On the biosimilars revenue, given that we spoke about execution in the opening remarks, how should we think about FY '27, FY '28 given we have had some launches in the back end of '26. Also, there was an impact of the planned shutdown that we took in third quarter and a bunch of launches, but we haven't really seen material improvement in biosimilars revenue fourth quarter versus second quarter, if that is a comparable number, given we have also seen market share increases. Is it fair to assume that full stabilization of that disruption that we saw in the third quarter is not yet done?
When we did the Q3 last quarter, we had indicated that we are slowing down some of these things to get ready for a greater supply capability in the coming fiscal. If you look at the numbers between Q3 and Q4, you have seen a sequential change, where we moved from a quarter which was $279 million, $280 million to about $300-plus million this quarter. So there's a sequential growth of 12% that you are seeing on a rupee basis in the revenues. We're also seeing the margins stable for the full year basis, which has been consistent. On the FY27/28 outlook, while we've not guided specifically on any numbers, we have several products launching in the coming fiscal — the ramp-up starts moving from the coming financial year in '27, '28 towards the later part of the year. Aspart will start seeing a ramp-up which will come in towards the second half of the current fiscal year. We have a negotiated settlement date with the originator for our aflibercept launch in the United States. We've seen tremendous success with our biosimilar ustekinumab, which continues to gain market share — IQVIA numbers as of February show the overall market is close to a fifth already. Fiscal '27, '28 as we get towards the later part of the year, we'll start seeing the ramp-up that we prepared ourselves for in Q3.
Shreehas, I understand you don't want to give specific guidance, but if I were to think about fourth quarter FY '27 exit run rate, given the launches that we have, what in your mind would be a comfortable number based on the launch pipeline?
I know that you've asked that question in different ways. But the important thing — if you go back to what I've said in previous conversations as well, this is not a quarter-on-quarter conversation. Look at it on a broader window, if you look at the business that we've built over the last 8 quarters or even 4 quarters, you will see a substantial shift. If you see just this year's numbers that we posted on a rupee basis, there has been a 16% growth over last year. And you've just seen Yesintek, which is our biosimilar Stelara starting to show numbers in the P&L. You will start seeing that flow through in the second half of fiscal '27 as more products come in. So, I can only point you towards how we've done in the past, which is a strong showing already and then tell you that look at the 4 quarters going forward, which will be a good way to see how the business ramps up.
On capital allocation going ahead — as you mentioned, you are done with majority of investment in capex, etc., and focus ahead will be on cash generation. But just wanted to have some more color on your focus in R&D. What kind of products you can add on to your portfolio, say, 2 to 3 years down the line? And apart from the Malaysia plant, do you have any other capex remaining from your end?
Capital allocation/investments are largely behind us. Now that we've merged the biosimilars business and the generics business, it strengthened our balance sheet immediately. Operating leverage is starting to kick in. The use of proceeds has allowed us to bring in INR300 crores of interest savings over the year, which will mean INR75-odd crores per quarter. Coming to portfolio — since we're no longer making investments in capex, we're trying to see how we can get those assets to deliver maximum profitability. That's what we've done with the biosimilars business — over the last 3 years it's playing out as operating leverage. And you will see that in our generics business as well because we have a very strong portfolio complementary to biosimilars. That will feed off the biosimilars capability we've built across several countries. We consolidate the business in the next 4 quarters and set it up for acceleration in the coming fiscal.
A specific question on the reported numbers in the income statement — under the head 'items that will be reclassified to P&L later'. There's a large number of INR760 crores for the quarter and then which will be re-classified, and which will not be reclassified about INR210 crores. So, what exactly is this?
If you're referring to what is captured in the other comprehensive income, there are some adjustments that you do there, which don't appear in the normal P&L. I'll take it offline. Why don't we take it offline Sanjay? Let's get in touch after the call, we'll explain. We have full backup.
On the biosimilars, what could be the capacity utilization currently? And the direction I'm trying to get through is that while we have a very robust portfolio and subsequent new approvals that might come through — from a capacity standpoint, do we really need further capacity expansion, or the current capacity would be good enough to drive growth for FY '27, '28 in particular?
