Biocon (Biocon) | 590 · Biocon’s contract research organisation (CRO) arm Syngene contributes 33% of total revenues. The company caters to 316 clients including eight out of global

July 27, 2018

ICICI Securities Ltd | Retail Equity Research

Result Update

Biologics, Syngene maintain momentum…

Revenues grew 20% YoY to | 1124 crore (I-direct estimate: | 1214

crore) mainly due to 35.5% YoY growth in Biologics to | 250 crore (I-

direct estimate: | 239 crore) and 39.5% YoY growth in contract

research to | 406 crore (I-direct estimate: | 425 crore)

EBITDA margins increased 60 bps YoY to 21.2% (I-direct estimate:

20.7%) mainly due to lower R&D spend. EBITDA grew 23.8% YoY to

| 238 crore against I-direct estimates of | 251 crore

Net profit grew 47.4% YoY to | 119.8 crore (I-direct estimate: | 127.6

crore) mainly due to a strong operational performance and lower

interest and depreciation expenses

Well poised to capitalise on global biosimilars opportunity

Biologics segment (18% of FY18 in total revenues) includes biosimilars,

encompassing Rh-insulin, insulin analogs, monoclonal antibodies &

recombinant proteins. It is the first Indian pharmaceutical company to

receive biosimilar approval in the US. The company has invested heavily

in this space in the last two to three years, especially the Malaysian

facility. So far, the progress has been encouraging with Trastuzumab and

Pegfilgrastim approvals in the US, Glargine launch in Japan and approval

in EU and Australia besides launches in emerging markets. We expect

biologics to grow at 46.5% CAGR to | 1652 crore in FY18-20E.

Research services (Syngene) to maintain growth momentum

Biocon’s contract research organisation (CRO) arm Syngene contributes

33% of total revenues. The company caters to 316 clients including eight

out of global top 10 global players. This segment has consistently been

growing in double digits and has recently been the major growth driver

for the company as the small molecules segment is slowing down. We

expect revenues to grow at a CAGR of 20% to | 2051 crore in FY18-20E.

Small molecules under pressure; branded formulations growing decently

Small molecules (35% of FY18 total revenue) comprise APIs like statins,

immunosuppressants, specialty APIs & also include generic formulations

business is witnessing steep pricing pressure in the US. The company is

exploring fewer opportunities but with higher profitability in this segment

like moving into formulations & filing own ANDAs, 505 (b)(2) filing, etc. It

has already filed few ANDAs, which include complex generics & injectables.

We expect small molecules segment to grow at ~7% CAGR to | 1709 crore

in FY18-20E. Branded formulations (14% of FY18 total revenue) include

finished dosages business in India and UAE. It comprises Indian domestic

formulations. The company owns 80+ brands encompassing therapies

like diabetology, oncology, nephrology, cardiology, immunotherapy, etc.

Biosimilar deals, approvals, launches to sustain investors interest

As expected, the beginning of FY19 was on a strong footing mainly due

to continuous strong traction in its “growth segments” (Biologics and

Syngene). The management has sounded confident on achieving US$200

million sales from the Biologics segment by FY19. Progress in biosimilar

approvals/launches in developed markets is also promising. Although

these approvals do not imply immediate launch of the product in these

regions, it endorses the development and manufacturing capabilities of

Biocon in the realm of biosimilars. Progress on the biosimilars regulatory

front in developed markets and launches in the developed as well as

emerging markets are likely to maintain investors optimism for the

company. We continue to value the stock on SOTP basis. Accordingly, we

arrive at a target price of | 740 per share.

Rating matrix

Rating : Buy

Target : | 740

Target Period : 12 months

Potential Upside : 25%

What’s Changed?

Target Unchanged

EPS FY19E Changed from | 9.3 to | 8.8

EPS FY20E Changed from | 14 to | 13.3

Rating Unchanged

Quarterly Performance

Q1FY19 Q1FY18 YoY (%) Q4FY18 QoQ (%)

Revenue 1,123.8 933.7 20.4 1,169.5 -3.9

EBITDA 237.9 192.1 23.8 233.0 2.1

EBITDA (%) 21.2 20.6 60 bps 19.9 125 bps

Net Profit 119.8 81.3 47.4 130.4 -8.1

Key Financials

(| Crore) FY17 FY18 FY19E FY20E

Revenues 3921.6 4129.7 5072.8 6206.4

EBITDA 851.2 829.1 1154.9 1506.8

Adj. Net Profit 508.7 372.4 530.8 797.1

Adj. EPS (|) 8.5 6.2 8.8 13.3

Valuation summary

FY17 FY18 FY19E FY20E

PE(x) 57.8 95.1 66.7 44.4

EV to EBITDA (x) 10.5 7.2 9.4 12.5

Price to book (x) 9.4 8.1 10.9 14.2

RoNW (%) 41.4 42.7 31.0 23.8

RoCE (%) 9.4 8.1 10.9 14.2

Stock data

Particular

Market Capitalisation

Debt (FY18)

Cash (FY18)

EV

52 week H/L 697/318

Equity capital (|Crore)

Face value (|) | 5

| 300 crore

| 35997 crore

Amount

| 35400 crore

| 1920 crore

| 1323 crore

Price performance (%)

1M 3M 6M 1Y

Biocon -12.2 -15.7 -7.9 38.6

Glenmark -4.8 0.5 -10.3 -19.3

Torrent Pharma 2.4 7.5 6.2 18.1

Aurobindo Pharma -4.2 -7.5 -8.8 -21.8

Research Analyst

Siddhant Khandekar

[email protected]

Mitesh Shah

[email protected]

Biocon (Biocon) | 590

ICICI Securities Ltd | Retail Equity Research Page 2

Variance analysis

Q1FY19 Q1FY19E Q1FY18 Q4FY18 YoY (%) QoQ (%) Comments

Revenue 1,123.8 1,213.9 933.7 1,169.5 20.4 -3.9 YoY growth was mainly due to 36% growth in Biologics segment and 40% YoY

growth in contract research. Miss in I-Direct estimates mainly due to inter

segment revenue adjustments

Raw Material cost 433.8 475.6 365.8 475.2 18.6 -8.7

Employee cost 261.4 273.1 213.3 257.0 22.6 1.7 Increased mainly due to commissioning of Malaysian facility

