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Biocon starts commercial operations under BMS pact
Biocon has commenced a fully dedicated research and development facility for Bristol- Myers Squibb (BMS), one of the leading global innovator in Biocon Park, Bangalore. This which was in line with Biocon’s collaborative research pact with BMS during March 2007. In fact, Syngene – the CRO arm of Biocon, entered into an R&D partnership with Bristol Myers Squibb (BMS) for providing services for discovery and NCE development.

The initiation of the research and development activity will expand the span of the drug discovery and development process. Syngene would facilitate contract research services right from the initial stage of lead optimization to early stages of clinical studies to Phase I and Phase II trials.

The 200,000 square-foot facility at Biocon Park is dedicated to helping advance Bristol-Myers Squibb’s work in discovery and early drug development, and is currently occupied by 270 researchers. The facility will house 360 researchers by the end of the year and could accommodate as many as 450 employees in the future.

This initiative is to add incremental revenues of about Rs 800mn in FY10
With the commissioning of the new research facility and anticipated ramp up in researchers count to about 360 (since most of the revenues for Biocon are on Full Time Equivalent (FTE) basis), we estimate Biocon’s BMS pact would add incremental revenue of Rs 800mn during FY10E. We expect the peak revenue potential from the pact will be materialised during FY11E with 450 FTEs and revenue worth Rs 1200mn. Initially the core research activity would earn revenue for Biocon but subsequently the additional support activities and possible supply opportunities (like supply of sample batches during the advance development of molecule) would further boost the earning potential of the BMS pact FY11 onwards.

Hold with a target price of Rs 139
Certainly going ahead, the commercial commencement of long awaited BMS research contract would emerge as a money spinner for Biocon, it also projects the research capabilities of the company in Global pharma industry. Apart from this, Biocon has few more medium-term revenue triggers that would maintain growth momentum. In fact, the commencement of Tacrolimus and mycophenolate mofetil (patent expires in May 2009) API supply to US during Q1FY10 and launching of Glargine (a basal insulin having market potential of Rs 400mn and only cometitor Sanofi-Aventis) in domestic market Q1FY10 onwards would power the earnings growth of the company. Biocon has already got the Drug Controller General of India (DGCI) approval for Glargine.

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