It will obviously vary plant by plant. So, there is no one number that we could give it to you now. But capacities do remain healthy. In Malaysia, we now have 2 lines. In Bangalore, there are multiple suites. There's no one number, but utilizations are healthy. As the Malaysia capacity doubles both for drug substance and drug product, we are fine there. Plus, we have some external CMOs as well. And in Bangalore, there could be minor debottlenecking here and there. But as of now, we don't see any need for a large greenfield capex, Tushar.
Considering the earlier commentary in terms of product launches largely second half FY '27 — is it that the first half is going to be largely stable, maybe currency benefit is what will drive growth for biosimilars business? And will this require reinspection or we are good to go in terms of commercials?
We don't guide specifically Tushar, but like what Shreehas said, you should budget for incremental growth from new launches more towards second half. And yes, there will be a currency advantage in the first half. (Shreehas adds:) The Malaysia drug product line comes on stream this quarter. As products bring up, this line starts supplying product to the market, which is why the ramp-up you will see happen through the year. The capacities are already invested in. It's not like there is no demand or capacity in the beginning. It just ramps up because the demand is set up and capacity comes on stream starting Q1. No, no, we are good to go in commercials (no reinspection needed).
Also on your U.S. dollar bonds, your bonds become callable from October this year, although at a premium price. But how are you thinking on the bonds given that your U.S. dollar bonds are at 6.67% coupon and you have talked about a focus on reducing your average cost of debt?
Imtiaaz, we are tracking the situation. We are happy that bonds are trading at a premium. You must have noted in the last few months, both the rating agencies have upgraded the rating. We are watching the situation. We have to evaluate whether it makes sense to pay the call premium in the first year. There is 50% call premium in the first year, 25% in the next year — that's the 5NC2 structure that we had. At this point, we are watching the situation. We are happy with the way things have progressed, and the idea will be to continue on this journey.
With the ramp-up that we are likely to see in the biosimilar portfolio, although we have started seeing strong growth in the U.S. business front given the kind of products that has been launched during FY '26 and the products like the Eylea that is there along with denosumab contribution in the current financial year — what is the kind of momentum that we would see for the U.S. business? And what is the likely share of U.S. business in FY '27 versus FY '26?
In the past, you heard me say that market share is not necessarily the only proxy for success. Market share and ASP has always been inversely proportional in a medical benefit product. We've been very clear about making sure that we will grow business profitably. Growth is only when it's profitable. So we've been very careful as we picked up market shares. The medical benefit products that you see today, where we've had fourth of the market, we've focused on making sure we retained that profitably. We would be fine if that market share is not the proxy for where we are, but we will grow that slowly. The market has examples where you have tried to gain market share very quickly, but then you crash out also very fast. Last quarter when we had a conversation on how we are approaching denosumab — it's branded Bosaya and Aukelso, we will be very careful in doing it because one of the brands is in the pharmacy benefit space and the other one is in medical benefit. Our focus is always profitable growth and not necessarily market shares. Numbers will play out over the year, and you will see them being more enduring over a period of time. Look at a broader time frame rather than trying to look at this as a quarter-on-quarter immediate launch and an impact on market share kind of a business.
Any clarity on the exclusivity that it could have for Eylea now?
For Eylea, our biosimilar position — there is a biosimilar that is there in the market already. And we've seen encouraging numbers from there, which tells us that we can actually commercialize that market very well. We have our terms for negotiation and settlement are confidential. And likewise, we wouldn't want to comment on others, but we believe we will be in a good position when we get out of the gates for the launch in the U.S. As that plays out, you can see it come through, but it wouldn't be fair on my part to comment on the terms of the settlement.
This insulin opportunity has been a kind of market situation in the global market given the GLP play and all that. So this is making us position us very strongly in the insulin side. And the doubling capacity what we are talking of, so that is also complementing that story. So this expanded capacity, what is the kind of lever that it is adding to the current insulin revenue of around $350-odd million?
