Why Biocon Share Price is Falling

Biocon share price is experiencing a similar downward trend as we saw in Paytm shares in the past couple of months. In the past one year, Biocon has tumbled 40%.

This is a massive fall for a company which used to be a part of Nifty 50.

In October 2022, we wrote to you about why Biocon share price was falling and looks like the worst is not over yet for the pharma company.

In this article, we will talk about the latest developments that lead to a 40% crash in Biocon shares.

#1 Block deal effect

On Friday last week 17 March 2023, hedge fund Ahan-I sold 1.5% stake in the Indian pharma company through a block deal.

A block deal is defined as a trade wherein more than 500,000 shares or shares worth a value exceeding Rs. 50 million (m), of a particular company listed on the exchange, are traded. When a company's shares are sold at a discounted price it drags down the company's share price.

Ahan-I sold a 1.5% stake in the company at an average price of Rs 200.7, which was around 10% lower compared to Thursday's trading price. Resultantly on Friday, Biocon's share price closed at Rs 201.8.

#2 USFDA issues continue to hurt Biocon's subsidiary

On 7 January 2023, Biocon said that the US Food and Drug Administration had issued a complete response letter for Biocon Biologics' (subsidiary of Biocon Biologics) application for Insulin-R, a proposed biosimilar for diabetes treatment.

The USFDA issues a complete response letter (CRL) to convey to a company that its initial review of an application is complete and it cannot approve the application in its present form.

In August 2022, the USFDA has carried out a pre-approval inspection of the company's Bengaluru facility. After the inspection, the regulator asked the company to implement a corrective and preventive action plan (CAPA).

In the CRL issued on 07 January 2023, the USFDA said it expects a satisfactory implementation of the said CAPA. The letter also cites that additional data is required in the BLA submission.

Hence, a delay in the approval of the drug, has pushed down Biocon shares.

#3 Poor quarterly results

For the quarter that ended 31 December 2022, the company reported total sales of Rs 22,968 million (m), which is 24% higher sequentially and 3% higher on a YoY basis. But it's the profit number that raises concerns.

For the said quarter the company reported a net profit of Rs 349 m, which is down 68% compared to last quarter and 87% lower when compared on a YoY basis.

During Q3, Biocon incurred an expense of Rs 2,710 m, primarily pertaining to deal-related expenses of the Viatris transaction which is an exceptional item. Hence, the company's profit was reduced only because of the presence of an exceptional item.

#4 FII Selling

Another reason behind the decline in Biocon shares is the stake sold by foreign institutional investors (FIIs).

FIIs have been divesting their stake in Biocon after June 2022. FII holding stood at 16.3% in the quarter ending June 2022. The stake was reduced by around 2% at the end of December 2022.

For more details, check out Biocon's latest shareholding pattern.

How Biocon share price has performed recently

In the past five days, shares of Biocon are down 7.9%. On a YTD basis, Biocon is down 23.3%

Biocon has a 52-week high of Rs 387.6 touched on 26 April 2022 and a 52-week low of Rs 199 touched today on 20 March 2023.

About Biocon

Biocon is India's largest and fully integrated innovation-led biopharmaceutical company.

The company is engaged in the manufacture of biotechnology products and research services. It focuses on the research and development of therapies for the treatment of chronic conditions.

It offers a range of active pharmaceutical ingredients (APIs), branded formulations, complex biologics and biosimilars, including monoclonal antibodies (MAbs), RH-Insulin and insulin analogues.

Apart from this, the company also provides services, including contract manufacturing, drug licensing, research, and manufacturing of small and large molecules for biotechnology and pharmaceutical companies across the world.

For more details about the company, you can have a look at Biocon's factsheet and the quarterly result.

You can also compare Biocon with its peers.

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