R & D Expenditure 44.0 55.2 58.2 51.0 -24.4 -13.7 Higher capitalisation during the quarter

Other Expenditures 146.7 159.1 104.3 153.3 40.7 -4.3

Total Expenditure 885.9 963.0 741.6 936.5 19.5 -5.4

EBITDA 237.9 250.8 192.1 233.0 23.8 2.1

EBITDA (%) 21.2 20.7 20.6 19.9 60 bps 125 bps YoY improvement mainly due to lower R&D spend

Interest 17.6 10.7 16.1 16.9 9.3 4.1 Increased mainly due to commissioning of Malaysian facility

Depreciation 99.1 110.4 98.8 95.3 0.3 4.0 Increased YoY mainly due to commissioning of Malaysian facility

Other income 68.8 60.7 54.0 67.5 27.4 1.9 Includes | 39 crore of forex gains against | 17 crore of forex gains in Q1FY18

EO 0.0 0.0 0.0 0.0 0.0 0.0

PBT 190.0 190.5 131.2 188.3 44.8 0.9

Tax 52.1 41.9 37.6 40.7 38.6 28.0

MI 18.6 26.0 16.4 22.3 13.4 -16.6

PAT 119.8 127.6 81.3 130.4 47.4 -8.1 Delta vis-à-vis EBITDA due to higher other income and lower Interest and

depreciation. Miss vis-à-vis I-Direct estimates mainly due to cascading effect of

lower-than-expected revenues

Key Metrics

Small Molecules 395.0 397.8 355.2 424.0 11.2 -6.8 YoY growth was largely driven by sales of key APIs including immunosuppressants

and generic formulations

Biologics 250.0 239.1 183.9 241.0 35.9 3.7 YoY growth was largely driven by higher sales of biosimilar monoclonal antibodies

(mAbs) in emerging markets, supported by Insulins business

Branded Formulations 147.0 150.0 130.4 149.0 12.7 -1.3 YoY growth was mainly due to lower base and volume gain in existing products

Contract Research 406.0 425.0 291.1 409.0 39.5 -0.7 YoY growth mainly on the back of 1) | 40 crore of one-off raw material pass

through 2) traction in biologics manufacturing, discovery services and chemical

development services, 3) lower base of Q1FY18 (fire incident impact) and 4)

favourable currency movement

Licensing income 5.0 2.0 7.7 2.0 -35.1 150.0

Source: Company, ICICI Direct Research

Change in estimates

(| Crore) Old New % Change Old New % Change

Revenues 5,148.9 5,072.8 -1.5 6,115.5 6,206.4 1.5

EBITDA 1,204.4 1,154.9 -4.1 1,583.8 1,506.8 -4.9

EBITDA Margin (%) 23.4 22.8 -63 bps 25.9 24.3 -162 bps Changed as per management guidance

Net Profit 558.2 530.8 -4.9 839.2 797.1 -5.0 Changed mainly in sync with EBITDA

EPS (|) 9.3 8.8 -4.9 14.0 13.3 -5.1

FY19E FY20E


Assumptions

Current

Growth (%) FY17 FY18 FY19E FY20E FY19E FY20E

Small Molecules 1,607.5 1,484.9 1,582.0 1,708.6 1,584.8 1,711.6

Biologics 622.5 770.2 1,139.4 1,652.1 1,075.7 1,506.0 Changed mainly due to strong traction from emerging markets and launches of

biosimilars in developed markets

Branded Formulations 548.9 611.5 673.8 774.8 676.7 778.2

Contract Research 1,192.7 1,423.1 1,736.8 2,051.0 1,779.9 2,101.8

Earlier

Source: Company, ICICI Direct Research; * excludes Licensing income


Company Analysis

Biocon was established in 1978 by first generation entrepreneur Dr Kiran

Mazumdar-Shaw. Unlike most pharma companies that are chemical

based, Biocon has carved out its niche in the more complex

biotechnology field. Over the decades, Biocon has successfully evolved

into an emerging global biopharma enterprise, serving its partners and

customers in over 75 countries. As a fully integrated biopharma company,

it delivers innovative biopharmaceutical solutions, ranging from discovery

to development & commercialisation. In 2004, it came out with its maiden

IPO.

Four of its biosimilar products (Trastuzumab, Pegfilgrastim, Adalimumab

and Insulin Glargine) have already reached the critical milestone of global

Phase III clinical trials. The company has initiated filings of biosimilars in

the US and EU besides launches in Japan. It has entered into a

partnership with Mylan for six biosimilar programs (Trastuzumab,

Pegfilgrastim, Adalimumab, Bevacizumab, Etanercept and Filgrastim) and

three insulin analog programmes (Glargine, Lispro and Aspart).

The company has received approval for its Insulin Glargine from the

Japanese regulator in March 2016. It has developed and manufactured

Insulin Glargine BS Injection Kit (FFP). FFP in Japan has commercialised it.

The company also achieved its first ANDA approval, Rosuvastatin

Calcium in US.

Recently, the company also entered into a partnership with Sandoz, a

Novartis division and a global leader in biosimilars, for an exclusive

portfolio of next-generation biosimilars in the area of immunology and

oncology. This synergistic partnership will leverage the capabilities of

both partners for an ‘end to end’ play encompassing development,

manufacturing, regulatory approval and commercialisation globally. This

collaboration addresses some of the long term biosimilars opportunities

beyond the near term opportunities being addressed by existing

partnership with Mylan.

