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The pharma sector which was a go-to space amid the Covid-19 pandemic has lost some of the post-pandemic gains in the last one year. The index has fallen around 21% from the 52-week high of 14,938.25 to a 52-week low of 11,726.45, marked in June this year. Clearly, there has been a noticeable decline in the entire pharma space, but contrarians (those who go against the crowd) are now having a closer look at Biocon Ltd. (NS:).
The share price of Biocon has underperformed the benchmark index, falling 14.55% in the one-year period, compared to Pharma’s 11.7% decline. Not just that, the stock recently touched a two-year low of INR 290.2, a few days back. So why is it becoming investors’ favorite?
Biocon has become a global biopharmaceutical enterprise, starting from just an enzyme company back in the 1970s. The consistent growth in the business clearly stands to this day with FY22 becoming the highest-ever revenue year for the company with INR 8,397 crores of revenue. The geographical business risk is highly diversified with a presence in over 120 countries. The company has also been ranked no.5 in the top 10 global biotech employers by Science magazine and has around 1,300 patents to its name.
The company operates via 4 business segments – Generics, Biosimilars, Novel Biologics, and Research Services (via its research arm, Syngene International Ltd (NS:)).
The Generics business manufactures APIs (Active Pharmaceutical Ingredients) which are the building blocks for medications. The company has expertise in fermentation technology but is expanding beyond fermentation-based APIs, for eg. peptides, potent APIs, etc. This is helping it to create a balanced portfolio across cardiovascular, anti-diabetes, immunosuppressants, high potent API & few niche molecules for hospitals/institutions. The segment registered a YoY growth of 19% in Q1 FY23 revenue to INR 580 crores due to continued performance in API & recently launched generic formulations, coupled with a lower base last year.
The Biosimilars business has provided the company first-mover advantage many times. It was the first company to commercialize human insulin using the proprietary P. pastoris platform and the first company to receive approval for bTrastuzumab and bPegfilgrastim in the US. As of FY22, the Biosimilars’ target addressable market was around US$21 billion which is expected to grow over 3.3 times to US$69 billion by FY26. The company recently acquired Viatris’ biosimilar business to build a fully integrated global biosimilar enterprise, which would improve its commercialization, supply chain, and regulatory capabilities in developed markets. Biocon Biologis also continues to expand its portfolio in collaboration with the Serum Institute of India. The company registered a 29% YoY growth in revenue from its Biosimilars business to INR 977 crores in Q1 FY23.
The novel biologics segment portfolio includes both, in-house as well as partnered and in-licensed products. Bicara Therapeutics, an associate of Biocon based in the US, is developing a pipeline of bifunctional antibodies that exploit the recent advances in immuno-oncology. Biocon’s novel assets also include Insulin Tregopil, which is an orally delivered insulin analog, that is making clinical progress. This segment is pioneering in the cancer space as well, having developed India’s first indigenously produced novel monoclonal antibody for the treatment of head and neck cancer.
The company is also at the forefront of research and development via its research arm, Syngene, with its world-class R&D and manufacturing infrastructure spread over 2 million square feet. Similar to Biocon, Syngene also posted a record FY22 with the highest ever revenue of INR 2,657 crores. Revenue guidance for FY23 has also been raised from mid-teens to high teens. To top it all, the stock is hovering near its 2-year low, providing a decent risk-to-reward ratio.
Disclaimer – Any above-mentioned security shall not be deemed as a recommendation to buy/sell/hold. I hold Biocon shares in my portfolio
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