Biocon in a position to be dominant player in diabetes-obesity space: Kiran Mazumdar Shaw

Shaw believes Biocon is better placed than the competition — 1) because GLP-1s have a very complex supply chain and hence make commercial sense only if produced at scale; and, 2) secondly, Biocon is already a serious player in the other diabetes drug – insulins.

“GLP-1s is not everybody's cup of tea, because GLP-1s has a very complex supply chain, from starting with the API, or the drug substance, which is very complex, and right up to the device which delivers the drug, to all the presentations that are involved to sterile manufacturing to oral dosage, which also is complex formulations. So there's a whole gamut of requirements when it comes to expertise and capacity,” she explained. There is no point trying to play in GLP-1s, if you have a very small capacity, it has to be done at global scale, she argued.

“And I think fortunately, Biocon has had the benefit of being very focused on insulins, which is a related kind of sphere, where, you know, the technology is very similar, the fungibility of the manufacturing facilities is very similar.”

Biocon is leveraging its experience in insulin manufacturing to build a robust GLP-1 pipeline. Besides, the company has already launched liraglutide, a GLP-1 drug, in the UK and Europe, and expects US approval soon. Semaglutide- now in the cross-hairs of a court case in India- is also in Biocon’s pipeline, with launches expected in emerging markets and Canada as early as next year. The US and European markets for semaglutide are projected to open up in 2031, but Biocon sees a significant interim opportunity in regions currently underserved by Novo and Lilly, the two companies which have branded products in this space.

Obesity: The Bigger Opportunity

Mazumdar Shaw highlighted that while GLP-1 drugs like semaglutide are effective for both diabetes and obesity, the obesity indication represents the larger market. “Semaglutide has two versions, right? One is for diabetes and one is for obesity. Of course, obesity is the bigger opportunity,” she said. Biocon plans to offer a range of presentations targeting both conditions

Surging Demand for Diabetes and Obesity Treatments

Shaw narrated how Biocon had entered into human insulins in the early 2000s when only animal insulins were available and that too imported. “If you remember, Latha, I ventured into insulins way back in the year 2000...my reason for making insulin was India had the world's largest burden of diabetes, and we were importing all our insulins. And, you know, tragically, we were having to use animal insulin instead of recombinant human insulin, which was so expensive. So as a biotech company, I felt I had to do something about it. And we developed India's first recombinant human insulin; that was our starting point for insulins.”

“We had the proud privilege of having the world's first USFDA approval for an interchangeable insulin, Glargine,” she added triumphantly.

Opportunities Galore for Biocon Group

Right now Biocon group has a bunch of growth areas besides the diabetes-obesity drugs, according to Shaw: Firstly, with global insulin leaders Novo Nordisk and Eli Lilly diverting production capacity to meet surging demand for GLP-1 drugs, Biocon is capitalizing on the resulting gap in insulin supply. “Insulins have become a windfall opportunity for us,” she noted, as the major players focus on GLP-1s, leaving behind a demand for more convenient insulin presentations beyond vials

Secondly, Biocon is preparing for a series of high-profile launches of generics and biosimilars over the next several years. “We are preparing to launch a product, every year,” she said. The company recently launched the biosimilar version of Stelara (brandname for ustekinumab), a drug used for intestinal inflammation. The next major launch is aflibercept, a drug for bowel and colon cancer as well as age-related macular degeneration. This is expected by mid-next year following a settlement with the branded innovator Regeneron. “And of course, Syngene is looking at building a very strong business in its CDMO opportunity,” she added, explaining how that makes the group diversified and less impacted by price pressures on a few generics.

Viatris & the Debt Burden

Biocon Biologics recently acquired Viatris — a US company, for about $3.3 bn in cash and stock, a purchase that has imposed onerous debt servicing on the company. But Shaw defended the acquisition as a transformational one, and the largest in Indian pharma. “I think it was very important that we made that acquisition because today, thanks to that, we are now a fully integrated biopharmaceutical company with a direct footprint in 120 countries, with one of the largest pipelines of products, both in the market and under development," she said.

Debt Reduction Plan

Shaw thinks the debt is very easily serviceable. “I think (investors) have seen us as a debt-free company. And therefore, they want us to not have this level of debt," she said, explaining why the company is looking at a QIP or some other fund raise to bring down the debt. “We are actually converting venture debt into equity. So basically, Biocon will hold greater equity in Biologics. So it's not like returning a bank debt. It is really very productively converting a venture debt into equity,” she added.

In the latest quarter, the company’s generics business faced pressure, but the recently-launched cancer drug Revlimid brought windfall profits for Biocon (which won’t be repeated as competitors will rush in). But Shaw is confident that that Biocon loses in, Revlimid it will make up in GLP-1s (as discussed earlier).

“Our's is a very well-balanced business, Lata. 60% of our business is coming from biosimilars. And the remaining comes from research services and generics…I expect to counterbalance the windfall that we had in generics with biosimilars," she said.

And Finally, Would IPO Biologics Merge With Biocon?

A committee of the board is evaluating the options, she said. “We are really evaluating the synergies, the size of the business, and whether it makes sense to merge or whether it makes sense to IPO. It's not appropriate for me to say at this time what my preference is. There's a committee looking into this and we will be driven by the committee decision,” she said.