Biocon’s prospects look good, but Street eyes better execution

2 min read . Updated: 15 Apr 2021, 05:35 AM IST Ujjval Jauhari

Biocon’s prospects have been improving since it unveiled its biosimilars pipeline along with Mylan

Biocon Ltd’s shares have fallen around 12% this year, underperforming the Nifty Pharma Index, which is up 3.7%. Of course, this comes on the back of massive outperformance in the past five years, with the stock rising 340% in a period when the pharma index was more or less flat.

The prospects of the company have been improving with the unveiling of its biosimilars pipeline in collaboration with its global partner Mylan.

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With investor expectations running high, and after a soft Q3 performance, sentiment on the Street was bound to take a beating. The ramp-up in the biosimilar portfolio was lower than expected, said analysts after the Q3 results announcement.

The company also pushed its $1 billion revenue guidance for the biologics business from FY22 to a later, unspecified date.

This, coupled with some management changes, has made the Street watchful of the pick-up in the company’s growth trajectory. “When looked together with the management change, some of the commercial initiatives undertaken by Biocon in the last few years may have a longer gestation to revenues," analysts at Jefferies India Pvt. Ltd said.

The reset button had been pressed largely on the back of rising commercialization costs during the FY18-21 period, say analysts.

The positive is that Biocon has seen good growth during the last few months. In the domestic market, growth has been more than 20% during the month of March, point out analysts at Motilal Oswal Financial Services.

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Of course, it’s also important to see if there has been a pick-up in performance in markets such as the US.

“US market is seeing better adoption of biosimilars, thus re-validating growth opportunities for players like Biocon," said analysts at HSBC Securities and Capital Markets (India) Pvt. Ltd.

This is good news for growth in the biosimilar product range already launched by the company in the US.

The multinational broker adds, “We remain positive on Biocon’s long-term prospects for biosimilars and believe that improved execution of launches in the US and a renewed focus for most of the world markets should help it to better pick up biosimilars sales."

‘Most of the world’ refers to world markets outside developed economies.

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