There is no record of any clinical trials ongoing for Biocon for biosimilar Keytruda — is this going through a partnership? How should we think of your participation?
I think it's very timely that the conversation that we've been having with the agency has resulted in the agency coming back and saying that the CES trial is no longer a mandatory requirement. In fact, it's not required for products to be approved. There are a couple of companies or more who've committed to this trial, and they have publicly stated that they are stepping back from those trials as well. Have we moved along that path, we would have probably incurred cost and exposed patients to that. So, I think we've been forward-looking on this. We've taken the lead, as always, on the scientific conversations that we've had with the agency on saying that we have enough CMC data, enough characterization analytical data to demonstrate that our product should be approved without clinical study Phase III. And what you've seen now is that the agency has taken a very progressive step. So clearly, it validates our views, and I do not think we are at a disadvantage. In fact, we believe we are in a position of strength at this point in time on these products.
What is the current market share for Yesintek? And on Aspart, given interchangeability, is it fair to believe we'll start with a market share comparable to what we have with Semglee?
I think let me get two, three points clear. The first piece is that as a community, there was a concern that whether Stelara would move in the similar direction as an Humira and it's encouraging to see that, that's not happened. You are seeing far more formularies listing biosimilars. Particularly, we've had tremendous success with Yesintek with over 70% of the commercial formularies listing the product. And that is very encouraging. So, it behaves very differently than what we had seen in the past, a couple of years ago. The second piece is given that there are private label players and both do not report exact market share, it's hard to talk about what market shares would look like. But the formulary coverage and the fact that we see uptick of the product indicates that Yesintek has an early lead on the biosimilar players. And it's taken a large portion of the biosimilar market, the market share, and you are seeing the brand starting to recede from formulary coverage. For Yesintek, we are fully integrated as we are for Aspart. So, we are not in a rush. We will do this in a responsible manner. And there is no reason for us to think that we should get any different market shares than the success that we've had with Insulin Glargine for Insulin Aspart as well.
What is restricting us from commercializing Denosumab and Bevacizumab — we had talked about Bevacizumab commercialization by this time? And on Denosumab, how do you see the competitive scenario?
Denosumab is commercialized under two brands. One, like you rightly said, is in the pharmacy benefit space. And there's another brand which is in the medical benefit space. Both compete for a different share of the market, and there are different archetypes in how those are commercialized. One of them will follow the route that we just talked about where pricing will play a big role. And the other, which is in the medical benefit place, will follow a route similar to our oncology franchise, where pricing alone is not important. You will have to gain traction with the IDNs or the buyers so that you can value maximize it. There are 5 players in the market today and five more in the pipeline. So, there are going to be people chasing this. If we pursue just market share, there is going to be a risk of losing value very quickly. We understand this market very well. You have seen us do this with other products. And we will do this in a very measured manner. We are in this for the long, so we will look to do this over a period of time, and we believe we will be very successful at.
With net debt reduction, are we laying out a road map for where we see overall debt levels in the next couple of years?
we have been committed to reducing debt at an overall level. And what you saw us do during the course of the last few quarters is we have retired all the structured debt. We have been able to retire Goldman Sachs. We have been able to do that with Kotak. And more recently, we are talking about Edelweiss as well. So, you will see the structured debt go off, and that will have a positive impact on the numbers starting in the coming quarter, and you'll see it improve as we get towards the end of the year. So, you heard Kiran talk about the benefit that will accrue to the P&L as we move. We are also looking at seeing how we can work through a low interest piece. So, the interest costs overall, I see coming down in the coming quarters.
Can you give us a breakdown of gross debt at parent vs BBL level, and what are the major short-term debt maturities as of September (reported at INR 69 billion)?
some of these questions, maybe we can take it off-line, and we'll give you all the details with respect to the debt in the subsidiary and debt at the parent level. But like what we have been saying all throughout, most of the net debt payable to bondholders and the banks is in the Biosimilars subsidiary. That is about USD 1.1 billion as of September. The short-term maturities are really revolving credit. So those are not like payable. But the full details, why do not we take it offline.
Now that we have launched Insulin Aspart, help us understand the kind of traction that can be expected from this product, given that we are the only interchangeable player in this space?
we are the first interchangeable bAspart that the FDA has approved. It is indeed a very proud moment for us. We are seeing a very strong traction for our insulin products, not just in the U.S. but globally. We will and we have already launched Aspart in a very responsible manner, first with an integrated player in the U.S., where we can responsibly supply that. We will continue to see a full year '26 demand that comes in. As you know that we will be working with these commercial payers through '25. And then as we get into '26, you will see the traction grow. But I do want to point out to you that we are seeing also an increasing demand for insulin Glargine, which continues to gain market share in several parts of the world.
So effectively, second half FY '26 is still the procedural aspect and then look at commercial traction in calendar year '26 — is that the way to think about it?
for the subsequent calendar year, you need to work between July and September or August and October in that time frame to gain commercial payer formulary status. We are the only biosimilar Insulin approved in the U.S. So clearly, there's a massive opportunity for us. And you will then get a full calendar '26 opportunity, which as you transition out the existing product, you will start gaining market share. When I said responsible, these are chronic therapies, and you want to make sure that you bring on patients and then you hold on to them for a very, very long period of time.
