Branded Formulations Business Will See Muted Performance In FY17: Biocon’s Kiran Mazumdar Shaw
Biotechnology major Biocon Ltd. posted a 52 percent rise in net profit in the quarter-ended September over last year ‘s corresponding quarter, a beat of 5 percent over the Bloomberg consensus estimate of Rs 139.6 crore. Double-digit growth in the small molecules and biologics verticals led the 19.6 percent growth in net sales for the quarter.
The acceptance of Biocon’s proposed biosimilar, Trastuzumab, for review by the European Medicines Agency (EMA) – the company’s second filing in EU – and the tentative U.S. FDA approval for the cholesterol treatment drug Rosuvastatin calcium tablets – which marks Biocon’s entry into the U.S. generics market – were the two important milestones for the company this quarter.
The company may see muted performance in the branded formulations division due to discontinuation of Abraxane, but expects to make up for it in the coming years, Chairman and Managing Director Kiran Mazumdar Shaw told BloombergQuint in a telephonic conversation. The company is on track to file Glargine and Adalimumab both in EMA and U.S. in this fiscal year.
Here are edited excerpts of the conversation with Shaw.
How has this quarter’s performance been? Has it met your internal expectations?
At a Biocon standalone level, revenues have grown 21 percent, Syngene has grown 14 percent year-on-year and 10 percent quarter-on-quarter. Each one of our businesses have seen healthy growth. Branded formulations, which was the only disappointing segment, has also grown 15 percent. Licensing has also been very healthy this quarter at Rs 32 crore.
I believe Abraxane was discontinued this quarter. What kind of impact can that have in terms of revenue loss for FY17, if you can put a number to that?
The Abraxane discontinuation did not reflect in our numbers. We had factored in that particular discontinuation in this quarter and we have also forecast that for the remaining part of the year, Abraxane will not contribute to sales. So we expect the annualised impact to be about Rs 75 crore.
On the operating margin performance, how confident are you of sustaining the 24 percent kind of level for the year?
Licensing income always bolsters margins. Having said that, even if you were to deduct this impact, you will still get a very robust EBITDA margin which we think we can sustain going forward.
Biocon had launched Insulin Glargine in Japan in July 2015. How has the initial response been in terms of revenue or at least market share? What are your plans to introduce Glargine in other geographies? Any licensing deals in pipeline for the same?
All we have shared in the past is that the size of the Japanese market is about $140 million for insulin Glargine. There are three players in that market – one is of course the original innovator who is Sanofi, followed by biosimilar Glargine of Lily and now biosimilar Glargine of Biocon which we are marketing through our partner FUJIFILM Pharma. Our partner has informed us that the market acceptance by both patients and doctors has been very positive. So we are quite confident of garnering some market share as a result of this. I can’t give you much more data because it is confidential. But the Japanese approval has opened many doors. Many emerging markets have opened up to us, many licensing deals have happened because of the Japanese approval and of course there is far more confidence in Biocon’s Glargine getting approved in Europe and U.S. as a result of this.
The branded formulations business was impacted as some of the key products were brought under drug price control in India, but the vertical has still grown by 15 percent. Can we assume most of the growth was driven by the UAE market?
The impact of drug price control has been limited. What has really impacted the business is the lack of Abraxane sales and phasing out of tenders. We were expecting some tenders this quarter which were postponed and that is impacting quarterly numbers. Having said that, because of Abraxane, we are largely going to see muted performance in branded formulations but we expect to make up for it in the coming years.
So the postponement of tenders means that the next 1 or 2 quarters should see good numbers?
Yes, I think it is just a phasing issue. I think some of these tenders will definitely get captured in the next few quarters. But the Rs 75 crore Abraxane revenue loss will hit this vertical the hardest since its quite a large number for this division. That’s why we think growth will be muted. It could have been better, but it will be muted.
Despite this, the division has grown by 15 percent this quarter, so could we assume most of the growth was driven by the UAE market?
Yes, mostly by the UAE market. But we have seen good growth in some product segments like oncology franchise, metabolics franchise and immunosuppressants.
Could you take us through planned product introductions in the domestic market? I believe Biocon is in talks with potential partners for in-licensing novel molecules?
We have some ongoing discussions but I can’t comment till we conclude any deal. It will add to the branded formulations portfolio. We hope to conclude it in the next few quarters.
What’s the progress on the biosimilars filings - on Trastuzumab. Can you tell us about the filing and approval timelines for U.S. and Europe?
The acceptance for review of our biosimilar Trastuzumab dossier by EMA is a big milestone for us and we are now on track to file for U.S. This fiscal we are expecting to file four dossiers - Glargine, Pegfilgrastim, Trastuzumab and Adalimumab. We are on track to file Glargine and Adalimumab both in EMA and U.S.
Biocon has received a tentative U.S. FDA approval for the cholesterol treatment drug Rosuvastatin calcium tablets. What could be the ANDA product pipeline over next 1-2 years. What is the revenue share that you expect will come from U.S. generics?
This is a strategy. Biocon wants to move up the value chain from APIs to ANDAs. We will basically confine ourselves to a very select portfolio of difficult and complex molecules. Statins has always been a mainstay for Biocon so Rosuvastatin made natural sense, to move up the value chain and make the finished dosage. We hope to be in the U.S. market, at least this fiscal, with out our Rosuvastatin calcium tablets under the Biocon brand. Having said that, even though we are into generics and ANDAs, it is not going to be the most important part of our business. It is going to be a value added part of our business and the most important part of our business is always going to be biosimilars for the foreseeable future. It terms of ANDA pipeline, every year we expect to file 2-3 ANDAs.