How should we think about growth from here? With the bunch of launches flowing through next year, should we get back to 20%+ growth trajectory for biosimilars with mid-20s margin, or should that margin also improve going into next year?
We've refrained from giving specific guidance for the future. We did say that we will have the mid-20s for the current financial year. With the launches now set up and the demand growing across geographies, it's obvious that some of these things are expected to improve, but I'll refrain from giving any specifics on how the margins are expected to improve. But clearly, the future is more exciting than what the past has been.
On the trajectory of the biologics business - there's been a slight slowdown in growth. What are the drivers that give us confidence on going to a faster trajectory?
If you look back almost 7 or 8 quarters, there's been year-on-year growth and sequential growth quarter-on-quarter. The last full year, we didn't have any new launches yet we saw a significant increase in revenues year-on-year. Characterizing it as a slowing down of growth is probably something we'll have to sit down and look at. We've clearly bought 5 new products, some of them we've launched. You've seen the uptick of Yesintek in the U.S. seeing a tremendous response - over 70% formulary coverage, amongst those few biosimilars in the U.S. which is now about double-digit market shares. Growth will obviously be expected when you have new product launches.
Could you give us a sense of how YoY and QoQ growth plays out between existing products and new launches in biosimilars? And is EU declining QoQ given the higher US sales? Also colour on market shares.
The way to look at this is a wider window of four quarters. New products take four to six quarters, some of them maybe up to six to eight quarters to reach their peak sales. Fiscal '27 is the first time you will see some of these launches that we did in '26 begin to play out. On Europe, we are looking to grow that market as well; this quarter we prioritized profitability. On market shares, legacy oncology products continue to have over 1/4th of the market in oncology. In Europe oncology, we were under 6%, now those are trending in double digits again.
Novo Nordisk is talking about launching vials next year citing generic threats - how do we perceive this versus our investments?
If the innovator does launch a different format or formulation, we will assess whether we need to develop it and for which market. The disposable pen is the standard in most developed markets in US and Europe, and they might have a different strategy for emerging markets. At this stage it will be difficult to comment, but we will track what makes most sense.
On biosimilar growth - if we look at the nine-month number of 17%, can it be split between older products versus new products launched in last six to nine months?
The scale-up of biosimilars is a bit staggered over multiple quarters. So a large part of the growth that we have demonstrated in the nine months is based upon the strength of the existing franchise.
What is the debt reduction roadmap? Can $500 million reduction be expected in next financial year?
In the last two quarters from June till now, you have seen all the structured debt getting retired. Cumulatively, that will be upwards of almost $550 million to $600 million. The debt ratios have improved with upgrade from both S&P and Fitch. What remains is the debt that we owe to bondholders and syndicated loan that we are on the journey for reduction in subsequent quarters based upon organic cash flow generation. We are not quantifying. In one year, such a large quantum is not possible. But it's one of the biggest and top priorities. Kiran added: debt-to-EBITDA ratio has come down substantially - now below 2.5x.
On the biosimilar business, the upgrade of production and quality - is it fair to assume that this is largely done and behind us? And what led to this need for upgradation, since these approvals were expected to come through this year?
We've upgraded our facilities to be able to scale up and be able to deliver on this increased demand as we go along. In the coming quarter, of course, it continues in our growth trajectory like we had projected. Given that we had a good demand for our products, we prioritized high-margin markets which preserved the margins. In fact, those margins have been higher than what our guidance has been in the mid-20s. So, on a full year basis, we'll of course be in the mid-20s on our margins as well.
Capex outlook for the consolidated entity in FY26 and FY27, and trajectory over the next two-three years?
At a group level, we were tracking roughly $275 million plus of capex every year. That has moderated to less than $225 million. And going forward, as the Malaysian capacity build-up gets over, we will see further moderation, because largely hereafter it will be maintenance capex across three companies. Shreehas added that the only real investment was insulin capacity doubling - drug product capacity comes online in the coming fiscal year. Siddharth added that large part of capex in generics is over.
