‘Fundamentally, we think that in the coming quarters, API business should come back.’
Photograph: Kind courtesy Biocon
Biocon is preparing to make the most of the peptides opportunity as these drugs start to go off patents globally.
They have already filed for approvals in several countries, and are vertically integrated to make these peptides, which are used to treat diabetes and obesity.
Speaking to Sohini Das and Aneeka Chatterjee/Business Standard over a video interview, Biocon’s chief executive officer (CEO) and managing director (MD) Siddharth Mittal outlines the growth strategies and challenges ahead.
Has the recovery been slower in the generics business than expected?
It has been quite good on the formulations side where we have seen good growth.
We have won a contract in the US and also a couple of tenders in the emerging markets, and we continue to supply those.
We also have recently secured new approvals, and we will launch these drugs in the coming quarters.
Overall, the formulations business has been a good growth driver.
However, we have seen weakness in our active pharmaceutical ingredients (API) business.
API did de-grow compared to last year but grew compared to the second quarter.
Fundamentally, we think that in the coming quarters, API business should come back.
The pricing pressure that we have seen in the US and a few other emerging markets did impact us though there are signs of normalcy.
We, of course, have to take steps on our side to bring down the cost of materials for our products, expand capacity, and bring in operating efficiencies that will allow us to compete in these markets.
On the API front, how is the global demand scene looking in FY24-25?
API business is directly linked to the generics business. The generics business is expected to grow at a compound annual growth rate (CAGR) of 7 per cent globally in the next four to five years.
The segments we are focusing on are diabetes, oncology, and immunology. These are the areas that are growing faster than the overall generics market.
We have niche products and glucagon-like peptide-1 (GLP-1) products that address a large opportunity in weight loss.
How big an opportunity do GLP-1 products have?
Everybody is targeting the GLP-1 opportunity because it is so large.
Today, revenue from GLP-1 products (from the sector) is around $35 billion in sales and is expected to cross $100 billion by the end of the decade.
There are many more drugs that are in the clinical trial stages globally.
The opportunity is very attractive. Biocon is well positioned given the science we know about the peptides, and is also vertically integrated.
We do our APIs through the fermentation and synthetic roots. We do our formulations and have our device capabilities. We have a broad portfolio of peptides and GLP-1s.
I think this opportunity will open up based on the patent expiration. We have done the filings in various markets which are being reviewed by the regulators.
We are very confident that we will be able to participate meaningfully in this space despite competition.
Any plans on peptides for India as well?
Our main focus is on exports. But, we are open to discussing licensing out some of these complex molecules to other companies.
But Indian companies are also working on their own GLP-1s. Whether we will bring any of these drugs to India is difficult to say.
It depends on our partner interest and what kind of clinical trials are required. In India, government regulations have made it difficult to bring these drugs in a cost-efficient manner.
They are increasing the development cost for us. Therefore, it is not viable to do clinical trials focused on India.
An investment of around Rs 15-20 crore is required for each molecule even for doing bioequivalence studies.
Can we expect liraglutide launch in CY24 or early CY25 in the US if things go well?
We have filed for liraglutide in the US. We also have a settlement for one of the liraglutide formulations (Victoza) with Novo Nordisk in the US market, subject to product approval.
We expect to launch this drug in CY25. I cannot give you specifics because the terms of settlement are confidential.
We also expect to launch this drug in some parts of Europe at the end of CY24; the filings have been done.
We have a collaboration in Canada with Juno, where the company will distribute the drug.
We are looking at filing this in many emerging markets. As of today, a lot of emerging markets have moved from liraglutide to semaglutide.
The patent expiration for semaglutide is after a few years, but in emerging markets, semaglutide would open up sooner than the US and Europe.
We do have semaglutide which is in advanced stages of development.
We have a broad pipeline of GLP-1 products. We will have all the high potential GLPs in our portfolio.
Apart from liraglutide and semaglutide, is there any other peptide which Biocon is interested in developing?
Eli Lilly’s Mounjaro (tirzepatide) is a blockbuster drug which has the highest outcome when it comes to weight loss.
It is better than even semaglutide. Analysts say Mounjaro can be as big as $50 billion in sales. We are working on a generic tirzepatide.
What is your capex plan in the medium term?
We have said that around half a billion dollars would be invested in R&D and capex.
In the last four years, we have roughly invested Rs 2,000 crore in capex in generics, and we have ongoing projects.
In the next 4-5 years, we are expecting another Rs 1,500 crore to go into capex.
Cumulatively, over a period of 10 years, we would have invested Rs 3,500 crore in capex.
We have expanded our immunosuppressant manufacturing capacity at the green-field facility in Vizag.
In the other facility, we are expanding our oncology-potent synthetic APIs.
In Hyderabad, we do non-oncology-synthetic APIs and the facility is ready, now undergoing qualification.
In Bengaluru, we are building the new injectable facility and expanding non-immunosuppressant fermentation capacities.
The investments are going across all our facilities.
What is the divestment plan for non-core assets?
We recently divested two of our therapeutic segments and branded formulations to Eris Pharma.
And, we continue to see what is strategic and not strategic in the years to come, and accordingly, we’ll make a decision.
But beyond that, it will be very difficult to give any specifics of what to expect in the future.
But debt reduction continues to be a focus area.
We recently paid off $200 million debt of Biocon Biologics and we will continue to bring down debt in the coming quarters.
How will the biosimilars business grow from here on?
The growth will be dependent on three factors – one is how much more market share can Biocon Biologics take in existing products.
The others are growth from new launches; and thirdly, the growth from the biosimilar of Humira, which has already been launched.
We have to see how the biosimilar Humira (adalimumab) market pans out in the coming quarters and which company is able to get what market share and at what price.
Biocon Biologics is now operating in 120 countries (after integration of the biosimilars business of Viatris).
This should give it a better understanding of these markets.
And then, it can come up with a good growth strategy for next year.
The Biotech CDMO business is facing some challenges globally. What is your take on syngene?
Fundamentally, long-term prospects should not change as companies would look at outsourcing more and more.
Once the global biotech funding environment normalises, we should see things coming back on track.
Syngene is impacted because new projects are being delayed.
It is talking with existing customers, large biotech companies, which are not necessarily impacted by the funding environment.
It’s more of a temporary scenario. Syngene is very well placed in the Asian context to gain from the outsourcing which companies in the West would be doing to Asia.
Any major USFDA inspections coming up in the next 3-4 months?
As of now there’s nothing which has been announced, but we do expect inspections in the Malaysia as well as Bengaluru facilities in the coming months.
It is difficult to say when that would happen.
All our generics are in the green. The Hyderabad and Bengaluru facilities had zero observations during the inspection.
Feature Presentation: Aslam Hunani/Rediff.com