Exhibit 1: Biosimilars: Insulin pipeline

Molecule Type Status

Rh Insulin Regular Acting Insulin Pre-clinical (US), Marketed EM

Glargine Long Acting Insulin Global Phase III, Aprroved & launched in Japan

Aspart Rapid Acting Insulin Analog Global Phase I

Lispro Rapid Acting Insulin Analog Preclinical

Total Market Size


Exhibit 2: Biosimilars: MAbs & biologics pipeline

Molecule Indication Status

Adalimumab Chronic Plaque Psoriasis Global Phase III completed

Trastuzumab mBreast Cancer Aproved in US, UR in EU

Pegfilgrastim Chemo-induced Neutropenia Aprroved & launched in US, UR in EU

Bevacizumab mColorectal Cancer Global Phase III, RoW Phase III

Filgrastim Chemo-induced Neutropenia Preclinical/Scale Up

Etanercept Auto-immune Preclinical/Scale Up

Total Market Size



Exhibit 3: Revenues to grow at CAGR of 22.6% in FY18-20E

2485.3

2877.33089.8

3381.0

3921.64129.7

5072.8

6206.4

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E

Revenues(|

crore)


Biocon has realigned its segments after the adoption of Ind-As. They are-

1) small molecules, 2) research services (Syngene), 3) branded

formulations and 4) biologics.

Small molecules- Small molecules (35% of FY18 total revenue) comprise

APIs like statins, immunosuppressants, specialty APIs & also include

generic formulations business witness steep pricing pressure. The

company is exploring fewer opportunities but with higher profitability in

this segment like moving into formulations & filing own ANDAs, 505 (b)(2)

filing, etc. It has already filed few ANDAs, which include complex generics

& injectables. We expect small molecules segment to grow at a CAGR 7%

CAGR to | 1709 crore in FY18-20E.

Biologics – The biologics segment includes novel biologics and

biosimilars, including Rh-insulin, insulin analogs, monoclonal antibodies

and recombinant proteins. This segment accounts for ~18% of FY18 total

revenue. Biocon is mainly focusing on the following therapies-

diabetology, oncology and immunology. This segment has been

specifically carved out to tap numerous biosimilar opportunities

especially in the next three to five years. Globally, the biosimilar space is

still in a nascent state for want of guidelines by most countries including

the US. The now defunct Pfizer deal was also based on biosimilar

opportunities. Biocon’s biosimilar pipeline currently includes 10 products

in different phases of completion. Out of these 10 products, the four

diabetic products- Rh Insulin, Glargine, Lispro and Aspart were the

subject matter of two deals first with Pfizer and then with Mylan

(excluding Rh Insulin). In Q3, Biocon secured its first ever biosimilar

approval (gTrastuzumab) by an Indian pharma company in the US.

Although Trastuzumab approval does not imply immediate launch of the

product in the US, it endorses the development and manufacturing

capabilities of Biocon in the realm of biosimilars. The company has also

announced a second partnership in the biosimilar space with Sandoz for

global development of next generation biosimilars. The company has

invested heavily in this space over the last two to three years, especially

the Malaysian facility, which is now functional. The progress, so far, has

been encouraging with launches in emerging markets, Glargine launch in

Japan and filing arrangements in the EU and the US. We expect biologics

to grow at a CAGR of 46.5% to | 1652 crore in FY18-20E.

10.7% CAGR

22.6% CAGR


Exhibit 4: Recent Progress on the biosimilars front

Date Event

Jun-18 Mylan entered in to a commercialization agreement with Lupin for biosimilar Etanercept for certain markets. Biocon has retains its economic interest in this

arrangement vis-a -vis Mylan in accordance with its existing collaboration agreement and would benefit from the accelerate commercialization of this product

Apr-18 Biocon/Mylan have in-licensed Humira biosimilar from Fujifilm and expects to launch in Europe in H2CY18

Mar-18 Mylan and Biocon receive approval for Semglee Biosimilar Insulin Glargine in EU and Australia

Jan-18 Collaborates with Sandoz for a global partnership to develop, manufacture and commercialize a number of next generation biosimilars

Dec-17 USFDA approval for Ogivri, a biosimilar Trastuzumab co-developed by Biocon and Mylan

Jul-17 Biocon's partner Fujifilm launches insulin Glargine in Japan

Jul-17 USFDA Oncologic Drugs Advisory Committee (ODAC) recommended approval of Biocon-Mylan's proposed biosimilar Trastuzumab in all eligible indications

Jan-17 USFDA accepts Biocon’s biologics licence application for its biosimilar oncology drug Trastuzumab

Aug-16 European Medicines Agency has accepted Biocon-Mylan Proposed Biosimilar Trastuzumab (gHerceptin) for Review

Jul-16 European Medicines Agency has accepted Biocon-Mylan Proposed Biosimilar Pegfilgrastim (gNeulasta) for Review

Jul-16 Biocon's Insulin Glargine Launched in Japan

Jun-16 Biocon and Mylan to present Phase 3 Trastuzumab Biosimilar Data at the American Society of Clinical Oncology (ASCO) Annual Meeting

Mar-16 Biocon's Insulin Glargine Receives Regulatory Approval in Japan

Mar-16 Biocon inks co-development & commercialisation agreement with Lab PiSA for Rh-insulin in US

May-15 Biocon-Mylan's PEG-G-CSF and Adalimumab enter Phase III clinical trials; patient recruitment for one Insulin Glargine Phase III study completed


Exhibit 5: Small molecules & biologics to grow at CAGR of 22% in FY18-20E

1503.7

1732.0 1765.0 1729.0

2230.0 2256.1

2721.4

3360.6

0

500

1000

1500

2000

2500

3000

3500

4000


(|

crore)

Small Molecules+Biologics


Branded formulations - It comprises India and UAE formulations. Biocon

owns 80+ brands encompassing seven therapeutic segments viz.

diabetology, oncology, nephrology, cardiology, immunotherapy,

comprehensive care and bio-products. However, with ~0.35% market

share (AIOCD MAT March 2018) and 56th rank in the IPM market (AIOCD),

the company is still a marginal player in the Indian context. Among

therapies, diabetology is the largest therapy, which accounts for 58% of

branded formulations. Some of its unique launches are INSUPen (insulin

delivery device), Biomab (novel biologic for oncology) and Alzumab

(novel biologic for psoriasis). The list includes CANMAb (biosimilar

version of oncology product Herceptin). This segment constitutes ~14%

of total revenue (FY18).

