Biosimilar insulin Glargine to make $100 m from FY18: Biocon

Syngene International had delivered good business, said Kiran Mazumdar-Shaw, Chairman & MD, Biocon.Syngene is Biocon's research services subsidiary.  The contract research and manufacturing organisation has invested robustly in some of its anchor client businesses. Its clinical business has also begun to gain traction, she added. Earlier in March, Japan had agreed to market and sell Biocon's biosimilar insulin Glargine from the first half of FY17. Shaw said this move will help it foray into large emerging markets like South Africa, Brazil, Russia and Turkey.  She expects these markets to give Biocon sales upwards of USD 100 million from FY18. During the Q4 of FY16, Biocon spent Rs 100 crore at a net level in R&D, and Shaw says she doesn't expect this mark to go any higher. Biocon's R&D team is working on the second phase of the development of oral insulin (IN-105), and Shaw hopes that it becomes an approved product in the next 2-3 years.Below is the transcript of Kiran Mazumdar Shaw’s interview with Sonia Shenoy Latha Venkatesh and Ekta Batra on CNBC-TV18. Sonia: Before we get to the details of Biocon, I just wanted to ask you about Syngene and the scorching pace at which we have seen the growth this time. 32 percent growth on the topline. What led to that and is that something that you can sustain through the course of FY17? A: Syngene has had a very strong run thus farm because all its basic strategic growth drivers are really driving good business and as you know, Syngene has been investing in some of its anchor client business very robustly and this is panning out very well for Syngene. The Bristol-Myers Squibb (BMS) business continues to drive good growth, followed by Baxter, Abbott and Amgen. So they are getting good traction on this kind of large business opportunity. But, added to that, some of these very differentiated offerings in the area of chemical synthesis and a largescale manufacturing opportunity that are beginning to start realising and driving good growth. Their clinical services business is also beginning to gain some traction and as you know, Syngene enjoys an impeccable track record in terms of regulatory approvals from US Food and Drug Adminstration (FDA), European Medicines Agency (EMA), and other international agencies and all this has augured very well for Syngene and there is a tremendous amount of confidence that pharmaceutical companies and non-pharma companies are buying into in terms of Syngene’s research services model. So, I feel that Syngene is well poised to really carry on with a strong growth momentum. Latha: I was actually more interested in what you can do with Glargine. That is what the analysts are really kicked about, the experts are kicked about. You have crossed the first big hurdle, now it is a quantum leap. But, give us some numbers for this quantum leap. What does it mean of new geographies, what does it mean in terms of revenues FY17-FY18? A: Let me answer this question in two parts. First and foremost, as you know, the Japanese approval means we can actually start marketing this product this fiscal and our partners FUJIFILM Pharmaceuticals have indicated that this should happen in the first half of this fiscal. So, we will see our product in the Japanese market this fiscal which is a great milestone for us. But as you very rightly said, this also opens up many doors for us. In many large emerging markets which were thus far not accessible because they would not just accept Indian data and the Indian dossier, what we are now going to be able to realise our entries into many big markets – South Africa, Turkey, Russia and many other large emerging markets where we believe the opportunity is significant. In addition to that, we are also all set to submit our dossiers to both EMA and US FDA this fiscal and that of course, will require a review period, so we will not be in the market this fiscal, but that basically, will be another big event to watch out for because that again, signals our inevitable entry into these very important markets. As a large global opportunity, you do know that Glargine is the second biggest blockbuster category drug in the pharmaceutical market. And, this is an opportunity, an addressable market size of around USD 8 billion. And of course, Biocon and Mylan will play very aggressively to see what part of this addressable market they can garner. Latha: You told us in detail about your plans for Glargine and the fact that it is on throws of getting permissions from US FDA as well as emerging markets. I was looking for slightly more clarity in terms of numbers, visibility. In FY17 and at least FY18, what can this do to the stock to the company? A: As you know, we are addressing a very large global opportunity. Insulin Glargine, as an opportunity is upwards of USD 8 billion as an addressable market. But most parts of this market opportunity is going to open up in FY18 and beyond. So, if I was to basically focus on the market opportunity, ahead of that