BIOCON LTD.

Building a Biotech Powerhouse

Presentation done by Group 4

Dhruv Pandey (MBA19191)

Hardik Sinha (MBA19192)
Harshita Kushwaha (MBA19193)
Ishwar Lohar (MBA19194)
Jenish Kinghfrey (MBA19195)
Vraj Kamodia (MBA19196)
Kumar Safal (MBA19197)
Kunal Kashyap (MBA19198)
Dhananjay Makwana (MBA19199)
Preeti (MBA19249)
Rishabh Goyal (MBA19270)
 Company Overview
Became the largest
Biotech enterprise in
Started by Kiran Mazumdar India and was ranked
Shaw in Bengaluru after 14th globally.
acquisition of Biotech
Chemicals Ltd by Unilever PLC Sales turnover of
and ICI India. USD 167 million.

2004 2015

1978 2005
Company was valued at
Plans to achieve a sales
USD 1.1 billion as a result of
turnover of USD 1 billion.
an IPO issued in March.

The company was built on manufacturing enzymes and focussed on building a core competency in ‘Solid state fermentation’. It also secured
a US patent for a reactor it developed called Plafactor which could manufacture drugs involving genetically engineered microorganisms in a
solid state fermenter.
Case Dilemma
Development of a strategic plan for drug discovery without compromising on
financial viability.
Industry Overview
Global:
● Modern biotechnology began with the
discovery of recombinant DNA technology in
1973.
● Its applications cover agriculture, industry
and medicine.
● It was estimated that by 2025, bio-drugs
would replace 70 percent of the conventional
therapies.
● Better effective than synthetic drugs
because they attacked the underlying
genetic cause of disease.
● Exhibit 2 lists the no of bio-tech firms across
the world by 2004.
Indian:
● Indian Biotech companies fell into
three categories:
1. Building on Bed rock biotech
products
2. Migrants from related sectors
3. Start-ups occupying niche
spaces
● Nearly 60 percent of India’s
biotechnology products were exported
● Process patents has allowed India to
produce generic drugs and capitalise
on it
Biocon’s Business Units
 BIOCON LTD

ENZYMES BIOPHARMACEUTICAL CLINICAL TRIALS CUSTOM RESEARCH

Springboard for
company’s
competitive Contributed to roughly around Clinigene was Biocon’s Syngene, subsidiary of
advantage. 80% of annual turnover in 2004. subsidiary which handled Biocon was focussed on
Core competency in molecular clinical trials and growing process of
Fermentation was
biology will provide strategic leveraged India’s vast Research Process
developed as
population. Clinigene Outsourcing (RPO) in
company’s core advantage in Statin production
was yet to develop as a synthetic chemistry and
competency and whose patent will expire by 2008.
leader in CRO. molecular biology.
contributed to 13-15%
revenue.
 Strategic diamond
ARENAS
VEHICLES
● Product categories: Enzymes,
Biopharmaceuticals, drug ● Internal development: Stage 11,12
discovery, custom research and drug development facility
clinical trials. ● Joint venture: CIMAB
● Market segment: US/Europe ● Licensing: Plafactor
● Core technology: Fermentation,
Plafactor, drug delivery
● Value creation: low cost

STAGING DIFFERENTIATORS
● Research and development
● Biological process, less risky.
● Commercialization ( weak at
● Inhouse expertise across drug
present, expansion needed).
value chain.
Suggestion: Open training facility
● Inhouse subsidiaries for clinical
trial and research.
ECONOMIC LOGIC ● Competitive pricing