8.5% CAGR

22.2% CAGR


Exhibit 6: Branded formulation sales to grow at CAGR of 13% in FY18-20E

347.9

391.4430.0 440.0

548.9

611.5

673.8

774.8

0

100

200

300

400

500

600

700

800

900


(|

crore)

Branded Formulations


Research services (Syngene) - Biocon’s research arm Syngene

contributed ~33% to FY18 total revenue. This is the CRO business of

Biocon, which deploys over 3500 scientists (FY18). The company

provides end-to-end discovery and development services for novel

molecular entities (NMEs) across industrial sectors including

pharmaceutical, biotechnology, agrochemicals, consumer health, animal

health, cosmetic and nutrition companies under one roof with a

distinctive economic advantage. It also provides support for biosimilar

and generic molecules development. The company provides variable cost

alternative like full-time equivalent (FTE) and fee-for-service (FFS) to the

traditionally fixed cost, in-house, resource intensive business model of

R&D focused organisations. Currently, the company has 316 clients

ranging from large multinational corporations to start-ups, including eight

of the top 10 global pharmaceutical companies. The company has

developed long-term relationships and has multi-year contracts with its

clients, including four long-duration multidisciplinary partnerships with

Bristol-Myers Squibb (BMS), Herbalife, Baxter International and Amgen.

This segment has consistently been growing at double digit and has

recently been the major growth driver for the company as the biopharma

segment is slowing down. We expect revenues to grow at a CAGR of 20%

to | 2051 crore in FY18-20E.

Research services revenues (FY18)

Dedicated,

35%

Discovery,

25%

Development,

40%

11.9% CAGR

12.6% CAGR


Exhibit 8: Trends in overall R&D cost (ex-capitalisation)

167.8

130.6

168.8

265.5 272.4

215.8227.3

290.9

6.8

4.5

5.5

7.9

6.9

5.2

4.7

4.5

0

100

200

300

400


(|

crore)

3.0

4.5

6.0

7.5

9.0

(%

)

R & D cost R & D cost (% revenues)


Exhibit 9: Trends in EBITDA margins

543.0

687.1 695.8635.8

851.2 829.1

1154.9

1506.8

23.9

22.5

18.8

21.7

21.8

20.1 22.8

24.3

0

400

800

1200

1600


(|

crore)

18

20

22

24

26

(%

)

EBITDA EBITDA Margins (%)


Exhibit 7: Contract research to grow at CAGR of 20% in FY18-20E

558.0

714.7822.0

1060.0

1192.7

1423.1

1736.8

2051.0

0

500

1000

1500

2000

2500


(|

crore)

Contract Research


20.6% CAGR

20.0% CAGR


Exhibit 10: Net profit to grow at CAGR of 50% in FY18-20E

508.9

413.8

497.4550.4

612.1

372.4

530.8

797.1

14.4

20.516.1 16.3

15.6 9.0

10.5

12.8

0

200

400

600

800

1000

1200


(|

crore)

4

6

8

10

12

14

16

18

20

22

(%

)

Net Profit Net Profit Margins (%)


Exhibit 11: Return ratios likely to improve on the back of better profitability…

11.9

10.4

6.5

9.4

8.1

10.9

11.7

14.2

12.6

13.7

12.5

7.8

10.5

7.2

9.4

12.5

6

10

14

18

22


(%

)

4

6

8

10

12

14

16

(%

)

RoCE (RHS) RoNW (LHS)


SWOT Analysis

Strengths – It is an early entrant in the more lucrative biotech space with a

proven track record. The space has high entry barriers due to complexity

of the molecules and tougher trials requirement. Four dedicated centres

catering to the top global players.

Weakness - Its largest segment i.e. small molecules has been witnessing

constant pricing pressure and capacity constraints.

Opportunities – A huge opportunity beckons for biosimilars as globally

seven out of the top 10 drug brands are biologics. Some of them will lose

patent exclusivity in the next five to seven years. The price erosion in

biosimilars is much less than that of chemical compound based drugs.

Threats- (i) Backtracking by Mylan may increase the R&D cost sharply, (ii)

pricing pressure in branded formulations, (iii) increased scrutiny by

USFDA and other regulators worldwide.


Exhibit 12: Trends in quarterly performance

(| Crore) Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 YoY (%) QoQ(%)

Revenues 813.9 796.2 807.1 945.0 992.0 954.1 1044.4 931.1 933.7 968.6 1057.9 1169.5 1123.8 20.4 -3.9

Raw Material Cost 293.9 326.3 303.1 322.6 400.2 353.8 374.7 348.4 365.8 377.6 423.8 475.2 433.8 18.6 -8.7

% to revenues 36.1 41.0 37.6 34.1 40.3 37.1 35.9 37.4 39.2 39.0 40.1 40.6 38.6

Gross Profit 520.0 469.9 504.0 622.4 591.8 600.3 669.7 582.7 567.9 591.0 634.1 694.3 690.0 21.5 -0.6

Gross Profit Margin (%) 63.9 59.0 62.4 65.9 59.7 62.9 64.1 62.6 60.8 61.0 59.9 59.4 61.4 58 bps 203 bps

Employee cost 148.3 143.1 152.2 166.5 178.5 180.4 194.2 193.9 213.3 225.5 235.3 257.0 261.4 22.6 1.7

% to revenues 18.2 18.0 18.9 17.6 18.0 18.9 18.6 20.8 22.8 23.3 22.2 22.0 23.3 42 bps 129 bps

R & D 50.0 57.4 67.9 100.0 51.4 65.0 85.0 65.0 58.2 53.9 52.9 51.0 44.0

% to revenues 6.1 7.2 8.4 10.6 5.2 6.8 8.1 7.0 6.2 5.6 5.0 4.4 3.9 -232 bps -45 bps

