Biocon Company Analysis Report

 Biocon  Company Analysis Report

Summary

• Biocon is one of the largest biopharmaceutical companies with specialization in biotechnology (Biocon), custom research (Syngene) and clinical research (Clinigene). Over the years, this company has systematically leveraged its technology platform to evolve from an enzyme manufacturer to a fully integrated biopharmaceutical enterprise.
• Biocon has a distinctive business model of self-financed innovative R&D, bio-pharma products and contract research services. Its current business model spans the entire pharmaceutical value chain, from pre-clinical discovery through clinical development and post-launch services.
• Biocon's Syngene division is one of the India's largest pre-clinical service providers with a portfolio of discovery services, including scaffold and library synthesis, medicinal chemistry, cGMP manufacturing of APIs, drug metabolism pharmacokinetics (DMPK) profiling, crystallography, efficacy studies in animals and oral dosage formulation for human studies.
• Despite the recent slowdown in global custom manufacturing business, Biocon's custom research division (which includes both contract research and manufacturing business) recorded y-o-y growth of 20.9% to reach $59m in FY 2010.
• Biocon is also recognized as one of the Asia's largest manufacturer of insulin and global scale mAbs. Additionally, in 2009, it acquired a synthetic chemistry facility in Hyderabad to boost capability in this segment.

Company overview

Table 21: Biocon snapshot
Headquartered:	Bangalore, India
Established:	1978
Consolidated revenue (FY 2010):	$507m
Segmental revenue (FY 2010):	$59m*
Employees (as of March 2010):	4,478
*Custom research division.Note: FY = Fiscal Year (April 01 to March 31)

Source: Company information

Established in the year 1978, Biocon is one of the largest biopharmaceutical companies with specialization in biotechnology, custom research (Syngene) and clinical research (Clinigene). Over the years, Biocon have systematically leveraged its technology platform to evolve from an enzyme manufacturer to a fully integrated biopharmaceutical enterprise. Biocon is also recognized as one of the largest global manufacturers of statins, immunosuppressants and insulin. Biocon’s value chain covers the entire length of discovery, development and commercial supply of novel drugs. With successful initiatives in clinical development, contract manufacturing and global marketing, Biocon delivers products and solutions to over 75 countries across the globe, of which many products have FDA and EMEA acceptance.

Biocon has made strong progress in becoming the partner of choice to potential collaborators. Some of its recent strategic alliances include: a global development and commercialization agreement with Amylin for diabetes, a strategic collaboration with Mylan to enter the global biosimilars market, and a partnership with Indian School of Business (ISB) to launch the Biocon Cell for Innovation Management, all in the year 2009. The company’s investment in a biotech start-up, IATRICa in 2008 is developing a therapeutic vaccine for cancer. More recently, in May 2010, Biocon signed a long-term agreement with Optimer (a US based biopharmaceutical company) for bulk manufacturing of fidaxomicin API which is being developed for the treatment of colon infection.

Business segmentation

Biocon is an integrated biopharmaceutical company with distinctive business model of self-financed innovative R&D, bio-pharma products and contract research services. Its current business model spans the entire pharmaceutical value chain, from pre-clinical discovery through clinical development to post-launch stage. Its business is mainly divided into custom research (Syngene), clinical development (Clinigene) and biopharmaceuticals (Biocon) which provide multiple revenue streams to balance risk, drive innovation and accelerate growth:

• Syngene – is the custom research division of Biocon which offers high value bio-pharmaceutical discovery and development services to major pharma-biotech companies across the globe;
• Clinigene – is the clinical research organization of Biocon which specializes in Phase I–IV clinical trials using well-characterized clinical databases for different diseases such as oncology, diabetes and cardiovascular disease;
• Biocon – specializes in the commercial sale of insulin, immunosuppressants and a range of biosimilar products in India and other parts of the world.