We are, in that sense, the only insulin company which has a peptides portfolio. We've heavily indexed on that. We've built a very strong insulin franchise globally. There are several markets — there are several countries in emerging markets, where our market shares are in excess of 50%. And we are a very responsible supplier. We've continued to grow that franchise. In dollar terms, we've refrained from giving numbers, but we see a very encouraging response in terms of how the product has grown, both for the long-acting and the short-acting insulin or even the recombinant human insulin, which is a very large requirement in several countries. We remain committed. We made these investments ahead of time. You will see us get those products to market. It will start playing out in the numbers starting second half of this year is our view.
Are we seeing annual price decline in the base portfolio or that is more or less flat — could you share some color on the base business erosion or that remains flat? And what percentage of our biosimilar sales is manufactured in-house?
Each geography has its own pattern. Europe is usually very steady. And North America, because of the strategy that we deployed on the ASP for the last 3 years, we have not seen much erosion. But yes, we should budget for some erosion, Vishal. But tough to tell you one specific number because it will vary depending upon the product life cycle. The whole portfolio is in-house, except adalimumab and etanercept. And we do take some help from CMOs in the human insulin, but we can come back to you with a specific number, Vishal.
Kedar, how should we think about deleveraging in fiscal '27 now that Biocon — the merger Biocon Biologics is done? And is it fair to assume that all of the free cash flow generation that we have would be largely used for deleveraging?
Yes, that's true, Neha. Every dollar that we generate out of free cash, the first claim is going to be to reduce debt, and we are pretty serious about it. In March '25, including structured instruments, we had more than $1.5 billion of net debt. That's down to $1.1 billion now. It will hover between $1.1 billion to $1.2 billion subject to working capital. And free cash that we generate hereafter will go towards reduction of net debt, Neha. We also refer to interest cost reduction — first quarter of FY'26, we had booked INR280 crores in that quarter. It was trending upwards to INR300 crores. And from those levels, now we are down to about INR210 crores, INR220 crores. It will have some currency impact because a large part of our debt is in dollar. But about INR70 crores, INR75 crores per quarter of interest cost reduction is being reflected in the P&L.
On biosimilars, can you give a split for FY '26 sales between developed market and rest of the world? And then on aflibercept where you will be coming soon in the market as per your settlement date — we have seen one of the earlier entrant going very aggressive in terms of taking market share. So how do you see that opportunity? Second question is on Aspart, which you indicated is a key product for FY '27. What kind of visibility we have in terms of higher demand or your capability to supply this product to gain meaningful market share?
In the past, we've said our distribution is pretty diversified between advanced markets and emerging markets. The split is roughly North America at 40%, 35% in Europe and 25% emerging markets. You see sometimes a little bit of a shift between North America and Europe. Roughly 75%-25% advanced markets to emerging markets, could be between 78%, 22% in a particular quarter. On Yesafili (biosimilar aflibercept), there is a biosimilar today, and it's been quite successful — that's a very encouraging sign because this is a niche product, a specialty one injected in the eyeball. One question was will ophthalmologists be comfortable using a biosimilar — that has been busted; there is comfort and willingness to use biosimilars. So given our track record of high-quality products, we believe there will be significant interest. On biosimilar Aspart (brand: Kirsty), we see a tremendous opportunity. We've been very careful as it's a chronic product. We are very uniquely placed as the only company with a biosimilar insulin and a peptide portfolio. We never look at it as a sprint. It's a marathon. We have 100% share in certain closed door networks that are there in the U.S. already. We're looking to expand that to the commercial play in the second half of fiscal year '27.
In March, I think we saw some draft guidelines coming from the FDA, which talked about significantly reducing the R&D cost to get like new biosimilars in the market. So, I just wanted your opinion on how that impacts, one, Biocon's existing products, commercialized products; and second, the pipeline?
