Biocon share price tanks 9% in one week, falls 3% on Friday alone as profits dip in March quarter

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Published: May 15, 2020 3:43 PM

After having jumped as much as 42% till last week from its March lows, pharma major Biocon’s share price has tanked 9% just this week.

Glenmark Pharmaceutical begins phase 3 of clinical trials on antiviral Favipiravir for COVID-19 patients in IndiaPharma shares have had a better performance this year in comparison to the benchmark indices.

After having jumped as much as 42% till last week from its March lows, pharma major Biocon’s share price has tanked 9% just this week. The scrip was trading at a price of Rs 359 per share last friday and it hit an intraday low of Rs 320 this Friday as investors took note of the disappointing January-March quarter results. Biocon posted a staggering 42% decline in consolidated net profits to Rs 123 crore, down from Rs 214 crore at the end of the December quarter. Pharma shares have had a better performance this year in comparison to the benchmark indices, Biocon is trading with gains year-to-date.

Revenue growth for Biocon was muted as well with just a mere 6% growth marred by the operational challenges arising due to the coronavirus pandemic. Consolidated net profit for the fiscal year ended March this year stood at Rs 748 crore down from Rs 905 crore a year ago. Amidst this, the small molecules and research services businesses delivered strong growth of 15% and 14%. “On a full-year basis, we reported a revenue growth of 15 per cent led by a strong performance by biologics, which grew by 29 per cent, small molecules by 18 per cent and research services by 10 per cent. We believe that the Biologics business will recover in Q1FY21 and fully normalise from Q2FY21,” Biocon Executive Chairperson Kiran Mazumdar-Shaw said. Biocon has also benefited from the range of clearances that the United States Food and Drug Administration has granted Indian pharma companies in the past few months. Biocon’s Small Molecules API Manufacturing Facility at Biocon Park SEZ, Bengaluru has received the Establishment inspection report from the USFDA with five observations. The EIR was however, closed with a voluntary action initiated report, Biocon said.

What could work in Biocon’s favour soon is the inclusion of the stock in the MSCI India index in the semi-annual rejig. Biocon is one of the 5 stocks that were added to the index by the index provider. MSCI’s indexes are followed by global fund houses to assign weightage to various assets on their portfolios. Biocon’s inclusion could see inflows from foreign investors as the rebalancing takes effect from next month.

On the charts, analysts are eyeing a favourable risk reward trade. “Biocon had a good run up until recently when it broke its support of 340. The stock has been falling on inclining volumes which is a bearish indication but I would not recommend a sell immediately. I would wait for it to break 319/320 levels” Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments told Financial Express Online. “This is an important juncture for this stock which if broken could take it down to 275. Traders could use this as a favorable risk reward trade where they could go long on it at the present levels of 330 and short/reverse their trade if it breaks 319 for a target of 275,” he added.

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