On other operating expense - we saw a 10% sequential jump. How should we look at the operating expense trajectory in coming quarters?
If you are referring to this other expense row, which is about INR 1,178 crores, that comprises the expenditure across manufacturing facilities quality expenses, commercial expenses across three entities. And that is largely fixed in nature. There is some element which is linked to the sales across all the three companies. And the growth of that particular line will be lower than the revenue growth.
Update on the net debt position as of December 31 or current?
The net debt that we owe to the bondholders and the banks shifts in a narrow range of $1.1 billion to $1.2 billion. All the structured debt has been retired. End of June, the Goldman instrument got retired. On 1st October, the Kotak instrument got retired. And in the first week of January, we have retired Edelweiss as well. This quarter, you've seen a decrease in the finance costs by more than INR 62 crores sequentially. Before we started this exercise, the annualized run rate of interest cost was trending upwards of INR 1,150 crores, INR 1,200 crores.
What is your rationale to acquire the full global rights for Hulio (adalimumab) given it was a challenging market in the U.S.?
Hulio for us is, contrary to perception, a very, very successful franchise. We've consistently for the last five years and this is probably the sixth year that we've grown that franchise in Europe. It continues to be one of our products that delivers in excess of US $200 million for us on an annual basis. Given that this was a product we developed very closely with our partners in Japan, and as we take it forward and increase our portfolio in the onco-immuno spaces, it made a lot of sense for us to integrate that product as well.
Will Hulio also improve our expectation for the U.S. market, or will it be mostly for ex-U.S.?
It would be meaningful for global markets. It will also give us the opportunity to widen our offerings. As you know, we currently only have the low concentration product in the market. We will also have the opportunity to develop beyond that. Clearly now Biocon has the ability to determine its future and the destiny with this product.
Adalimumab (Hulio) is a $200-plus million business for us. Is that correct, and is this one of the molecules with $200 million+?
We had four molecules in the zone of $200 million annualized revenues and adalimumab was one of those molecules.
On the generics business - traction on new launches including GLP-1s, and outlook?
The growth was driven primarily by liraglutide launch in European markets, which was through our partner Zentiva as well as direct to market in a couple of countries. We will be launching this product in a few more European countries in fourth quarter. Apart from Europe, our filing is under advanced stages of review in various markets, including the U.S. The demand is still very solid - it's a de-growing market because patients have moved to Ozempic, but limited competition. Apart from Liraglutide, we had a couple of other OSD products launched and a couple more launches coming up - the base business is doing good, market share holding up in the U.S.
Update on GLP-1 and semaglutide in Canada and elsewhere?
We have filed in Canada, Brazil, Saudi, Turkey. The review cycle is long drawn, especially in Canada, where we have not seen a single generic GLP being approved, including liraglutide. We are hoping that sometime next calendar year, we should be in a position where we at least make advanced progress on semaglutide.
What's holding Canada as a regulatory authority for approving GLP biosimilars or generics?
The GLP-1 has a separate guideline path that Health Canada follows, a bit different compared to European regulator or U.S. FDA. Despite filings, multiple filings on liraglutide and other GLPs, Health Canada has not approved a single file there. They are still trying to understand the risk associated with this product and the preclinical work generic filers have to do. We have done back and forth with Health Canada on our previous filing of liraglutide. We are hopeful that next year, we should be able to get the approval. Bringing down the cost and making the drug affordable is a priority for the regulator as well.
Is this because innovators acted through biological routes where filers used synthesis route?
No, that is very clear globally that everywhere, including U.S. and Europe, everybody is developing with a synthetic route. So that is not a concern. Kiran added that Liraglutide has been approved by Europe, so Health Canada really has to have a regulatory final view on what it requires to approve.
Progress on insulin aspart and how the commercial scale-up is expected to happen over the next 12 to 18 months?
