Biocon Investing Heavily In Peptides, Potent Oncology APIs: MD & CEO, Siddharth Mittal

The Indian pharmaceutical major, Biocon is seeing a huge potential in peptide drugs and plans to heavily invest in the said therapeutic area in the times to come. Peptide therapeutics are short polymers of amino acids which are used for the treatment of conditions like type 2 diabetes, weight loss, multiple sclerosis and hypertension.  

Biocon’s MD and CEO, Siddharth Mittal in a post-annual results interaction with BW Healthcare World stated that, “As we move forward, we see a huge potential in peptides. It is a growing segment where the big shift is being seen with companies like Novo Nordisk or Eli Lilly moving their focus from insulins to GLP1 drugs and what used to be USD 20-30 billion insulin market is now actually projected to be over USD 100 billion GLP1 market so we see that as a significant growth driver for us for the next 5 to 10 years. And we are investing heavily there in terms of both pipeline capacity and capability building.”

Biocon delivered handsome financials for FY23 with its revenues closing 59 per cent higher at Rs 3,929 crores compared to last year. The company’s growth was led by its subsidiary Biocon Biologics which contributed Rs 2,100 crores. 

Edited Excerpts:

What have been the picks for you this quarter? And are there any areas of concern that you have sensed, that also need improvement?

We have had a very good quarter, our revenues closed at Rs 3,929 crore up by 59 per cent compared to last year, in which the biggest contributor was Biocon Biologics contributing Rs 2,100 crores up by 114 per cent compared to last year and this contribution came as we had completed the acquisition of biosimilar business from Viatris in the previous quarter. So, we saw a full-year impact of those numbers in the fourth quarter, which was the main reason for the growth. 

Apart from biosimilars, Syngene again had an excellent quarter; they are close to the Rs 1000 crore revenue mark. They grew 31 per cent this year compared to last year. And this was again on account of the manufacturing business or the contract that they had earned with Zoetis apart from the growth in their existing base business, i.e. discovery and development. 

The EBITDA margins this year fell by 1 per cent. Do you see them increasing in the upcoming financial year?

The Core EBITDA margins actually grew from 33 per cent to 35 per cent this quarter and from 32 to 34 per cent on a full-year basis, so the margins have been growing. Of course, our investment in R&D is also going up. And we hope that on a full-year basis, we continue to maintain these levels of margin despite all the pricing pressures that we see in the US and other key markets that we have. 

Tell us about the generics business growth this year, with your major revenues coming from the biosimilar business, will we see the generics business going on the back burner or will it return to the centre stage as well going forward? 

Our entry into biopharmaceutical happened through our API business 25 years back and it has been a core part of our overall business. Our focus, of course, was on biosimilars for many years. But we started focusing again on the generics business or the API business a couple of years back and one of the reasons why we spun off biosimilar into a separate subsidiary was to bring back focus on the generics business. 

We have started investing again in creating capacities in creating pipelines and strengthening our quality systems for the generics business. We are investing almost half a billion dollars over a period of five years in creating capacities and an R&D pipeline for the generics business, our focus would of course continue to be on fermentation, which has been our strongest area. 

How are you planning to grow your product portfolios going forward?

We have expanded our R&D infrastructure and more than doubled the investment and the number of people who are working on our products. And now we are looking at filing anywhere between five to seven new APIs and between eight to 10 ANDAs in the US. 

And these would, of course, be focused on mainly fermentation and peptides. But we are also looking at a very important segment, which is the potent oncology API segment as we are aware that cancer as a disease or our oncology as a therapeutic area has been the biggest in the whole healthcare sector where affordability and accessibility is a big concern. Hence, we are working on a wide portfolio of oncology APIs and formulations which we plan to bring to various parts of the world over the next five to seven years. 

What is the assessment, for how long are we going to see these pricing pressures in the US? 

The pricing pressure will not go away, they have always been there and it was just that during a certain number of years. It went deeper from a 5 -7 per cent average reduction in prices to a double-digit reduction. 

And we do not see the pricing pressure ever go away because the price of generic drugs or biosimilars never go up, they always go down. Especially in the US when the customers do contracts whether it's for three months, six months, nine months or one year, and when they invite bids again, after the expiration of the contract. There's an automatic tendency on the incumbent to reduce prices to retain that business and hence you see that annual price reduction.

Right now we are not seeing the price reduction to go back to its original levels of 5-7 per cent. It's somewhere between 7-10 per cent. But again, it's drug-specific in some drugs we continue to see much deeper price erosion whereas in others there is a rationalisation that's happened and there is lower price reduction. 

Your company is already diversifying into other markets. Tell us about that. And future partnerships when you think about moving away from the US or focussing your attention on other markets?

We have been supplying insulin to 70 countries and filing for approvals for our drugs in various parts of the world not necessarily going by the size of the market. And that would continue to be our endeavour in future whether directly or through partnerships, or by an indirect government tender participation. 

The volumes of the revenue growth will of course come from larger markets. So beyond the US, and Europe, traditionally Latin America, comprising Mexico and Brazil, have been strong market for us. The Middle East has also been quite strong. 

We also definitely see a huge opportunity from China although it takes a longer time to get one’s foothold in China, it is the second largest pharmaceutical market in the world today. And we do see a shift where the Chinese companies are looking at sourcing drugs from Indian companies, especially the more speciality complex drugs which are of high quality. Because the Chinese regulators are looking to source drugs for local patients more in line with international drug standards. So, that opens up opportunities for companies like ours.

What are your growth projections for FY24? 

As I mentioned in the generics business, we expect mid-teens kind of growth, and in research services high teens to low 20s. And in biosimilars, we are starting with a very solid base of USD 1 billion and there are a couple of important launches coming up such as Adalimumab in July. So, we would be looking to expand our market share as well as a geographical presence for our existing commercialised molecules. 

In addition to that, we are also hoping that we are able to get the approval for our biosimilar Aspart and biosimilar Bevacizumab by the end of this fiscal and we are able to launch those two drugs. A large part of the impact of these launches would come only twelve months post the launch. So we will see a very little impact maybe this year, but at least it will help us grow in FY25.