The FDA has led the way saying that you do not need a Phase III clinical trial to approve these high-quality biosimilars. And that has significantly allowed us to do 2 things — it has reduced the development cost by 50%; it's half the development cost. And it's accelerated products from a development standpoint by at least 3 to 4 years. The common belief is that it's lowered the bar to the market, which is incidentally not accurate — while the clinical Phase III trial requirement has been taken away, there has been an expectation of higher comparability standards, analytical comparability standards. So companies who've been developing this are clearly at an advantage. It does give companies like Biocon an advantage given our proven track record in CMC comparability and analytical characterization.
I understand it being beneficial for Biocon in terms of the products that you are still yet to bring in the market. But what about the products where Biocon has a good position in the market — where you are the incumbent and you might be facing some incremental challenges in those products?
We do not see an incremental challenge because the products that we have brought to market have a very strong leadership position. In the U.S., our oncology portfolio, which is in the medical benefit space, has fourth of the U.S. market today. One is to get an approval. The other is to reliably supply it. Third is to do it consistently. And fourth is to be a reliable partner to physicians, health caregivers and a reliable supplier to the patient. Credibility is built over a period of time. Being a fully integrated player has given a lot of levers to Biocon. So we do not see a challenge because of this revised guideline. In fact, it's advantage Biocon the way I see.
Could you give us an understanding of the constant currency sales in each of the divisions? And could you give us some colour in terms of market shares and the $200 million benchmark that you had shared last year — the market shares as well as the number of products that are above $200 million in biosimilars.
The growth numbers in rupees that we have reported — if you roughly take about 3%, 4% out you'll get a dollar number. For example, biosimilars, we are saying it's 12% growth year-on-year in this quarter. The dollar growth will be about 7% or so. That's the constant currency number. In terms of the products that were beyond $200 million, we have done good progress. Insulin now has crossed $300 million this year — that includes Glargine, Aspart, human insulin, DS and DP. So total insulin franchise is now beyond $300 million. Adalimumab is now beyond $250 million and Pegfilgrastim, Trastuzumab are hovering around $200 million or slightly lower than that. Bevacizumab has crossed $100 million now. This is without contribution from U.S. because the launch has just been made. And then there are products like etanercept, Yesintek is inching up now.
If you could also help with any update on the market shares that you had shared last year. And the margin improvement that we are seeing in the generics business adjusted for Revlimid, I just wanted to understand, is that a function of the change in the API and formulation mix or is there something else?
Market shares are steady. The oncology market shares are steady around 23% to 25%. Glargine market share is what's reported is about 11%. On generics margins — we had guided that from the first quarter till fourth quarter sequentially, as the sales do inch up, there will be a margin improvement. So in quarter 4, you are seeing roughly under 10% EBITDA margin, and that's because of both — the overall sales have gone up so we have operating leverage benefit as the facilities get utilized. And there is a positive product mix as well.
This Malaysia doubling, the timeline for this? So effectively, for full year '27 compared to what we have in '26, this DP Malaysia in particular, is what will drive — and some amount of debottlenecking at Bangalore from a capacity standpoint is what will drive growth for FY '27. Is that the safe assumption?
The DP has happened — the Line 2 is getting qualified as we are speaking and will get operational soon. DS, the drug substance doubling will happen towards the end of this financial year. Yes, and after that as well, correct.
On the generics side — a good amount of investments largely behind both in terms of capex as well as product development. Now we are scaling up in terms of business without any niche product, so to say — how to think about the scale-up of this business and subsequently the margin improvement? What's the gross margin currently and how the operating leverage will play out in the coming time? Will scale-up be supported by existing product or require new approvals?
The gross margins are in early 40s, two-third API, one-third generics — that's the split today. The GLP-1 revenues, which was about less than 10% of the overall business last year in FY '26, will scale up. The focus going forward is very clearly going to be on margin improvement because we built state-of-the-art facilities. These facilities have now come on stream. As demand ramps up and capacity utilization is there, you will start seeing the margin improvements flow through. It is a mix of both — scale-up of existing products and new approvals. Many of these products, the approvals come in ahead of time, unlike the biosimilar business. The generics portfolio benefits from earlier visibility. Biocon is set up in a very different way, where you have fungibility for drug substance for the peptide portfolio as it gets into the fermentation space, where there is hardly any competition. And then you have fungibility for the drug product facilities. As that demand ramps up, you will start seeing better utilization and a better return on that investment.
