‘Indian pharma will benefit from research-linked sops’


NEW DELHI : The government should come up with research-linked incentives for the pharmaceutical industry to ensure Indian companies play a strong role in innovative medicine and research, said Kiran Mazumdar-Shaw, executive chairperson, Biocon and Biocon Biologics. In an interview, she said that though India has played a huge role in novel products, there is a need to invest in research and innovation to launch new drugs and therapies, as it is beyond the reach of many companies. Edited excerpts:

What are the key financial highlights for Biocon in Q2?

We delivered a very strong quarter results in terms of revenue which grew by 23% to 2384 crore. This growth was led by biosimilars, which was up 34%. Our research services grew robustly by 36%, and generics business grew 18%.

Across the board, we have seen very strong revenue growth. Our core Ebitda (earnings before interest, taxes, depreciation, and amortization) was up 34% to 816 crore. Ebitda margin of the core business was at 35%, up 2% from a year-ago. Our core business is very strong. Under normal circumstances, investing in R&D (research and development) is very capital intensive for growth. Our R&D expense shot up 52% to 252 crore compared to 165 crore in the year-ago. So, our core Ebitda is strong, but net Ebitda is down to around last year’s level due to R&D spending. These numbers indicate that we have a very strong pipeline. R&D investment for FY23 is 1084 crore. So, overall, Biocon Biologics is positioned for very strong and sustainable growth in the coming years.

Has there been any progress on acquiring Viatris’ biosimilars business? What is the status of the deal with Serum Institute of India for vaccines?

The Viatris deal is expected to conclude soon, as we have the necessary provisions to go ahead with this transaction. Biocon Biologics will issue compulsorily convertible preference shares worth $1 billion, and an upfront cash payment of $2 billion to Viatris. Biocon has secured $1.2 billion of debt to fund the cash transaction.

For the SII deal, we are in talks with a large number of investors. Biocon has already infused $650 million and SII has put in $150 million. Of this, Biocon will fund $230 million from existing reserves and another $420 million we will get through structured mezzanine financing. We are in the process of securing investments to retire the mezzanine financing, after closing the deal. Biocon’s stake in Biocon Biologics will be 68% after the Viatris and SII transactions are completed. The strategic alliance with Serum Institute Life Sciences (SILS) for vaccines is on track for closure by Q3FY22.

What are the key metrics for the generic formulations and active pharmaceutical ingredient (API) businesses?

Generics have grown 18%. This business is tracking well but it contributes 26% to the group revenue. A substantial contribution is coming from biologics, which is 42% of consolidated revenue, trending towards 1,000 crore. It is set to grow very substantially once the Viatris and Serum deals are concluded. Research services numbers are also very strong, contributing 32% to consolidated revenue. We also signed a very large manufacturing deal with Zoetis and it has the potential to add around $500 million over the next 10 years. The agreement will leverage recent investments in our biologics infrastructure and will be a key strategic move for the manufacturing services division.

What about the Insulin portfolio?

We expect to add Insulin Aspart very soon as we get approvals from US FDA. Our insulins hold double-digit market share in Malaysia, Mexico and Morocco and our recombinant human insulin is also doing well. We have a very comprehensive portfolio. Insulin is a huge opportunity for Biocon because of the global disease burden.

How do you see the Indian pharmaceutical sector and how it fought the covid pandemic?

India which is known as “pharmacy of the world” played a major role during the pandemic and played an important role in the generics business in global healthcare bringing in affordability and accessibility.

Besides, India played a huge role in novel products because we need to invest in research and innovation because making of these products today are beyond the reach of many people when it comes to new drugs and newer therapies and that’s why the government needs to come up with research-linked-incentive for Indian pharmaceutical industry because can play a very strong role even in the innovative medicines.

What is the priority for the company as the covid pandemic has receded now?

We are back to business now, and with our 100% operations focusing on all the opportunities which were lost during the covid pandemic. Now, there is a huge demand for our products and we need to make sure that we address these opportunities with a lot of competence and confidence. We have put in our efforts in investing in global scale capacity and now, we can leverage that investment in a very big way. At this moment, we are very well-positioned to address all the opportunity that we can see and we believe that we are uniquely placed because of the vertical integrated models we have with the global scale capacities and kind of commercial engines we have.

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