Biocon (More milestones ahead, BUY):
We came out more positive from our meeting with Biocon’s management. Licence fees from the recent insulin deal with Pfizer will start getting recognised from this quarter; the upfront payment of US$200m is significantly more than the development expense, ensuring good margin on the revenue recognised, and emerging market ramp-up of the partnership will come soon (India launch expected in 2011). Listing of CRAMS subsidiaries and progress in monoclonal antibodies partnership with Mylan could be medium-term upsides. We raise our FY11-12 core earnings estimate by 10–11%, as revenue from the Pfizer deal will more than offset high R&D expense of EU insulin trials. We upgrade Biocon to BUY and raise our price target to Rs492.