Bevacizumab — I missed the sales for FY '26, if you could just repeat?
It's 100 million, Tushar. It's entered in that bracket now. This will be without the contribution from U.S. geography.
A couple of questions with regards to your U.S. dollar bonds. Would you be able to provide some colour on your hedging policy? Any specific hedging policy you have on the U.S. dollar bonds?
On the bonds, we don't have to hedge because we have a natural hedge. We are largely a dollarized company. So, we have significant dollar cash flows. So, we don't hedge our loan book actually.
Having seen the integration well and also having done investment into the generics in advance — what should be the investment priorities for FY '27 now for you? That means capex is likely to subside.
If you heard Kiran in the beginning, most of our investments are behind us, Surya. Our focus is always going to be now that you have a strong balance sheet and you're looking to have operating leverage that's come in. The focus is going to be capital allocation at this stage will only focus on how you profitably sustainably grow the business. We're not looking at very big-ticket greenfield kind of expansion because we don't need it to support the business plan that's going forward. So focus is now on execution, consolidating the business and walking it through the quarters as we bring the business up in a sustainable manner. You will see the EBITDA growth that you've seen already in the margin profile improvement. The focus will be to sustainably do that on a consistent basis. Yes, we've already said that (capex is likely to subside).
Can you break up your biosimilar sales between U.S., emerging U.S., Europe and the rest of world? And which would be our largest product as of now within the biosimilar portfolio?
For the last 2 quarters, the mix of North America is slightly higher. In the past, we have said North America is about 40%, Europe and a little bit of Japan, ANZ 35% and emerging market 25%. Our hunch is over the long term, that's how it will stay. Last 2 quarters, because of prioritization and higher growth, North America is higher, and that helps us obviously in the margins. Within the biosimilars, NorAm led by U.S. is about 46% this quarter. Last quarter, it was slightly higher. On products globally — total insulin franchise globally has crossed $300 million. Adalimumab globally is beyond $250 million. And then the other 2 key oncology assets are a little less than $200 million. Bevacizumab is now $100 million plus. And then there is Yesintek, there is etanercept.
On the insulin business — you talked about you have now the short-acting, long-acting as well as recombinant insulin. What is the addressable market globally across these 3 insulins put together from a size perspective?
From a dollar number perspective, I think we can get you the numbers, but it will be around $7 billion, $8 billion overall insulin. RHI is about $1.5 billion globally, and you'll see the other 2 be in the region of about $3 billion. But these numbers are not as reported by IQVIA. It changes significantly as you get towards the emerging markets and tender businesses. But it is a significant business with just the originators and a limited number of players. In the U.S., you have just us, which is a biosimilar insulin. So that's a tremendous franchise to be focused on. There are other attractive assets that certain innovators are focused on, which interest them. That leaves a very large playing field for Biocon.
On that account, there have been off late some recent approvals with Chinese companies which have come through. How should one think about that? In the past, Chinese have had a tendency to disrupt markets — do you foresee some of those challenges for us in the broader insulin space?
The first indication of this is that it signals the fact that what we've been saying — and it validates that it's an extremely attractive market for people to come in. And we've seen certain European companies wanting to enter as well, partnering with other companies from China. This is clearly what we've been saying. It's a tremendous opportunity. The product remains in business in requirement several decades after it's commercialized. There are limited players and the product is going to be there forever. So it kind of validates our thesis on insulin. And again, it also tells you that it takes a long time to develop it unless you're fully integrated and have the scale that we've built over decades. Being successful is not just having a product or an approval — you need to be consistent, you need to be in a position to have fermentation capability, the drug product capability, device capability to navigate the IP space. So it's a long-term commitment, which Biocon has done over the decades.