Other Expenditure 113.4 100.3 99.1 159.0 98.8 114.9 114.4 136.3 104.3 129.3 124.2 153.3 146.7 40.7 -4.3

% to revenues 13.9 12.6 12.3 16.8 10.0 12.0 11.0 14.6 11.2 13.3 11.7 13.1 13.1 188 bps -5 bps

Total Expenditure 605.6 627.1 622.3 748.1 728.9 714.1 768.3 743.6 741.6 786.3 836.2 936.5 885.9 19.5 -5.4

% to revenues 74.4 78.8 77.1 79.2 73.5 74.8 73.6 79.9 79.4 81.2 79.0 80.1 78.8

EBIDTA 208.3 169.1 184.8 196.9 263.1 240.0 276.1 187.5 192.1 182.3 221.7 233.0 237.9 23.8 2.1

EBITDA Margin (%) 25.6 21.2 22.9 20.8 26.5 25.2 26.4 20.1 20.6 18.8 21.0 19.9 21.2 60 bps 125 bps

Depreciation 59.0 61.0 63.9 64.8 66.1 68.3 70.3 72.5 98.8 93.6 97.4 95.3 99.1 0.3 4.0

Interest 4.4 2.9 1.5 16.6 5.7 6.5 8.8 5.0 16.1 13.8 14.7 16.9 17.6 9.3 4.1

OI 19.9 22.7 21.6 21.4 40.9 38.4 47.5 43.2 54.0 50.8 33.9 67.5 68.8 27.4 1.9

PBT 164.8 127.9 141.0 136.9 232.2 203.6 244.5 153.2 131.2 125.7 143.5 188.3 190.0 44.8 0.9

Tax 37.6 28.2 21.8 59.1 55.2 41.7 54.4 10.3 37.6 42.5 36.1 40.7 52.1 38.6 28.0

Tax Rate (%) 22.8 22.1 15.5 43.2 23.8 20.5 22.2 6.7 28.7 33.8 25.2 21.6 27.4

PAT 127.2 99.7 119.2 77.8 177.0 161.9 190.1 142.9 93.6 83.2 107.4 147.6 137.9 47.3 -6.6

PAT Margin (%) 15.6 12.5 14.8 8.2 17.8 17.0 18.2 15.3 10.0 8.6 10.2 12.6 12.3

Exceptional Items (EI) 0.0 107.8 0.0 -268.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Net Profit before MI 127.2 -8.1 119.2 346.2 177.0 161.9 190.1 142.9 93.6 83.2 107.4 147.6 137.9 47.3 -6.6

Add/(less) MI 7.1 12.5 17.7 21.1 15.8 19.8 19.5 20.9 16.4 20.3 21.7 22.3 18.6

Net Profit after MI 120.1 -20.6 101.5 325.1 161.2 142.1 170.6 122.0 77.2 62.9 85.7 125.3 119.3 54.5 -4.8

Net Profit (excl.EI) 120.1 87.2 101.5 56.7 161.2 142.1 170.6 122.0 77.2 62.9 85.7 125.3 119.3 54.5 -4.8



Conference call highlights

The management has reiterated FY19 Biologics sales guidance of

US$200 million

EU approvals for Trastuzumab and Pegfilgrastim (both oncology)

are expected by 2018 end

Insulin Glargine launch in EU is also likely to be by 2018 end

The management expects R&D trajectory (gross) to remain at

| 450-500 crore. With Q1 gross R&D at | 88 crore, the remaining

three quarters are expected to witness a significant ramp-up

R&D expenses during the quarter include some component

pertaining to Sandoz deal

During the quarter, the company launched Pegfilgrastim (branded

as Fulphila) in the US in partnership with Mylan. The profit sharing

for the same will be reflected in the subsequent quarter

Fulphila has been offered at 33% discount to the reference price

in the US

The management expects to complete clinical trials for Insulin

Glargine in the US by the end of 2018. The 30-month stay on the

same pertaining to a litigation is till March 2020

The EIR from the USFDA for Bengaluru facility includes clearance

for Biologics and drug substance facility

The management expects the Malaysia facility to achieve break

even during the current fiscal. Operating expenses for this facility

during the quarter were at ~US$50 million

During the quarter, the company has received | 340 crore from

stake sale in Syngene, which was utilised for capex


Valuation

As expected, FY19 began on a strong footing mainly due to continuous

strong growth in its growth segments (Biologics, Syngene). The

management is confident of achieving US$200 million sales from

biologics segment by FY19. Progress in biosimilar approvals/launches in

developed markets is also remarkable. Although these approvals do not

imply immediate launch of the product in these regions, it endorses the

development and manufacturing capabilities of Biocon in the realm of

biosimilars. Progress on the biosimilars regulatory front in developed

markets and launches in the developed as well as emerging markets are

likely to maintain investors optimism for the company. We continue to

value the stock on an SOTP basis. Accordingly, we arrive at a target price

of | 740 per share.

Exhibit 13: Valuation

Particulers FY20E EPS (| cr) Multiple (x) Per share (| )

Biocon (ex Syngene) 7.7 36.0 275.9

Syngene

Targeted Market Cap 13700

Biocon's Holding 71.7%

Holding Company Discount 20.0%

Syngene valuation 7853

Per share valuation 131

NPV (BIosimilars) 331

SOTP valuation 740

Source: ICICI Direct Research


Exhibit 14: One year forward PE

0.0

100.0

200.0

300.0

400.0

7/1

0/2

01

2

1/1

0/2

01

3

7/1

0/2

01

3

1/1

0/2

01

4

7/1

0/2

01

4

1/1

0/2

01

5

7/1

0/2

01

5

1/1

0/2

01

6

7/1

0/2

01

6

1/1

0/2

01

7

7/1

0/2

01

7

1/1

0/2

01

8

7/1

0/2

01

8

(|)

