Shares of Biocon took a hit, falling as much as 5.5 percent in early trade on October 31, bogged down by the company's dismal quarterly show as net profit took a dive in the July-September quarter.
The drugmaker's net profit plunged 84 percent on year in Q2 to Rs 27.1 crore, sharply down from Rs 172 crore that it reported in the same quarter of the previous fiscal. The operational performance also deteriorated as EBITDA margin squeezed to 19 percent in Q2, down from 21 percent in the same period last year.
Despite the weak bottomline and operational performance, the company's revenue rose 4 percent to Rs 3,590.4 crore, as against Rs 3,462 crore in the year-ago period. Goldman Sachs, which maintains a 'buy' rating on Biocon with a price target of Rs 350, noted that the drugmaker's margins surprised negatively, primarily due to lower gross margins and operating leverage.
At 09.35 am, shares of Biocon were trading at Rs 312.20 on the NSE.
The company's biologics business--Biocon Biologics, reported Q2 revenue of Rs 2,182 crore, marking a 19 percent on-year growth on a like-for-like basis. The business also achieved a core EBITDA of Rs 691 crore, resulting in a core EBITDA margin of 32 percent.
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"We had a robust performance in the biosimilars business, up 19 percent on a like-for-like revenue basis, driven by strong market share gains in our US oncology and insulins franchises,” Kiran Mazumdar-Shaw, Chairperson, Biocon Group, said in an exchange filing.
Brokerage firm Nuvama Institutional Equities noted that the H1 FY25 performance of Biocon was muted as expected, but the firm eagerly awaits a pickup in H2 FY25. The firm sees promise in Biocon's biosimilar pipeline and GLP-1 opportunity while research services is expected to benefit from CDMO tailwinds.
The brokerage also awaits medium-term rerating triggers for Biocon, that include a clearance of
USFDA inspection (Malaysia and Bengaluru facility) and biosimilar launches (aspart, bevacizumab and ustekinumab).
Given that several uncertainties still stand in the way for Biocon, Nuvama chose to retain its 'hold' call on the stock with a target price of Rs 310. Motilal Oswal Financial Services also seconded the view as the brokerage also awaits clarity on USFDA compliance at Biocon's Malaysia and Bengaluru sites, prompting it to retain its 'neutral' call on the stock with a price target of Rs 300.
MOFSL also feels that though Biocon has strong capabilities and capacities in the development
and manufacturing of biosimilars, timely successful compliance remains vital for growth potential in this segment.
On the other hand, Goldman Sachs still remains optimistic about an improvement in Biocon's earnings trajectory.
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