The disruption in business due to covid-19 has proven to be acute for Biocon Ltd. With its Q4 figures trailing far behind Street estimates, the firm may struggle to show growth in the coming two quarters as well. Needless to say, the stock dipped about 3 per cent on Friday. The fall in revenues is worrisome. Revenues were about 13 per cent lower than what analysts had estimated, who assumed there was some notable pre-buying among consumers. This can also be seen in the about 12 per cent year-on-year fall in its branded formulations in Q4. A huge concern has been the bigger dent in revenues of the biologics division which fell 21 per cent year-on-year. However, the loss is also because of the logistics and supply chains that were hit in the latter part of Q4. While the company has maintained this is a one-time covid19-related impact, the challenges are likely to persist in the first two quarters of fiscal 2021 due to the lockdown. The silver lining in the Q4 figures has been the higher growth in research services: up 14 per cent year-on-year. Rising overheads are another worry. Higher employee costs and other expenses and the cost of co-development have dragged down operating leverage considerably. Besides, the expense for new-drug research has meant that Biocon will have to significantly increase its research and development spending. Already, R&D expenses  in Q4 had risen about 36 per cent, and are likely to be high in the near future.
In fact, operating leverage has been hard hit during the quarter. Ebitda margin fell to about 20.2% in Q4, far lower than 26.8 er cent in the year-ago quarter. This does not lead to much hope for the stock’s prospects. While the scrip has zoomed about 27 per cent in the past year due to clearances received from the USFDA for of its two plants, at  Rs 324 apiece, it is at a stiff price-earnings ratio of about 52 times trailing 12-month earnings.
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