BANGALORE Biocon Ltd, India's largest listed biotechnology firm, said on Thursday it would divest its stake in German unit AxiCorp by the end of June, a move that would boost its profit margins.
The company, which roughly met estimates with a 25 percent rise in fourth quarter net profit, said the divestment is part of its focus on global alliances that would include Germany and did not require the company to have a separate unit for the region.
Biocon and Pfizer agreed last year to a deal in which Pfizer would globally sell insulin drugs made by Biocon.
"The quality of AxiCorp earnings was not comparable to the quality of Biocon's earnings and that's the first thing that will happen. You will see there will be a huge improvement in the quality of margins," Biocon's chairwoman, Kiran Mazumdar-Shaw, said on Thursday at a news conference.
"Going forward we will see how we can robustly grow our top-line."
The company said in January that revenue from AxiCorp would be under pressure as it eliminated some low-margin drugs after the German government asked drugmakers to offer rebates.
Biocon's operating margins were at 22 percent in the fiscal fourth quarter ended March. Excluding AxiCorp, that figure would have been 32 percent, Shaw said.
Bangalore-based Biocon hopes to sell its stake in AxiCorp for 40 million euros ($58.2 million), Shaw said.
In 2008, Biocon agreed to buy 70 percent in the German marketing firm for $43.7 million to boost its business overseas. AxiCorp was expected to help Biocon market and distribute a range of pharmaceuticals in Germany and throughout Europe.
On Thursday, Biocon said the divestment decision would have no impact on development of biosimilar insulin and analogs in collaboration with Pfizer.
During the transition period, AxiCorp will continue to provide Biocon with clinical development services for Biocon's insulin in Europe, Shaw said.
Shares in Biocon, which the market values at $1.7 billion, fell 4.6 percent after the announcement.
Biocon said fourth-quarter net profit rose 25 percent to 1.01 billion rupees ($22.8 million) from 806 million rupees a year earlier, bolstered by strong sales in its biopharmaceuticals drugs.
The profit was roughly in line with analysts' estimates of 993 million rupees, according to Thomson Reuters I/B/E/S.
Revenue in the March quarter rose 8 percent to 7.2 billion rupees.
"The numbers are in line with expectations but there are uncertainties about the strategy behind the divestment of AxiCorp stake," said Bhavin Shah, a sector analyst with brokerage Dolat Capital in Mumbai.
Biocon is conducting final stage trials on its experimental oral insulin drug, IN-105 , for which it hopes to find a global partner in this fiscal year that ends next March, Shaw said.
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(Additional reporting by Sumeet Chatterjee and Neha Singh; Editing by Ranjit Gangadharan and Matt Driskill)