Series1 46.7x 35.6x 17.2x 9.8x 2.4x

[

Exhibit 15: One year forward PE of company vs. CNX Pharma Index

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.007/10/201

2

1/10/201

3

7/10/201

3

1/10/201

4

7/10/201

4

1/10/201

5

7/10/201

5

1/10/201

6

7/10/201

6

1/10/201

7

7/10/201

7

1/10/201

8

7/10/201

8

(x)

Biocon CNX Pharma


Exhibit 16: Valuation

Revenues Growth EPS Growth P/E EV/EBITDA RoNW RoCE

(| crore) (%) (|) (%) (x) (X) (%) (%)

FY17 3922 16.0 8.5 61.6 57.8 41.4 10.5 9.4

FY18E 4130 5.3 6.2 -26.8 95.1 42.7 7.2 8.1

FY19E 5073 22.8 8.8 42.5 66.7 31.0 9.4 10.9

FY20E 6206 22.3 13.3 50.2 44.4 23.8 12.5 14.2



Recommendation history vs. Consensus

0

100

200

300

400

500

600

700

800

Jul-18May-18Feb-18Dec-17Sep-17Jul-17May-17Feb-17Dec-16Sep-16Jul-16May-16Feb-16Dec-15Sep-15Jul-15

(|

)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

(%

)

Price Idirect target Consensus Target Mean % Consensus with BUY

Source: Reuters, Company, ICICI Direct Research

Key events

Date Event

Jul-15 Syngene IPO starts from July 27, 2015 at a price range of | 240-250

Oct-15 Acquired API unit of Acacia Life Sciences Private Limited at Vizag

Jun-16 Biocon and Mylan to Present Phase 3 Trastuzumab Biosimilar Data at the American Society of Clinical Oncology (ASCO) Annual Meeting

Jul-16 Biocon's Insulin Glargine launched in Japan

Jul-16 European Medicines Agency accepts Biocon-Mylan proposed biosimilar Pegfilgrastim (gNeulasta) for review

Aug-16 European Medicines Agency accepts Biocon-Mylan proposed biosimilar Trastuzumab (gHerceptin) for review

Jan-17 USFDA accepts Biocon’s biologics licence application for its biosimilar oncology drug Trastuzumab

Jul-17 USFDA Oncologic Drugs Advisory Committee (ODAC) recommends approval of Biocon/Mylan’s proposed biosimilar Trastuzumab, a biologically similar version

of Roche's breast-cancer drug Herceptin

Dec-17 USFDA approval for Ogivri, a biosimilar Trastuzumab co-developed by Biocon and Mylan

Jan-18 Collaborates with Sandoz for a global partnership to develop, manufacture and commercialize a number of next generation biosimilars

Mar-18 Mylan and Biocon receive approval for Semglee Biosimilar Insulin Glargine in EU and Australia

Apr-18 Biocon/Mylan have in-licensed Humira biosimilar from Fujifilm and expects to launch in Europe in H2CY2018

Jun-18 USFDA Approves Mylan and Biocon’s Fulphila (pegfilgrastim-jmdb), the First Biosimilar to Neulasta

Jun-18 The company has received an Establishment Inspection Report (EIR) from the USFDA for its Sterile Drug Product manufacturing facility in Bangalore

Jun-18 Mylan entered in to a commercialization agreement with Lupin for biosimilar Etanercept for certain markets. Biocon has retains its economic interest in this

arrangement vis-a -vis Mylan in accordance with its existing collaboration agreement and would benefit from the accelerate commercialization of this product

Jul-18 Biocon has received the EU GMP certification for its Sterile Drug Product manufacturing facility in Bangalore, which was inspected in March 2018


Top 10 Shareholders Shareholding Pattern

Rank Investor Name Latest Filing Date % O/S Position Position Change

1 Shaw (Kiran Mazumdar) 30-Jun-18 43.1 258.8m 10.5

2 Glentec International 30-Jun-18 19.8 118.6m 0.0

3 OppenheimerFunds, Inc. 30-Jun-18 4.3 25.9m 0.0

4 Biocon India Ltd Employee Welfare Trust 19-Jun-18 1.5 9.0m 0.0

5 Franklin Templeton Asset Management (India) Pvt. Ltd. 31-May-18 1.3 7.7m 0.3

6 Jupiter Asset Management Ltd. 30-Jun-18 1.2 6.9m 0.1

7 Templeton Asset Management Ltd. 31-Mar-18 1.1 6.7m -0.1

8 Chandavarkar (Arun Suresh) 30-Jun-18 1.1 6.6m 0.0

9 Suresh (Arun) 31-Mar-18 1.1 6.6m 6.6

10 Aditya Birla Sun Life AMC Limited 30-Jun-18 0.9 5.2m 0.0

(in %) Jun-17 Sep-17 Dec-17 Mar-18 Jun-18

Promoter 60.7 60.7 60.7 60.7 60.7

Public 39.3 39.3 39.3 39.3 39.3

Source: Reuters, ICICI Direct Research

Recent Activity

Investor Name Value ($ mn) Shares Investor Name Value ($ mn) Shares

Shaw (Kiran Mazumdar) 94.91 10.49 Fidelity International -18.86 -2.24

Suresh (Arun) 60.16 6.60 BlackRock Institutional Trust Company, N.A. -18.93 -1.92

Norges Bank Investment Management (NBIM) 7.90 0.94 Aberdeen Asset Management (Asia) Ltd. -4.67 -0.47

Kotak Mahindra Asset Management Company Ltd. 8.29 0.84 Causeway Capital Management LLC -2.38 -0.28

Reliance Nippon Life Asset Management Limited 5.98 0.66 BlackRock Asset Management Ireland Limited -2.67 -0.27

BUYS SELLS

Source: Reuters, ICICI Direct Research


.

