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Operationally in line with our estimate

* Revenue grew 5.5% YoY to INR18.4b (est. INR19.2b) in 2QFY22.

* Revenue growth was led by:

* a) Research services (33% of sales), up 17% YoY to INR6.1b.

* b) Biosimilars (40% of sales), up 9.8% YoY to INR7.4b.

* c) Novel Biologics contribution of INR121m (nil in 2QFY21).

* Growth was dragged lower by generic sales, which fell 11.5% YoY to INR5.3b (27% of sales).

* Gross margin (GM) contracted by 40bp YoY to 65% due to a change in the product mix.

* However, EBITDA margin expanded by 80bp YoY to 24.3% (est. 22.7%). As a percentage of sales, higher staff expense (+180bp YoY) was offset by lower other expense (-250bp) and lower R&D cost (-60bp).

* EBITDA increased by 9% YoY to INR4.5b (est. INR4.4b) in 2QFY22.

* Adjusting for an exceptional item relating to modification of the optionally convertible debentures of a PE investment in Biocon Biologics and reversal of SEIS claims relating to a prior period, PAT grew at a higher rate of 26% YoY to INR2.4b due to higher other income at INR1b (INR155m in 2QFY21).

Key highlights for 2QFY22

* Listing of BIOS’ Semglee on Express Scripts’ national preferred formulary paves the way for an uptick in sales

* BIOS has launched Labetalol Hydrochloride tablets and Esomeprazole Magnesium Delayed Release capsules.

* The USFDA conducted a Remote Interactive Evaluation of BIOS’ oral solid dosage plant in Bengaluru, the outcome of which is awaited.

* The new greenfield Immunosuppressants API manufacturing facility in Visakhapatnam is on track to be commissioned in late FY22.

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