution from licensing which we estimate at Rs1.6 bn in
FY2012E, in line with guidance. We estimate reported EPS (see Exhibit 6) of Rs17.6 in FY2012E
(versus Rs19.4 earlier, Rs7.8 in 1HFY12) to increase by 14% to Rs20.2 (versus Rs21.4) in FY2013E.
We maintain BUY with PT at Rs445, unchanged (18X core FY2013E EPS)
We expect sales momentum of 2QFY12 to sustain and expect mismatch of higher development
costs versus licensing to correct in 2HFY12E. We value stock at Rs445 at (1) 18X FY2013E core EPS
of Rs20.2, (2) cash/share of Rs26, and (3) Pfizer deal NPV/value of Rs57.
Key takeaways from conference call
Pfizer has launched insulin and glargine at same price points as Biocon in 1QFY12 in India
under different brand names. Registrations in emerging markets are underway. Biocon is
targeting 40% plus growth in FY2012E and Rs5 bn of sales from branded formulations in
India by FY2014E versus Rs1.6 bn in FY2011. We estimate sales of Rs4 bn in FY2014E.
Biocon is supplying Atorvastatin API to 4 partners in Europe and has tied up with 2
partners in US who are likely to launch in FY2013E.
Significant numbers from Fidaxomicin supplies for Biocon are expected in FY2013E.
Recently Optimer increased its peak sales forecast to US$2 bn from US$1.5 bn earlier.
Biocon has also tied up as the exclusive supplier for Europe where launch is planned in
2012E with Astellas as marketing partner. Optimer received positive response from CHMP
(Committee for Medicinal Products for Human Use) in September 2011. The European
Commission generally follows the recommendations of the CHMP and delivers its final
decision within three months of the CHMP opinion.
Licensing income was Rs511 mn in 1HFY12, however, only Rs220 mn of this flowed to
EBITDA and Rs110 mn to bottom line versus entire amount of Rs437 mn which went to
bottom line in 1HFY11. Biocon expects licensing income to pick up in 2HFY12E to touch
FY2011 levels of Rs1.52 bn.
Contract research delivered PAT of Rs240 mn in 1HFY12 versus breakeven position in
1HFY11
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