If you want to guide for full year FY26/27 in terms of the R&D spend on the biosimilar side, either on an absolute basis or as a percentage of revenue?
We've said, Tushar, that we would be in that 7% to 9% of revenues for R&D, and we continue to be in that range even now and on a full year basis, you will see us in that 7% to 9% range.
On the gross margins on the Generics business, what kind of gross margin we are tracking, and what kind of R&D spend one should build for the generics business?
the R&D spend again, last quarter was at 9% of Generics revenue. And I expect it to be in a similar trajectory of 8% to 10% of revenues. And as far as the gross margins are concerned, we are looking at mid-40s. Of course, this fluctuates depending on what kind of product launches come up and what kind of pricing we get. We are, of course, expecting improvement in gross margin in the coming quarters. But at least in H1, we have seen mid-40s margin.
On the FDA's revised guidance on lowering requirements around comparative efficacy trials — do we expect this to be a positive for us in terms of the R&D spends that we do on developing each biosimilar product?
Having the Phase III or the CES trial, as they say, taken off, that doesn't necessarily lower the barriers to entry, which is the common perception, it certainly lowers the cost to development, and it certainly shortens the time to bring products to market, both beneficial for patients. So that's why it's an exceptional move. But it increases the focus and the burden on CMC development and facility GMP clearance for biologics. And on both these counts, companies which have been doing this for a very long period will essentially see more products getting to market sooner than in the past.
Would you expect some of the newer players to accelerate their development and hence, more competitive intensity in the space?
whilst people will obviously try to invest in biosimilars much more exuberantly than they have done in the past because of cost of development, established players like Biocon Biologics will have a clear advantage of bringing more products to the market. So, we expect our pipeline development to be more expanded and extended and faster to the market. So, we don't necessarily see this as a competitive threat, but we see this as a great opportunity of expanding our portfolio.
There's a fairly decent loss reduction at the Generics EBITDA level versus last quarter — what exactly drove this: newer launches like liraglutide and Dasatinib or ramp-up at Vizag, Cranbury, the new peptide facility?
I think we are delivering in line with that guidance. And, of course, the facilities getting capitalized is one thing. We also must lock in customers, especially for our APIs from these facilities, which would take some time, but the main uptick in the margin is because of the GLP-1 Liraglutide launch in the European market. And we, of course, have other products as well, which contributed to the revenue growth and the profit growth. Dasatinib was launched in quarter 4 of last fiscal FY '25. So, it continues to do well for us. We had an important launch in quarter 2, which was Sacubitril/Valsartan as well, which led to the growth in quarter 2 and the margin. And we would continue to see margin improvement and revenue growth traction in the second half of this fiscal.
Interest costs are broadly in line with Q1 despite Goldman Sachs repayment — when can we see a reduction? Should we look at a lower number in Q3?
we've already started reflecting the Goldman Sachs impact on our margins. And I think Q3 will reflect the Kotak and then Q4 should reflect the Edelweiss.
Certain formularies have excluded Aspart as a class and in some cases NovoLog is at a superior tier to Kirsty — does this limit the TAM for Aspart?
customers are continuing to be very bullish on Aspart from Biocon and we're working through those. But we don't see any limitations because of the channels. There's still a lot of opportunity for Kirsty, our Insulin Aspart. And we know those channels very well. And as Shreehas said, as we continue to be that responsible player and ramp up as formularies come, we'll be very aggressively pursuing those, and customers are anxiously awaiting as we continue to roll out our Insulin Aspart. So, I don't see this as a concern as we look to move forward with our franchise. I would say no because certainly, we would love to have 100% market share in biosimilars. But as you look across the U.S., there remains a significant amount of payors and a significant amount of opportunity within the GPOs or integrated delivery networks to be able to grow our business and achieve very similar aspects into the current market share that we see with insulin glargine. I see this as a tremendous opportunity and are not concerned with some of these initial formulary decisions. It doesn't mean they're permanent. Shreehas Tambe added: when the FDA talked about our Aspart approval, it said that it was the first interchangeable biosimilar rapid-acting analog. They did not approve it just as interchangeable to Aspart. So, there's a broader fungible market is what we believe. So, it's a bigger piece of the pie.
What is the current outstanding structured debt on the books as of September quarter, and how much CP has been issued?
the only instrument, which is outstanding as on 30th September is the Edelweiss instrument. Goldman Sachs exit happened on 30th June, and the Kotak exit happened on 1st of October. And we have agreed with Edelweiss to exit on or before 31st January. The CP issue was for about INR 6 billion. That also has been repaid.
