Here are my notes from the conference call
- Biosimilar business
o Performance below par because of operational and logistical issues (11% YOY growth); Expect recovery in Q3 and Q4; Current sales split is 50-50 b/w developed and emerging markets; Large amount of emerging market biosimilar business comes from government tenders, however B2C business offers better prices; Biocon is active in both (tender + B2C)
o Want to be vertically integrated to be price competitive but this requires a lot of upfront investments
o Insulin glargine (semglee) launched in US market at 65% discount to innovator price; launched in Spain (third largest in terms of value in Europe); applied for interchangeability status in US
o Abbreviated pathways will allow competitors to come in earlier because of the lower upfront investment requirements
o Maintaining market share of 15% in Pegfilgrastim up to FY20Q2 (gone to 17.5% as on last week)
o Market share of 6% in Trastuzumab (and 10% in 420 mg) upto FY20Q2 (gone up to 7.8% as on last week)
o Target action date for Bevacizumab might move from December 2020 depending on FDA’s ability to visit the facility
o See more aggressive price based competition in biosimilars in Europe
o Interchangeability: For the $1bn target, not banking on interchangeability (I am highly sceptical of this) - Novel biologics business
o Equillium got a positive remark from FDA for itolizumab and will initiate a global phase III trial in Q4CY2020. Biocon initiated a Phase III trial in India in September for itolizumab; Indian revenues for itolizumab is booked under Biocon Biologics (exports for itolizumab will start in the end of FY21) - Generics business
o gCopaxone: Will file back a response to CRL in the next few months (by next quarter), since it’s a major CRL it will take FDA about a year to review - CAPEX
o Generics business cumulative CAPEX will be 2000 cr. in next 3 years
Greenfield Vizag plant: phase I commissioned (small unit); larger immunosuppressant facility is under construction and will be commissioned physically by CY22 (investing 600 cr.)
Looking to do CAPEX in injectable facility (location not finalized yet), work will start in CY21
Constructing a peptide API facility in Bangalore, will take 2 years to be commissioned
Large synthetic block coming in Hyderabad, construction will start in CY21
o Biologics business:
Gross fixed asset is $450mn, net block is $200mn; Investing heavily in CAPEX as expecting revenues to scale to $1bn; Large monoclonal antibody plant will come commercial in FY23. Asset block will go to $1bn ($400mn of cash will go into these facilities over the next 4 years until FY24; $200mn already spent) - Reduction in EBITDA margins is because of higher forex losses (over gains last year), high employee and R&D costs; Core EBITDA margins (net of licensing, forex losses and R&D) stood at 32% vs 33% last year
- Malaysia plant is now at break-even level
Disclosure: Invested (position size here)