R&D focus

Biocon's Syngene division is one of the India's largest pre-clinical service providers with a portfolio of wide range of discovery services, including scaffold and library synthesis, cGMP manufacturing of APIs, medicinal chemistry, drug metabolism pharmacokinetics (DMPK) profiling, efficacy studies in animals and oral dosage formulation for human studies. Since its inception in the year 1994, Syngene has been providing customized R&D services to both pharmaceutical and biotechnological companies on a strong platform of confidentiality and intellectual property (IP) rights. This division has the distinction of setting up India's largest R&D partnership with Bristol Myers-Squibb (BMS) and is also working with other pharmaceutical companies to provide high quality integrated discovery and pre-clinical development services at competitive prices. In March 2009, BMS in a co-operation agreement with Syngene opened a dedicated R&D facility in Bangalore, India. The 200,000 square-foot facility at Biocon Park is dedicated to advance BMS' work in drug discovery and early stage development with over 270 researchers.

Financial performance

Despite the recent slowdown in global custom manufacturing business, Biocon's custom research division (which includes both contract research and manufacturing business) recorded a y-o-y growth of 20.9% to reach $59m in FY 2010. Moreover, Syngene, an internationally reputed contract research and manufacturing organization with multidisciplinary skills in chemistry and biology services has also consolidated its position as one of India’s premier CRAMS player. With FY 2010 sales of $56m and a y-o-y growth of 25.4%, Syngene was the company’s second largest division by revenues.

Table 22: Biocon financial performance by segment ($m), FY 2010
Division	Sales FY 2010 ($m)	Sales growth FY 2009–10 (%)	Share of revenues FY 2010 (%)
Pharma	440	46.0	86.8
Custom research	59	20.9	11.7
Others	8	-44.0	1.5
Total	507	39.1	100
Note: all numbers were converted into $m considering an average exchange rate for the fiscal year (i.e. in FY 2009, INR1 = $0.0218; in FY 2010, INR1 = $0.0211). FY = Fiscal Year (April 01 to March 31)

Source: Company reports

Growth strategies

Strong manufacturing capabilities in wide range of segments

The process of producing biotech products is inherently complex and requires specialized technical knowledge to transform laboratory scale processes into a reproducible commercial manufacturing process. Biocon capability to achieve this is unusual among Indian CMOs. The company has two global scale bio-manufacturing facilities, including an aseptic fill and finish facility which follow FDA and EU GMP guidelines. Biocon has strong manufacturing capabilities in fermentation (proteins and small molecules), monoclonal antibodies (mAbs), synthetic chemistry and fill/finish (cartridges, vials, PFS, etc). The company is also recognized as one of the Asia's largest manufacturers of insulin and global scale mAbs. Additionally, in 2009, it acquired a synthetic chemistry facility in Hyderabad to boost capability in this segment.

R&D collaboration with Bristol-Myers Squibb

In March 2009, Syngene entered into a collaborative research pact with BMS to provide dedicated drug discovery and development services in Bangalore Biocon Park. Furthermore, BMS is also the largest contract research client for Syngene with over 30% revenue contribution to Syngene operation. In March 2010, Syngene signed a collaborative research pact with US based Endo Pharma for developing novel biological cancer drugs. Reportedly, the deal is the first instance of a US company partnering with an Indian CMO over the development of a novel biological.

Biopharmaceutical revenues to maintain steady growth in coming years

Biopharmaceuticals (covering statins, insulins and immunosuppressants, branded formulations and APIs) is the flagship segment of Biocon with revenue contribution of around 87% in FY 2010. India has a high prevalence of cardiovascular disease, diabetes and disorders of central nervous system. Thus, with leading brands in diabetology, oncology, cardiology and nephrology, Biocon is well positioned to capitalize on the domestic market in the coming years. Mergers and acquisitions, partnerships and in-licensing deals are other value creating strategies that are likely to be implemented in achieving this goal.

Biocon has already registered its insulin in about 40 key markets (including Brazil) and expects to tap another 20–25 non-regulated and semi-regulated markets (including China and Australia) by 2012/13 which will increase its insulin revenues in the medium term. Alongside, Biocon is also undertaking the Phase III clinical trial for its recombinant human insulin in Europe and expects to launch there by 2013 following the patent expiry of Sanofi-Aventis' Lantus.