● High volume market (Diabetes

drug).
● Economies of scope.
Biocon’s Financials
 Statement of Revenue
Statement of Revenue For the year ending March (US$ million) 2005 2004
Revenue
Statement of Revenue Sale of Product 88.83 91.44
For the year ending March (US$ million) 2005 2004 Growth Contract research services 9.10 7.06
Revenue Other Income 2.07 1.50
Sale of Product 148.18 113.19 31%
100.00 100.00
Contract research services 15.18 8.74 74%
Other Income 3.46 1.86 86%
166.82 123.79 35% Less:
Cost of goods sold 53.78 53.99
Less: Cost of contract research services 4.62 4.18
Cost of goods sold 89.72 66.84 34%
Gross Profit 41.60 41.83
Cost of contract research services 7.70 5.17 49%
Gross Profit 69.40 51.78 34% Less:
Less: Research & Development expenses 2.01 2.41
Research & Development expenses 3.36 2.98 13% Selling, general and admn. Expenses 6.54 6.81
Selling, general and admn. Expenses 10.91 8.43 29% Depreciation 3.02 2.89
Depreciation 5.04 3.58 41%
Interest 0.44 0.33 33%
Interest 0.26 0.27
Income tax 5.67 5.96 -5% Income tax 3.40 4.81
Net Income 43.98 30.50 44% Net Income 26.36 24.64
 Balance Sheet

Balance Sheet For the year ending March (US$ million)

Assets 2005 2004 Liabilities and stock equity 2005 2004
Current Assets Liability 47.23 27.06
Cash and cash equivalent 0.45 0.34 Accounts payable 1.57 0.83
Investments in marketable securities 49.79 4.99 Advance from customers 11.47 10.71
Restricted time deposits 0.23 71.13 Short term borrowings 15.54 9.78
Trade receivables 41.83 26.8 Deferred taxes
Inventories 16.92 19.32
Others 3.44 5.05 Stock holders equity
Fixed Assets Common Stock 11.46 11.28
Good will 0.5 0.5 Authorised paid up capital 76.93 75.69
Property Plant and machinery 128.61 48.28 Others 0.35 -0.97
Other investments 4.11 0 Retained earnings 84.53 42.42
Loan to joint venture company 2.35 0 Total Liabilities and Stock Equity 249.08 176.8
Other Assets 0.85 0.39
Total Assets 249.08 176.8
Case questions
1) Biocon’s success story: Factors that
supported growth
● First mover’s advantage - Largest Biotechnology enterprise in India
● Biological process
a. Less risky
b. Low Manufacturing cost
● Diversified company portfolio - The company has four active business units
focusing on different segments of pharma industry
● Patent law - Once the patent of a clinical drug expires it can be marketed
and sold as a generic drug. Clinical drug patent lasts for a decade
2) Biocon in future: Light at the
end of the tunnel
• By 2025, 70 percent of conventional therapies will be replaced “Designer Drugs” based on
biotechnology, which are considered more effective as compared to synthetic drugs.
• Wide business portfolio; reduced risk
• Core competency is a major differentiator
• Higher probability of passing clinical trials due to biological origin of drug
• Greater customer acceptance
• Cost effective (relative to synthetic drugs)
• Dominant market position in first 2 stages (research, development) of drug discovery
• Specific entry targets – drugs for diabetes and cancer
• Highly experienced R&D team with a strong knowledge base backed by a strong leadership
• In 2005, Indian Govt. would bring product based patent from process based patent which
would make the launch of self developed drugs an extremely attractive option for
established Indian pharma companies
3) Hindrances to growth: Threats

● Uncertainty during drug development phase

● 2007 change in patent laws may bring new players in market and hence
there is a risk of Biocon losing its current market share
● Least expertise in commercialisation phase of drug discovery
● Clygene’s revenue less than 0.5 million, which is less than top 3 players (
1.42% of the combined revenue of top 3 players)
● Rapid proliferation of Clinical Research Organization (CRO) has created
intense competition
● Patent expiration of Statin in 2008, market of statin will shrink
4) Action Plan: Wooing board members

• Goal : To integrate all the three divisions generic, innovation & research and
commercialization
• Tasks :
 To continue to be the market leaders by focusing on Enzymes and
Biopharmaceuticals as they are the maximum revenue generating for Biocon
 To create the Biomab, an antibody for head and neck cancer, this can help generate
a $250 million revenue which can be crucial in generating the desired goal of $1
Billion revenue
 Outsource Clinical trials and should focus on core competency [ Generic market &
Drug Development]
 To continue forming alliances with various companies in the areas of R&D, Sales and
Marketing and by investing in research facilities.
Thank you!