For bourse-listed Bioton, a manufacturer and distributor of biotechnology products, 2007 brought both successes and failures. One of world's few producers of recombined human insulin, the firm saw sales of insulin grow 15 percent y/y in H1 2007. Over the same period Bioton had zł.112.7 million in revenue and zł.67.7 million in profit - 25.8 percent higher than in the comparable period of 2006. Its net revenue after Q1- Q3 2007 was zł.86.41 million, compared with 67.5 million the year before.
With the insulin market on the rise, Bioton had ambitious plans in 2007. It signed takeover agreements with two Italian companies and one Ukrainian firm. It also began targeting its sales in Russia, China and India.
Adam Wilczęga, Bioton's CEO, has stressed his firm's intention to tackle international competition on several occasions. Bioton's development strategy calls for it to take a 10-percent stake of the global insulin market within the next five to six years.
Not so bright
Bioton's share price opened 2007 at the level of zł.2.28 and ended it at zł.0.89, a drop of around 61 percent. Its stock took a steep dive on the WSE last summer after doubts were raised over the takeover of Indar, Ukraine's largest insulin producer. Bioton was to acquire a 100-percent stake in the company, of which it already owned 29.29 percent, by the end of Q3 2007, but this was put on hold after objections from both Indar's management and the Ukrainian government. The future of the transaction remains uncertain.
Despite these difficulties, the decision to go abroad was a worthwhile step, analysts said. Although Polish companies are a bit late in heading East, those markets still hold potential, Mariusz Ignatowicz, an pharmaceutical market analyst at PricewaterhouseCoopers, told WBJ. These markets are highly unpredictable, however, and realizing goals in them is difficult, he noted.
Regaining trust
Despite these difficulties, investors have not lost faith in Bioton. In December, the company gained zł.244.97 million from its issue of 272.19 million J-series shares. As many as 80 million of the shares were purchased by Prokom Investments.
These funds will be designated for working capital, as the firm has large expenditures related to new and ongoing investments. Even with the cash infusion, Bioton needs an additional zł.150-200 million to conclude all its required investments, according to its president.
Bioton's plans for 2008 are ambitious. Its plant in the Russian city of Orel is expected to start producing insulin in the middle of 2008. Bioton's Chinese arm, Sci-Gen, is expected to start making profits next year. The sale of insulin in China should commence in the first quarter of 2008, while Bioton's plant in India should start producing insulin crystals in the second half of the year.
What needs to be done
Apart from international growth, the company needs to invest in new products. This is all the more crucial since almost 50 percent of the company's income comes from the sale of recombined human insulin. Such heavy reliance on one product is dangerous, analysts said.
The company also needs to increase its production capacity - without that, entering new markets will be impossible, stressed Paweł Burzyński, an analyst of with BZ WBK brokerage. Investment in R&D is crucial too. "Spending on R&D is not high enough to change Bioton's overall perception as a generic-drugs company," said Ignatowicz.
The new year will bring new challenges. The biotech industry is highly unpredictable and problems may occur with registering new medicines, especially if a competing product proves to be a failure, Burzyński said. He added that competition with world players and producers from India and China also poses a problem.
Bioton
CEO: Adam Wilczęga
Strengths:
- Growing market for biotech products
- Increasingly international position
Weaknesses:
- Unpredictable market
- Strong global competition
