Why Biocon Share Price is Falling

The share price of many Indian bio-pharmaceutical companies have been on a downward trajectory. Between 2017 and 2020, most of them reported flat or negative performance.

However, things changed after 2020 as defensive sectors such as pharma and FMCG were back in limelight.

Investors loaded on the best FMCG stocks in India and best pharma stocks in India to tide over the volatility.

After reaching their peak in the pandemic era, these stocks again saw a major correction in 2022.

We even covered detailed editorials on why pharma companies are falling. You can also check out the reason for the fall in Piramal Enterprises, fall in Gland Pharma, and fall in Divis Laboratories

Among the prominent names, one such company is Biocon. The share price of Biocon, the largest biopharma company, has been under pressure this year.

Today, share price of Biocon hit a new 52-week low of Rs 258.

Apart from weak March 2022 quarterly results, there are other reasons too why the stock is under pressure.

Read on to find out more....

#1 Issue of Form 483 for 3 Sites

The USFDA (United States Food and Drug Administration) issued Form 483 to three sites of Biocon in September this year. It was for two sites in Bengaluru (India) and one site in Malaysia.

The Form 483 was issued to the firm's management on violations of the Food Drug and Cosmetic (FD&C) Act and related Acts.

The inspections started on 11 August 2022 at the Bengaluru site and concluded with the Malaysia site on 30 August 2022.

Following this inspection, Biocon shares saw a sharp 4% drop in its share price intraday.

Form 483 issued to a company always brings some sort of negative sentiment and damages the reputation of the company. When the US drug regulator finds a manufacturer violating the regulations, it causes a selloff until the manufacturing company clarifies on the progress and the next steps.

This might be one reason why Biocon share price is falling.

Update: Adding to worries, the European healthcare regulatory that sets quality and ethical standards for drugs in Europe, recently issued a list of deficiencies at Biocon's plant in Bengaluru.

The European Directorate for the Quality of Medicines and Healthcare conducted a good manufacturing practices inspection at Biocon's API site in Bengaluru from 12 September to 14 September.

#2 Supply Chain and Pricing Concerns

For the past two quarters, Biocon is facing headwinds in the form of pricing pressures as raw material prices have increased.

That apart, logistics costs have also gone up, raising supply chain concerns.

The company's MD and CEO Siddharth Mittal had highlighted that the performance for some segments was muted due to supply and operational challenges.

Pricing pressures, and escalating costs of solvents, raw material and logistics have impacted the earnings.

Recent developments...

In September 2022, Biocon divested a 5.4% stake in its research arm Syngene International. The stake sale in the company aggregated a little over Rs 12 bn.

The deal was carried out through an open market transaction. According to the bulk deal, the promoter sold a total of 21,789,164 shares. These shares were sold at an average price of Rs 560.04 apiece.

Biocon is currently looking forward to closing the Viatris deal inked in 2022. According to the agreement signed, Biocon will give Viatris US $2 bn as the payment.

This payment will be through a deferred payment of US$ 335 m through internal cash flow. The remaining will be raised through equity commitments.

How Biocon has performed on the bourses recently

Over the past one month, shares of Biocon are down more than 10%. Over the last six months, the shares are down by 24%.

So far in 2022, the stock is down by 29%.

Biocon shares touched a 52-week high of Rs 410.7 on 8 February 2022 and a 52 -week low of Rs 258 today.

The stock is currently trading at a PE ratio of 34.6x and PBV (Price to Book Value) of 4.2x.

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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Biocon vs Eris Lifesciences

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