Financial summary

Profit and loss statement | Crore

Year-end March FY17 FY18 FY19E FY20E

Total Operating Income 3921.6 4129.7 5072.8 6206.4

Growth (%) 16.0 5.3 22.8 22.3

Raw Material Expenses 1477.1 1642.4 1971.6 2397.6

Employee Expenses 747.0 931.1 1108.9 1295.8

R&D Expenditure 272.4 215.8 227.3 290.9

Other Expenditures 573.9 511.3 610.1 715.3

Total Operating Expenditure 3070.4 3300.6 3917.9 4699.6

Operating Profit (EBITDA) 851.2 829.1 1154.9 1506.8

Growth (%) 33.9 -2.6 39.3 30.5

Depreciation 277.2 385.1 429.3 477.8

Interest 26.0 61.5 54.1 42.6

Other Income 157.1 206.2 147.8 186.2

PBT before Exceptional Items 705.1 588.7 819.4 1172.6

Less: Exceptional Items -128.3 0.0 0.0 0.0

Total Tax 161.6 156.9 190.6 258.0

PAT before MI 671.8 431.8 628.8 914.6

Minority Interest 76.0 80.7 100.0 125.5

Adjusted PAT 508.7 372.4 530.8 797.1

Growth (%) 61.6 -26.8 42.5 50.2

EPS (Adjusted) 8.5 6.2 8.8 13.3


Cash flow statement | Crore


Profit/(Loss) after taxation 612.1 453.1 530.8 797.1

Add: Depreciation & Amortization 277.2 385.1 429.3 477.8

Net Increase in Current Assets -380.8 -248.7 -318.3 -473.1

Net Increase in Current Liabilities 310.4 128.4 215.3 302.5

Other Operating Activities 26.0 -55.8 54.1 42.6

CF from operating activities 844.9 662.1 911.1 1146.8

(Increase)/Decrease in Investments -394.0 168.9 0.0 0.0

(Purchase)/Sale of Fixed Assets -632.2 -913.1 -1100.0 -1100.0

Increase/ (Decrease) in Minority Interest 110.3 0.0 -93.1 0.0

Other Investing Activities -65.2 600.3 -42.0 -26.2

CF from investing activities -981.1 -143.9 -1235.1 -1126.2

Proceeds from issues of Equity Shares 0.0 16.8 0.0 0.0

Inc/(dec) in loan funds -261.9 -114.1 -300.0 -200.0

(Payment) of Dividend and Dividend Tax -70.2 -78.7 -53.4 -79.7

Interest Paid -26.0 -63.7 -54.1 -42.6

Other Financing Activities 0.0 0.0 0.0 0.0

CF from financing activities -358.1 -239.7 -407.4 -322.3

Net Cash flow -494.3 278.5 -731.5 -301.6

Opening Cash 1538.6 1044.3 1322.8 591.3

Closing Cash 1044.3 1322.8 591.3 289.7

Free Cash Flow 212.7 -251.0 -188.9 46.8


Balance sheet | Crore


Liabilities

Equity Capital 100.0 300.0 300.0 300.0

Reserve and Surplus 4737.7 4880.8 5358.2 6075.6

Total Shareholders funds 4837.7 5180.8 5658.2 6375.6

Total Debt 2205.4 1920.1 1620.1 1420.1

Minority Interest 376.1 467.7 374.6 374.6

Other NCL & LT Provisions 393.9 410.1 392.3 392.3

Source of Funds 7813.1 7978.7 8045.1 8562.5

Assets

Gross Block - Fixed Assets 5409.7 5847.4 6772.4 7963.3

Accumulated Depreciation 1811.0 2174.3 2603.6 3081.4

Net Block 3598.7 3673.1 4168.8 4881.9

Capital WIP 839.2 1302.8 1477.8 1386.9

Total Fixed Assets 4437.9 4975.9 5646.6 6268.8

Goodwill on Consolidation 26.4 26.4 26.4 26.4

Investments 1382.7 675.2 675.2 675.2

Inventory 635.3 722.5 849.8 1039.7

Debtors 883.2 1063.9 1251.3 1531.0

Cash 1044.3 1322.8 591.3 289.7

Other Current Assets 419.9 428.0 431.6 435.2

Total Current Assets 2982.7 3537.2 3124.0 3295.5

Creditors 739.7 1005.3 1182.4 1446.6

Provisions 46.8 46.5 76.7 106.8

Other Current Liabilities 698.2 959.2 967.2 975.2

Total Current Liabilities 1484.7 2011.0 2226.3 2528.7

Net Current Assets 1498.0 1526.2 897.7 766.8

Deferred Tax Assets 190.6 193.4 212.7 234.0

Other Non Current assets 277.5 581.6 586.4 591.3

Application of Funds 7813.1 7978.7 8045.1 8562.5


Key ratios


Per share data (|)

Reported EPS 10.2 6.2 8.8 13.3

BV per share 80.6 86.3 94.3 106.3

Dividend per share 1.2 0.5 0.9 1.3

Cash Per Share 17.4 22.0 9.9 4.8

Operating Ratios (%)

Gross Margin 62.3 60.2 61.1 61.4

EBITDA margin 21.7 20.1 22.8 24.3

EBIT Margin 14.6 10.8 14.3 16.6

PAT Margin 13.0 9.0 10.5 12.8

Inventory days 59.1 63.9 61.1 61.1

Debtor days 82.2 94.0 90.0 90.0

Creditor days 68.8 88.9 85.1 85.1

Asset Turnover 0.5 0.5 0.6 0.7

EBITDA Conversion Ration 99.3 79.9 78.9 76.1

Return Ratios (%)

RoE 10.5 7.2 9.4 12.5

RoCE 9.4 8.1 10.9 14.2

RoIC 13.1 9.8 14.2 17.1

Valuation Ratios (x)

P/E 57.8 95.1 66.7 44.4

EV / EBITDA 41.4 42.7 31.0 23.8

EV / Net Sales 9.0 8.6 7.1 5.8

Market Cap / Sales 9.0 8.6 7.0 5.7

Price to Book Value 7.3 6.8 6.3 5.6

Solvency Ratios

Debt / EBITDA 2.6 2.3 1.4 0.9

Debt / Equity 0.5 0.4 0.3 0.2

Current Ratio 1.3 1.1 1.1 1.2

Quick Ratio 0.9 0.7 0.8 0.8



ICICI Direct coverage universe (Healthcare)

