by Suhani Adilabadkar

Biocon’s journey from a rented garage to India’s largest bio-pharmaceutical company has been prodigious. The strategic collaboration with Mylan in 2009 was a major breakthrough for the firm, in creating a cost-effective opportunity and opening up the global generics biologic industry for Biocon.

Completing its 40-year journey, the pioneer of biosimilars in the Indian space is currently seeing the benefits of its R&D efforts. The street is betting on the company's robust biosimilar product pipeline and awaiting the IPO of Biocon Biologics (subsidiary). The scrip has gained 70% over the past one year.

Quick Takes:

• Biocon Biologics has guided for a $1 billion revenue target in FY2022.

• Activ Pine LLP, an affiliate of True North Fund has picked up 2.44% stake for $75 mn in January 2020.

• Tata Capital Growth Fund has made an investment of Rs. 225 cr ($30 mn) for equity stake of 0.85%.

• Generic business grew 16% YoY, Biocon Biologics 19% YoY and Syngene reported flat revenue growth.

• The company is undertaking capex of $200 mn per year for the next two years, split equally between generics and biosimilar businesses. 

June FY21 Branded as a 'Recovery Quarter'

The management had guided the June quarter to be a recovery quarter after reporting weak numbers in the March quarter of FY20. After muted revenue growth of just 3.4% in Q4 FY20, operating revenues in June came out in double digits, a 14% jump YoY at Rs. 1671 crore compared to Rs. 1466 crore same period previous year.

Operating profit also improved with a decline limited to the single digits, at 5% in Q1 FY21 against a 21% dip in Q4 FY20. Operating profit was reported at Rs. 413 crore in June quarter FY21 against Rs. 437 crore in the corresponding quarter last year.

Operating margins stood at 24.73% in Q1 FY21 against 29.85% same period last year contracting 512 bps, impacted by R&D spend on the biologics business and a lower profit share contribution from its partners. Net Profit or PAT was weighed down by rising biologics costs, higher depreciation and R&D expenditure, declining 27% YoY reported at Rs. 171 crore in June quarter FY21 compared to Rs. 235 crore same period previous year.

The company reported gross R&D spends of Rs.142 crore for June quarter, which was about 11% of revenue excluding Syngene. The company is undertaking capex of $ 200 mn per year for the next two years, split equally between generics and biosimilar businesses. 

June Recovery After a Muted March

Similar to a generic drug, biosimilars or bio-generics come into being with the patent expiry of biologic drugs. And biologic drugs are derived from a living cell extracted from animals, micro-organisms and even humans. Biocon is the first Indian company to get its Biosimilars approved and commercialized in U.S., EU, Japan, and other developed markets, and the first company worldwide to develop human insulin on a Pichia expression system. Another recent development - with the global collaboration agreement with Voluntis in July 2020, Biocon would be one of the first insulin companies to offer a U.S. FDA cleared and CE-marked, highly validated digital therapeutic product, Insulia.

Moving on to the Covid impact on Biocon’s quarterly results. March quarter witnessed weak results and though the generics segment and Syngene reported healthy numbers, biosimilars with roughly one third revenues dipped 21% YoY due to Covid related logistics issues, after reporting seven consecutive quarters of revenue and profit growth.

THe June quarter came with some recovery as biologics retuned back to growth with a robust double digit 19% YoY jump. In generics (small molecules) constituting APIs, generic formulations and ANDA business, this grew 16% YoY in Q1 FY21. Elaborating on this segment, Mr. Siddharth Mittal, CFO, Biocon Ltd said, “This journey started four to five years back, and was a slow journey. When the entire generics industry faced headwinds in the US, we had slowed down. We are now picking up pace again, we are building capabilities in terms of adding R&D infrastructure, adding manufacturing infrastructure, adding right skill people to work on this pipeline and we are going to start ramping up our pipeline which will be under development and the filings for which will happen over the next few years”.

The company aims to grow its generics business at high single to a low teens rate for the next one to two years.

The research subsidiary, Syngene International reported flat revenue numbers impacted by Covid restrictions as the research arm lost three weeks in Q1 FY21 recording only 50% of its normal revenues, and operating at 70% levels. Continuous contract renewals, client additions and its five year, Rs. 550 crore capex plan coming to end in FY21, has been enthusing investors and Syngene stock has gained more than 200% over the past five years. The management has currently guided for double-digit revenue growth in FY21.

Biocon Biologics Projects an Aggressive Revenue TargeB

In Biologics, there are on the whole, 28 molecules, 11 partnered with Mylan, several partnered with Sandoz, the current global leader in biosimilars by revenue and the remaining portfolio is being developed independently by Biocon Biologics.

Of these five molecules have been commercialized globally - Trastuzumab (cancer) with a lot of fanfare over the past two years, Pegfilgrastim (stimulating growth of white blood cells), Glargine (insulin), rh-Insulin (diabetes) and Bevacizumab (cancer).  By the end of FY20, Biocon Biologics had approvals for Trastuzumab in 60 countries, Pegfilgrastim in 36 countries, Bevacizumab in two countries, Insulin Glargine in 60 countries and rh-Insulin in over 40 countries.

Speaking on future growth plans, Dr. Christiane Hamacher, CEO and MD, Biocon Biologics, said, “Overall, we are on track to have at least eight biosimilars being sold in developed markets by the end of fiscal year 2022, addressing a market opportunity of approximately up to $33 billion. We anticipate that our pipeline will deliver at least three additional molecules between FY‘23 and FY‘25 after which we expect to launch an average of two molecules per year”. She also reiterated the Biocon Biologics guidance of meeting its $1 billion revenue target in FY2022.  Some large investors appear to agree with these projections: Activ Pine LLP, an affiliate of True North Fund has picked up 2.44% stake for $ 75 mn in January 2020, and a very recent investment of Rs. 225 cr ($ 30 mn) came through by the Tata Capital Growth Fund for equity stake of 0.85%.