CASE STUDY

Company
LOGO Re-Inventing BIOCON

Name Reg. No

Tejas Rane 09PGDM78

Abhijeet Sabat 09PGDM46

Niraj 09PGDM69

Upendra 09PGDM63

Sravanthi 09PGDM86

PRESENTED by-GROUP 8
 RE-Inventing BIOCON
Company name

 Crystal Gazing

Kiran M. shaw steered the company through several reinventions first moving from being an
enzyme maker to statins and when price crashed and Chinese competition intensified, she shifted
focus to biopharma now she wanted to unlock the value from her three main business
biocon, syngene and clinigene and reposition the company as a major biopharma company she
expressed herself well

“ we keep reinventing our self in the first 20 years we focused on
enzymes, in last 10 year we focused biopharma and services we now want to get into the market
with our own products it was the first about branded enzymes, now it is about branded
Biopharma”

 While market like China are good stepping stone Kiran M Shaw realized that the real opportunity
was in US and western Europe, where 100s of billions of dollars were spent on Pharmaceuticals
every year. However she also realized that such market were difficult to enter as regulatory
charges were high and there were many large competitors, much larger than Biocon. Hence she
felt Biocon could not make money in US Market, apart from facing tough competition such as US $
13 billion Amgen and Biogen which may also foray in India.
That Leaves just one option – Acquisition however that too requires heavy investments of funds.

Kiran is certain that she will not got to market to raise funds for future growth but could thinks of
leveraging the borrowing completely. Considering that Kiran has successfully steered her
company through previous evolutions, would you bet against her.
 INTRODUCTION
Company name

•Biocon was found in November

29th 1978

•Focused from enzymes

manufacturing to development of
Biopharmaceuticals.

•India’s 1st billion dollar biotech

company.

•1st in India and 20 th in world in

terms of revenue and market
capitalization

•Joint venture between Leslie

Auchincloss and kiran Mazumdar
Shaw
 INORGANIC GROWTH
Year
Company name Company Country Type of Agreement
2003 Cuban institute CIMAB Cuba Joint venture
2004 Vaccinex New York Strategic partnership
2005 Bentley Europe Product licensing
pharmaceuticals

Karolinska institute Sweden Collaboration

(MOU)

2006 Bayer Health Germeny Licensing agreement

Care(BHC)

Innate pharmaceuticals Sweden Co-operation agreement

Ferozsons Pakistan Licensing agreement

2007 Neo-pharma Abu Dabi MOU
Deakin university Australia MOU
Novoenzymes N. America and EU Divested enzyme division

Abraxis biosciencs India Licensing agreement

2008 Axi-corp GmbH Germany Acquisition
IATRICa Inc. USA Strategic partnership
 SWOT ANALYSIS
Company name
STRENGTH OPPORTUNITY COMPETITIVE EDGE

Biocon R&D expertise Global pharmaceutical market USFDA accepted

-Plafractor (US patented )
Rich and expanding new
drug Pipe line
Debt free Cash Rich status
Highly skilled man power
 Fully integrated business
model (Syngene, Clinigene & Biocon)
Strategic alliances and
acquisitions (Axicorp)
US$ 400 Billion facilities
Regulated generic market
estimated at US $ 38 billion Patented process
Patents expires Govt. Policies for Statins
& HMO will drive global
demand for generic statins Biological plant
Diabetes is assuming for Mab production
pandemic proportions, fueling
global demand for insulin and
Oral Anti dietetics

WEAKNESS
THREAT
Manufacturing Sites
limited to India Regulatory risk
Statin dependent Competitive threat (Amgen and Biogen)
 Recourse Based View (RBV)
Company name

• Financial
• DE Ratio:0.11 , Operating cash Income:832.35Cr, Credit rating: A+
Tangible • Physical Resources
Resources • Market value of fixed assets:715 Cr

In Tangible
• Patents: 205 Granted Patents
Recourses

• Core Competence in Fermentation (Plafractor – a

solid state fermentation reactor)
Organizational
Capabilities • Highly skilled manpower
 Business Strategy
Company name
 PORTER’s Five Forces
(Latin America and Western Europe)
Company name

Very LOW
Very LOW

HIGH HIGH LOW

Moderate

By this analysis we foresee increasing competition in the industry. It will be

between large players (with economies of scale) and it may be possible that
some kind of oligopoly or Cartels come into play in other word the large
player in the industry will survive.
 Yes ...We would bet against
Company name

Kiran would have to borrow heavily from FI’s & Banks ,so the costs of borrowings may assume to be higher.
Naturally the financial expenses of the company MAY INCREASE disproportionately. This will change the
current pattern of earning of the company.

At present the % of Financial expenses is not more than 1% heavy borrowings will lead to high increase
in it.

The Debt Equity ratio of the company is 11.35 % only now and more ever it is decreasing rapidly. Hence it
may be advisable to borrow funds as there is favourable position to do so. but again if 100% of requirement is
met by borrowed funds it will lead to heavy increase in it in short time. This may cause panic in local
investors & similarly the new borrowed funds may get costlier.

So it is again advisable to decide some combination of debt & equity components in funding new
requirements. Say 60-40 or 70-30...

Also the degree of Financial leverage change due to change in interest costs of the company. Currently we
can say that the DFL is increasing (1.05 in March07).

Heavy increase in borrowed funds will increase DFL to a great extent and hence there will be HUGE
RISK OF INSOLVENCY ( If the company does not perform up to expectations in future.) Hence to
reduce the DFL it is advisable not to borrow 100% but to raise some funds from equity also.
 Contents
Company name
D/E Ratio DFL ( ebit/pbt) % Financial
0.9 1.25 expenses
0.8 5
1.2
0.7 4.5
1.15 4
0.6
3.5
0.5 1.1
3
0.4 1.05 2.5
DFL ( %
0.3 D/E Ratio 2
1 ebit/pbt) Financial
1.5
0.2 expenses
1
0.1 0.95
0.5
0 0.9 0

07
06
05
04
03
02
01
07
06
05
04
03
02
01

Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'
Mar'

DE Ratio Biotech industry

1.8
1.6
1.4
1.2
1
0.8 DE Ratio
0.6
0.4
0.2
0
Ranbaxy Dr. Reddy Amgen GSK
Company
LOGO