Biosimilars to lead growth; generics to be a small part: Biocon

Biotechnology major Biocon reported 19.8 percent rise in revenues to Rs 796.2 crore year-on-year and margins grew to 25.2 percent from 21.2 percent in the second quarter of FY17. The company’s standalones sale grew 17 percent in Q2.Biocon is expecting growth to come from its main biosimilars business and not the US generics business, said Kiran Mazumdar Shaw, Chairperson and MD of the company. Q2 performance was boosted by delivery of small molecular business. In Q2, the most significant milestone was the tentative nod for Rosuvastatin Generic. The company booked Rs 32 crore licensing income pertaining to biosimilars. Speaking to CNBC-TV18, Shaw said that biosimilars are seeing a good uptick in emerging markets. The US generics market will be a very small part of the revenue, Shaw said. Biocon will soon file for Trastuzumab in the US market. Currently, the company is waiting to get marketing rights for the drug in Europe in the next 12-18 months. Launch of Insulin Glargine in the Japan, too, has been positive for the company. Approval in Japan has opened other markets for Glargine, Shaw said. Biocon has stopped Abraxane, a drug in its cancer portfolio, in Q2. No sales were factored in the last quarter and no sales will be for next two quarters as well. The loss for the drug will be around Rs 75 crore for Biocon.Below is the transcript of Kiran Mazumdar Shaw’s interview to Nigel D’souza and Ekta Batra on CNBC-TV18.Nigel: Topline growth of around 20 percent on the whole, that is a fairly good set of numbers. Syngene’s growth at around 14-15 percent, we have seen even 18 percent. What is the outlook going ahead? Also, a quick word on the margins of around 25 percent. I was looking at your research and development (R&D) cost in terms of percentage on sales. It is at around 8-9 percent. You said that it is going to go even above 10 percent, so are you confident of holding on to these margins of around 24-25 percent?A: The business is well-positioned. You have seen all our businesses deliver very strongly this quarter and we are confident that many of the events that we have announced this quarter, such as the tentative nod that we have received for Rosuvastatin calcium tablets which will herald a foray into the US generics market. The launch of our biosimilar insulin glargine in Japan through our partners, Fujifilm Pharma which has been well accepted and received by both patients and doctors augurs well for growth in that market.Our Malaysia facility has been approved. We expect commercial sales to start from that plant in H2. We have seen two dossiers now being accepted for review by European Medicines Agency (EMA), which means that we will be entering the European market for our biosimilars within the next 12-18 months. So, everything is well positioned now for us to start seeing good traction. Our small molecules vertical has also delivered very robustly for this quarter and we expect to see that perform similarly for the rest of the year.Ekta: I wanted to concentrate a little bit on the triggers such as your entry into the US generics market. For Crestor generic, when do you expect final approval from the US Food and Drug Administration (FDA) as well as for maybe Crestor generic, where exactly would those two final approvals or tentative approvals respectively stand?A: We have got a tentative nod, so the final approval should come very soon and we expect definitely to be in the US market during this fiscal. So, that is the expectation and thereafter, of course, we will have hopefully other generic approvals next fiscal.Ekta: So, what would your filing or your Abbreviated New Drug Application (ANDA) pipeline look like for the US generics market and maybe a year or two years down the line, how much would be the US generics market as a percentage of sales, considering that we are seeing pricing pressure and other competitive intensities increasing only in the US markets.A: Generics is going to be a very small part of our overall business. It is a sub-segment of our small molecules business because we want to basically vertically integrate our business and move up the value chain. So, we do not expect it to be a significant part of our overall business.However, what we are betting on big is our biosimilars business and that is something where we are seeing a lot of good uptake in emerging markets in the near-term. And obviously, when it gets approved in US and Europe, these are going to be big growth drivers for us in the future. So, that is where the growth is going to come from. So, generics per se is not something that we are betting big on. Biocon is focusing on a very small niche portfolio of generics for the US market and it is a strategy of adding value to our active pharmaceutical ingredient (API) business.Ekta: Let me just take you on, on the biosimilars business, because everybody is waiting by to see what happens with Trastuzumab in the European markets. When can we hear something formidable according to you, from the European Union (EU) regulators and when can we expect a US filing as well?A: The earliest you can expect approval from the European agency could be within 12 months. But it is generally a 12-18 month timeframe. The data is very good. We believe our dossiers is very robust and high quality dossiers. So, we should be able to get approval hopefully in the next fiscal, hopefully, in calendar year 2017. That is the expectation, but we need to see how the regulators look at our dossiers and give us that final approval, the marketing authorisation, so to speak. We expect to also be filing in the US very shortly. We already indicated that we are on track for filings this fiscal and we remain committed to that filing.Ekta: The one reason why the stock is seeing a rerating in 2016 is because of your insulin Glargine launch in Japan. Can you tell us how exactly the insulin Glargine launch has done in Japan? If you could share some financials on that and what is the plan to scale it up into other markets as well?A: I cannot give you too much optics on that because it has just entered the Japanese markets. The Japanese Glargine market is about USD 140 million in size and Fujifilm Pharma has just informed us that our product has been very well accepted by patients and doctors and they are hopeful of garnering a good market share in the Japanese markets. But more importantly, that was a trigger to indicate the quality of our product, the quality of our dossier and the higher attributable, approvability of our Glargine dossier, both in EU and in the US. That was the main trigger because the Japanese market and the Japanese regulatory system is very stringent and therefore, getting approval in Japan was a very big event for this particular molecule.Having said that, the Japanese approval has certainly opened up many more emerging markets and we have entered into many more licensing deals for Glargine in many emerging markets. Therefore, we believe that the insulins portfolio per se is going to be a very important segment for us going forward.Nigel: I want to talk about Copaxone, the multiple cirrhosis drug. I was reading a couple of articles. A US patent agency, they have invalidated the third patent of Teva. What kind of an opportunity does it present for your company? Could you give us some kind of a outlook on that front?A: We are developing this ANDA for Glatiramer Acetate and we are in the process of developing this asset for submission to the US FDA. We are working with many of the queries raided by US FDA. So, we cannot give you any guidance on when we will be able to get this approval from US FDA, but suffice to say that we are answering many of the queries that have been raised by US FDA and we hope to be able to address these queries and hopefully get approval before too long.Ekta: There was one particular product in your oncology portfolio where there was a discontinuation of sales and there could be an impact of around Rs 75 odd crore. Is some of the impact already factored in this quarter or is it just going to be a prospective and what is the reason for the discontinuation?A: This was a product that we had in-licenced from Abraxis Biosciences and this company got acquired from Celgene thereafter. Celgene has decided, for strategic reasons to discontinue this product for supplies to us and this has been factored in this quarter. This quarter has not realised any revenues from Abraxane and we are indicating that the next two quarters will reflect this particular discontinuance and the total impact would obviously then on an annualised basis, it is estimated to be around Rs 75 crore.