Biocon reported Q3 numbers higher than our expectations (13% beat on Ebitda and 9% beat on net income), almost entirely driven by higher licensing income (net of higher R&D spend) during the quarter. Other than this, the only surprise was subdued performance at Axicorp, which was offset by strong growth in biopharma and a recovery in research services.
Higher sales in biopharma (+22% YoY; +15% QoQ) & higher licensing income (up 339% YoY ? largely from Pfizer) led to good revenue growth (+15% YoY). Launch of tacrolimus earlier in FY11, continued growth in the India-branded biz and a pickup in statins were the main factors aiding strong growth in biopharma. Research services (+14%) also grew well following a pick up in fortunes at Syngene.
However, the Axicorp business (-15%YoY, -19% QoQ) in Germany was affected by compulsory rebates in the German market from this quarter.
Ebitda margins improved 317 bps YoY, primarily on the back of higher licensing income. R&D expenses were higher as well, with charges of cRs300m (related to insulin for Europe) that were capitalized earlier being expensed during the quarter. Net Profit growth (+22% YoY) was subdued due to unusually higher tax rate (c22% vs 15%), which is expected to normalise over the full year.
Key earnings call takeaways: Firstly, encouraged by the oral insulin (IN 105) trial results and hopes to be able to shortlist a potential licensing partner in the next 6 months. Secondly, revenues from India and other emerging markets under the insulins deal with Pfizer to commence in FY12.
Thirdly, plans to bolster immunosupressants pipeline with three new products (one filed, two under development for the US). Fourthly, expects to launch reusable pen for insulin in mid-2011 and lastly expects to file human insulin in Europe in mid CY12.