opportunity, then I would say that we are really looking at Japan and some of the key emerging markets like South Africa, Brazil, Russia and another key emerging markets like Turkey, etc. Now, collectively, these could offer Biocon an opportunity of upwards of USD 100 million and that is the kind of addressable market that we are trying to realise over the next two years just ahead of the US, European opportunity which could be significant thereafter. So, we are very well-positioned in the insulin space to be a big player. And you know we are betting very big on this because we have invested big time in Malaysia, India, and we think that considering the fact that very few players in the biosimilar insulin space, where really Lilly and Biocon are the only players apart from the originators. We have a huge opportunity going ahead. Ekta: I wanted to ask you about the Research and Development (R&D) costs. It is one of the highest that you have recorded in quarters gone by indicating that yes, you are looking at more research and development down the line in terms of your pipeline. How much can we expect in terms of an average run rate in terms of R&D costs and where exactly are they being utilised? A: The quarter spend has been the highest to date. We have spent Rs 100 crore at a net level and Rs 152 crore at a gross level and this almost reflects between 15 and 23 percent of bio-pharma revenues which is a very significant spend in R&D. We expect this is a sort of hit the top of the spend rate that we anticipate. So, I do not think you will see a much higher spend in R&D rates going forward because as you know, we are sort of coming to the end of big-ticket spends on many of our biosimilar programmes. As you know, we have indicated that we will be submitting our dossiers for many of our big ticket spends, Glargine, Pegfilgrastim, Trastuzumab, Adalimumab, in FY17. So, you can basically get some sort of optics on how these R&D spends have been surging over the last few quarters. So, going ahead, you are likely to see these levels being sustained but equally, I do not think you are going to see much greater spends in R&D going forward. Having said that, you must realise that these are very important investments for Biocon because these are going to deliver very high growth opportunities for Biocon going forward. And as I keep reiterating, the return on investment on these kind of investments is going to be significant for Biocon starting with the Japanese approval which you saw have gone down very well with investors.Ekta: Where would that leave the status of approval for your oral insulin IN-105?A: Oral insulin is a programme that we are going to now develop and take to the next phase of development. That trial should start very soon and we will be then looking at oral insulin possibly as an approvable product in the next two-three years.Ekta: There is one particular incident, which has come up with a clinical research organisation which is Semler Research where US FDA has brought up quite a lot of observations and in fact all of the drugs -- the studies were conducted there have to now be redone or relooked at. Your thoughts in terms of the entire incident that has taken place and whether Biocon would have any sort of outsourcing to Semler Research?A: Certainly Syngene's clinical research arm has an impeccable track record with US FDA, EMA and other regulators and since they also offer very similar types of services apart from other more specialised services, we believe that this is an opportunity for Syngene to gain some upside based on some of these kind of incidents. So we look at it as something which Syngene can benefit from and gain from.Ekta: That brings me to the question about multiple incidents, which have now taken place about the US FDA getting more stringent when it comes to observations and plant observations by Indian companies, do you think that this is just a phase that Indian companies are going through maybe could last for the next one-two years, they come out stronger, better and more efficient at the other end of it?A: I certainly believe so but having said that, you should also look at recent report. which tells you that some of this is being blown out of proportion because if you compare the kind of 483s and warning letters that Indian companies have received and compare it to other countries especially even the US, we should not be in an alarmist kind of a situation because we are sort of almost on similar levels as what happens in other geographies.Having said that, we must focus on compliance and be very compliant with stringent of norms that are exercised by US FDA and EMA. I know that Biocon as a group has been very committed to compliance to regulatory norms and we enjoy a very impeccable track record in terms of our audit inspections and compliance track record but there are many other Indian companies, which equally have this opportunity to create this impeccable track record. We will come stronger out of this because there needs to be much more focus on compliance.