We are the first interchangeable rapid acting analog that the FDA has approved. We've had a very, very successful entry into the U.S. market with the closed-door hospital networks. We see close to 100% conversion to our product. As Matt, our Chief Commercial Officer for Advanced Markets and Josh Sasly, who leads the North America team, deal with the responses coming up, you will see more progress into a wider group of customers as we expand our presence in the North America market.
Will insulin aspart convert into business this calendar year or have its own gestation period?
We would certainly look to move this product into this financial year. Our demand for insulin has been growing. We are looking to add more capacity - doubling our drug product capacity this fiscal. Our insulin glargine capacity demand continues to expand. So this should happen in the current fiscal, and we look to expand that to more customers beyond what we've done so far.
Repeated question - whether adalimumab is one of the top three products which have crossed 200 million for us?
Kedar said, it's not three, but four molecules, which have got over $200 million in revenue and adalimumab is one of them.
Our EBITDA of INR 700 crores in biosimilars - is there any inclusion of the exceptional gain in this number?
No, that gain is in the exceptional line. It's not part of the ordinary business. So that gain that we have realized by virtue of the integration transaction is not in the EBITDA line. INR 700 crores is the clean EBITDA for biosimilars.
What drove the biosimilars EBITDA jump sequentially when top line was down?
This quarter, we have prioritized high-margin markets. Usually, the North American geography mix out of total biosimilars is roughly 40%. This quarter, it's beyond 46%, 47%. That's the reason we have been able to get both higher gross margin and EBITDA as a percentage terms. For your simulation and modelling, you should consider full year average because the other regions will shape up in the coming quarters.
Is the insulin market now supply-constrained, particularly when innovators moved capacity to weight-loss drugs?
The insulin demand has continued to be robust. Given that there is just the innovators and Biocon, it is a very unique situation to be in. We have a proprietary platform on which we make our insulins. We also have very large-scale manufacturing capacity, device capabilities, which is needed for insulin. So, demand is absolutely not a challenge here at all. And it is as much as we can make. We are doubling our capacity in the drug product insulin capacity, and you will see that franchise grow in the coming quarters as we take on more market share.
When will Malaysia expansion commercialize?
The drug product is expected to go commercial in the coming fiscal, which is fiscal '27, and the drug substance expansion, which is also expected to double our capacity will come in a year or 1.5 years after this.
On semaglutide in India, given prior transactions with Eris, what is the play looking like for Biocon?
Our strategy typically in India is through a partner. Since we had divested our branded formulations business to Eris, we did tie up for liraglutide with two other companies in India. India is one of the only markets where you need a full-blown clinical trial, unlike Europe, US and other markets. So that decision will be taken whether we wait for an ICH country approval and apply for a clinical waiver versus spending significantly on Phase III clinical. One way or the other, we will apply for marketing approval in India in due course, and the commercialization will be through a B2B partner.
On adalimumab - timeline for regulatory process and tech transfer, and rationale for the deal?
We have much better control on the product now. We have end-to-end integration that allows us to do more with that asset than we had until now. Tech transfer is already initiated. It will happen in phases - element of the device, element of the syringe on the drug product side, and the element related to tech transferring the clone and the drug substance. We will work with regulators globally. There is close coordination and collaboration with FKB in Japan.
On Aflibercept - do we own 100% of the rights or share profit with J&J/Momenta?
There's no profit share, there is a small royalty. We are not public about the quantum, but it's not very significant.
Can you name the four molecules with $200 million-plus revenue? And are we still pursuing the oral insulin program?
On oral insulin: physiologically, it worked, but financially, it didn't make sense because insulin is a very low-cost product. To make it work, it was going to cost a lot more. So financially, it was not viable, and hence we dropped the program. Kedar added: the four molecules we have named last year are trastuzumab, pegfilgrastim, insulin franchise (including glargine) and adalimumab. These are the four molecules which have crossed $200 million in FY '25.