Company I-Direct CMP TP Rating M Cap

Code (|) (|) (| Cr) FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E FY17 FY18E FY19E FY20E

Ajanta Pharma AJAPHA 1044 1,190 Hold 9185.3 57.4 53.0 46.4 59.6 18.2 19.7 22.5 17.5 42.3 31.0 23.3 24.8 33.7 23.8 18.0 19.7

Alembic Pharma ALEMPHA 558 460 Hold 10510.7 21.2 21.9 22.6 25.5 26.3 25.5 24.7 21.9 25.3 17.9 14.6 16.5 21.0 18.5 16.6 16.3

Apollo Hospitals APOHOS 937 1,230 Hold 13040.9 15.9 10.3 23.8 31.6 59.0 91.1 39.4 29.7 6.1 6.8 9.3 10.8 6.0 3.8 8.2 10.0

Aurobindo Pharma AURPHA 582 640 Hold 34120.3 38.8 41.8 36.7 40.7 15.0 13.9 15.9 14.3 24.4 20.5 16.7 16.9 24.2 21.0 15.7 15.0

Biocon BIOCON 590 740 Buy 35400.0 8.5 6.2 8.8 13.3 69.6 95.1 66.7 44.4 9.4 8.1 10.9 14.2 10.5 7.2 9.4 12.5

Cadila Healthcare CADHEA 371 380 Hold 37991.1 14.5 17.5 16.8 19.0 25.5 21.2 22.1 19.5 13.1 17.1 14.7 15.5 21.4 21.5 17.8 17.5

Cipla CIPLA 628 640 Hold 50553.9 12.5 18.3 21.3 26.4 50.2 34.2 29.5 23.8 7.7 9.9 12.0 14.5 8.0 10.8 11.4 12.7

Divi's Lab DIVLAB 1076 1,070 Hold 28556.5 39.9 32.8 41.0 48.6 26.9 32.8 26.2 22.1 25.3 19.8 21.1 21.9 19.8 14.8 16.3 16.9

Dr Reddy's Labs DRREDD 2133 2,170 Hold 35391.4 78.0 57.0 80.3 120.5 27.4 37.4 26.6 17.7 7.3 6.1 7.5 9.3 10.5 7.2 9.4 12.6

Glenmark Pharma GLEPHA 569 500 Hold 16061.0 42.2 28.5 30.4 33.3 13.5 19.9 18.7 17.1 19.5 14.2 13.8 14.0 26.5 15.4 14.2 13.6

Indoco Remedies INDREM 192 190 Hold 1771.1 8.4 4.5 8.2 13.5 23.0 43.0 23.4 14.2 8.7 5.7 8.8 13.9 11.8 6.0 10.2 15.0

Ipca Laboratories IPCLAB 626 760 Buy 9621.1 15.4 19.0 30.4 42.2 40.6 33.0 20.6 14.8 8.7 9.1 13.7 17.2 7.9 9.0 12.9 15.6

Jubilant Life JUBLIF 780 1,090 Buy 12427.1 36.9 41.3 61.2 77.0 21.1 18.9 12.7 10.1 13.8 14.9 18.9 21.1 16.8 16.0 19.4 19.8

Lupin LUPIN 813 760 Hold 36753.3 56.7 13.3 34.0 40.4 14.3 61.3 23.9 20.1 16.6 10.6 11.0 12.6 19.0 4.4 10.4 11.2

Narayana Hrudalaya NARHRU 250 310 Buy 5109.0 4.1 2.5 6.4 9.9 60.5 99.4 39.0 25.2 12.5 6.4 12.7 16.4 8.8 5.1 11.4 15.1

Natco Pharma NATPHA 780 860 Hold 14390.5 26.3 37.7 42.7 27.5 29.6 20.7 18.3 28.3 33.6 27.3 27.3 16.1 29.5 22.6 21.5 12.6

Sun Pharma SUNPHA 555 510 Hold 133255.2 29.0 13.0 18.1 21.6 19.1 42.8 30.6 25.8 20.3 9.8 11.5 12.7 19.0 8.1 10.4 11.2

Syngene Int. SYNINT 577 685 Buy 11538.0 14.4 15.3 17.6 19.6 40.2 37.8 32.8 29.4 16.0 15.9 17.0 17.4 20.3 17.7 17.1 16.1

Torrent Pharma TORPHA 1495 1,420 Hold 25292.8 55.2 40.1 46.5 64.6 27.1 37.3 32.1 23.1 18.9 11.6 13.7 17.4 21.5 13.8 14.3 17.2

RoE (%)EPS (|) PE(x) RoCE (%)



RATING RATIONALE

ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to its

stocks according to their notional target price vs. current market price and then categorises them as Strong

Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is

defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDC,

Andheri (East)

Mumbai – 400 093

[email protected]


ANALYST CERTIFICATION

We /I, Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report

accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or

view(s) in this report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities

Limited is a Sebi registered Research Analyst with Sebi Registration Number – INH000000990. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has

its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which

are available on www.icicibank.com.

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking

and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts

and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and

meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without

prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current.

Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended

temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this

company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This

report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their

receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific

circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate

the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any

loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the

risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to

change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment

in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in

respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned

in the report in the past twelve months.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any

compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts

and their relatives have any material conflict of interest at the time of publication of this report.

It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts of this report have not received any compensation from the companies mentioned in the report in the

preceding twelve months.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month

preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject

company/companies mentioned in this report.

It is confirmed that Siddhant Khandekar CA-INTER, Mitesh Shah MS (Finance) Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,

publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities

described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and

to observe such restriction.

Documents

Biocon (Biocon) | 590 · Biocon’s contract research organisation (CRO) arm Syngene contributes 33% of total revenues. The company caters to 316 clients including eight out of global