What is the split between the formulation and API business in Generics right now, and what is the margin profile — historically API had higher margins?
the margins are impacted because of the new facilities. And of course, formulation business margins are slightly lower compared to the API business. But we are, of course, working on all the other cost improvement programs on the API also to further improve the margins. I mean there is a class of products such as Statins, which is challenging scenario. And we do continue to face a lot of pricing pressure there unlike Immunosuppressants, which continues to be high-margin business, and of course, Peptide continues to drive growth for us, which is primarily on the formulation side. To answer your question in terms of the split, if you look at today, almost 60% of the business continues to come from API and 40% is coming from formulation. And then over the last couple of quarters, formulations are what's driving the growth and will continue to drive the growth as we move forward in the second half of this fiscal and also in the next fiscal.
Biocon has end-to-end GLP-1 capability — what is the device capacity and fill-finish capacity you are working with now, given Semaglutide filing and Liraglutide opportunity are in the visible range?
let me add that capacity will not be a constraint on the formulation side or the device side. We have multiple facilities, we have shared infrastructure, shared facilities with Biocon and Biocon Biologics. We have just commissioned our new injectable facility, which is, again, dedicated or focused on GLP-1s. We have external manufacturing network, CMOs and whatever is the demand which we anticipate over the next couple of years, we are very confident that we will not have capacity constraints, whether it's coming from API, whether it's coming from formulations or device assembly. And I think we are very well placed on all these fronts to capture the opportunity over the next couple of years. And, as you know, Ozempic opportunity is near term in the emerging markets, and the opportunity in the U.S. and Europe in various other markets start in '31. And I think the investments that we have made over the last couple of years puts us in a very comfortable position to capture the opportunity for next decade plus period.
What is your reading on market share improvement from the FDA guideline removing CES trials, and what kind of ASP erosion do you see as competition intensity picks up?
the two biggest things that the guideline that the FDA has put out intends to achieve: one, is it intends to reduce the cost of development which it will do immediately, which is a positive sign. And two is, it will bring the time down for development which will bring these products to patients sooner. So, it will cut down that development time significantly. So biosimilars getting to patients faster and the cost of these products for development being lower are the two primary benefits of this. Now how each of the products will gain market share is a capability of your commercial platform. Now coming to the other aspect where you talked about the inverse proportional relationship of market share and ASP. The erosion in price is usually always an artifact of competition. You need to be a fully integrated player to be able to leverage all aspects of that value chain. And we develop our products. We manufacture them. We have commercial capability, so we can be competitive in this space. We have not seen erosion, which is outside of that expectation that we had had. So, it has been a gradual curve, and we continue to see when it stays competitive. It is not a cliff that we would have seen in some of the other parts of the business, not in biosimilars.
Can you give us a color on how the revenues for the half year split across various geographies — U.S., Europe, and emerging markets?
that ratio is roughly the same that we have been indicating, 40% in North America, 35% in Europe and 25% for Emerging Markets. That is the rough split.
We've had a lot of discussion around biosimilars in the U.S. — if you can spend some time on how you're seeing progress on EU and emerging markets from a portfolio perspective?
I appreciate it because we usually talk about the U.S. Europe has been a focused area for us. It is a big opportunity that we've talked about even in the past. In the initial phases, we have talked about moving this business into select markets in the European region, and you are starting to see that happen. You are starting to see the market shares grow in our oncology product. In Emerging Markets, while we have a very strong network of partners and we'll continue to build on it, there is a certain challenge when it comes to the tendering process, which brings in some predictability and concerns around how that business operates. So, we are focused on two things in the Emerging Markets where we are looking to be self-led in more countries than we have been in the past. And two is we are looking to bring in more balance of retail business in addition to our tender business, which brings in more predictability than we had in the past.
With U.S. launches set to scale up next year, do you see the geographic mix changing meaningfully or do all regions grow in a balanced manner?
First up, we have a very balanced mix, if you see what you just said, it is about 40% or thereabouts in the U.S., 35% in Europe, and 25% in the rest of the world. And that is a very healthy distribution. There is no exposure in any one particular market. We expect all regions to grow. You may see a differential growth across, but we expect the balance to be in a similar range that we are seeing at this point in time.
With some innovators deprioritizing insulins, can you put in perspective the global opportunity there for players like Biocon to step in?
Biocon is very, very strategically placed in this particular opportunity. If you look back and see who the GLP-1 players are today, they are the insulin companies. Insulin companies have brought in the Semaglutide. It is the insulin companies who brought the Tirzepatides to the market. The only other player outside of that which is a biosimilar insulin player and is in a position to bring in GLP-1s is Biocon. So, it does place us in a very unique position. We do see a growing opportunity in the insulin space. We have not seen any other biosimilar insulin really in the U.S. at this point in time or in Europe. So, the opportunity is tremendous. And it is really up to us to take this market share in a very responsible manner so that we can provide options to patients for a very, very long time. Not only is the insulin opportunity limitless, but there's the opportunity of having the peptide portfolio which requires a tremendous amount of education and working with patients to understand each of the device that they will get, which will be different than the originator device is an experience that is invaluable because of our insulin commercialization capability and we see a huge success on that background.