Biocon Q4FY18 Concall Summary


Financial Highlights


  • Total Consolidated Revenues for the year were at Rs.4336 crores, up 6% compared to the previous fiscal.
  • Revenues from Operations were Rs.4130 crores, which reflects a growth of 5% compared to the previous fiscal. This includes licensing income of Rs.23 crores as compared to Rs.145 crores the previous year.
  • Biocon incurred a gross R&D spend of Rs.380 crores this year. Of this amount, Rs.216 crores is reported in the P&L corresponding to 8% of revenues excluding Syngene. They capitalized an amount of Rs.165 crores as compared to Rs.135 crores in FY2017.
  • Biocon booked a forex gain of Rs.83 crores this year, compared to a loss of Rs.3 crores the previous year. Major gains amounting to Rs.74 crores were booked in Syngene.
  • Group EBITDA stood at Rs.1035 crores for the year, down 9% with an EBITDA margin of 24%. Core margins that is EBITDA margins net of licensing, impact of forex, and R&D stood at 27%.
    Reported Net Profit for the year was Rs.372 crores, which represents a Net Profit margin of 9%.
  • The effective tax rate for the full year at 26% again appears higher than last year of 19%.
  • The Board of Directors have recommended for approval by the shareholders, a Final Dividend of Re.1 per share (20% of face value of each share) for the financial year 2017-18.


Biocon Q4FY18 Financial Highlights.png
  • Total Consolidated Revenues for the quarter of Rs.1237 crores, which is up 27% compared to last year.
  • Revenues from operations were at Rs.1170 crores, which reflects a growth of 26% compared to last year. This includes licensing income of Rs.2 crores this quarter compared to Rs.16 crores in Q4 last fiscal.
  •   Biocon incurred gross R&D spends of Rs.98 crores this quarter. Of this, Rs.51 crores is reported in the P&L corresponding to 7% of revenues excluding Syngene. We capitalized an amount of Rs.47 crores related to their biosimilars and insulin analogs development expenses.
  • Biocon booked a forex gain of Rs.42 crores this quarter as compared to a loss of Rs.17 crores in Q4 last fiscal. This gain is reflected in the ‘other income’ line of the P&L statement.
  • Group EBITDA was at Rs.300 crores for this quarter, with EBITDA margin at 24%. Core margins, i.e. EBITDA margins net of licensing, impact of forex and R&D stood at 26%.
  • Reported Net Profit for the quarter was Rs.130 crores, which represents a Net Profit margin of 11%.
  • The effective tax rate at 21% for the quarter appears higher than last year tax rate of 2% last year as they had utilized R&D incentives and deferred tax asset for the full year in Q4 of last year.

Key Busines Highlights of the year

  • Biocon’s partner Mylan received approval for Ogivri™, Biocon’s partnered biosimilar Trastuzumab from the USFDA in December 2017. It became the first company from India to get its biosimilar approved by the USFDA and their biosimilar Trastuzumab also received approval in Brazil through Biocon’s partner Libbs Farmaceutica. Subsequently an approval in Turkey was also received.
  • Mylan and Biocon also received approval from the European Commission and Therapeutic Goods Administration (TGA) Australia, for Semglee™, which is their biosimilar Insulin Glargine. Semglee™ is expected to be launched by their partner Mylan in Australia and Europe in the second half of this year.
  • Biocon and Mylan agreed to accelerate the introduction of biosimilar Adalimumab in Europe through Mylan’s in-licensing arrangement with Fujifilm Kyowa Kirin Biologics or FKB. FKB’s product is at an advanced stage of review with EMA and could potentially obtain approval in Europe in the second half of 2018.
  • Biocon and Mylan have also agreed to expand their longstanding collaboration with the addition of two next generation biosimilar programs with Insulin Glargine 300 units/ml and Pertuzumab.
  • Syngene, Biocon’s Research Services subsidiary, extended its contract and increased the scope of its engagement with BMS, its largest customer. Syngene also expanded its ongoing research collaboration with Amgen and signed a multi-year agreement with GSK.
  • Biocon was ranked among global top 10 biotech employers as per the 2017 rankings released by Science Career magazine. They are the only Asian company to feature in this list.

Business segments

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Small Molecules

  • Small Molecules revenues were Rs.1508 crores, which is down 8% from the previous year. The segment clocked revenues of Rs.426 crores for Q4FY18, which is up 8% YoY
  • This segment faced headwinds as a result of pricing pressure and channel consolidation by our clients in the US, which impacted our static sales. Continued demand for immuno-suppressants helped offset some of the pressure in this segment.
  • Despite the pressures, Viocon were able to increase market share for some of their specialty APIs in key markets.
  • Biocon also made regulatory submissions for multiple APIs across developed and key emerging markets. This will help this segment while moving into FY19.


  • Biologics revenues grew 10% to Rs.770 crores in FY18
  • Biologic segment revenues grew 47% in Q4FY18 and 10% for the full year.
  • The full year growth was impacted by shut down of fill-finish plant for modifications and requalification post regulatory audits last calendar year and lower licensing income pertaining to this segment.
  • Adjusting for impact of decrease in licensing income, product revenues growth was strong at 68% in Q4 and a decent 29% on a full year basis.
  • The growth was led by insulin sales in Malaysia via the offtake agreement, higher sales in Mexico where their partner won a government tender and traction in the AFMET region contributed to the insulin growth.
  • Antibodies product revenues increased as a result of the expansion of their geographical footprint in emerging markets.

Branded Formulations

  •  Branded Formulations grew 14% to Rs.149 crores in Q4. and 11% to Rs.612 crores in FY18
  •  In FY18, the growth in Branded Formulations, which comprises India and UAE, were led by strong growth in the UAE business at 33%, while growth of the Indian business remain muted at 4%, with performance impacted due to various challenges faced by the business.
  • The UAE business reported an overall strong revenue growth driven by their metabolics portfolio, which comprises novel in-licensed products like Jalra and Imprida and their own brand of biosimilar Insulin Glargine, Glaricon™.
  • In India, Biocon launched Krabeva®, a biosimilar Bevacizumab, our second oncology biosimilar launch in India. Developed for the treatment of metastatic colorectal cancer and other types of lung, kidney, cervical, ovarian, and brain cancers, it is an important addition to our current oncology portfolio in India.
  • Biocon hadto take price reductions in some of their products, both mandatory as well as market-based. Furthermore, there was a temporary volume shortfall for certain biologic products due to the shutdown of their biologics facility in Q2 and Q3 of FY18.


  • Syngene registered revenues of Rs.1423 crores, reflecting a strong growth of 19% compared to the previous fiscal.    Syngene reported revenues of Rs.409 crores, up a solid 45% compared to Q4 of last fiscal.   Syngene reported revenues of Rs.409 crores, up a solid 45% compared to Q4 of last fiscal.
  • Syngene’s revenues recorded a strong growth this year on the back of an overall strong performance across its businesses. While discovery services and development manufacturing services showed strong momentum, dedicated centers continue to be on a strong footing.
  • Revenue growth in Q4 was a robust 45%, signaling a full recovery from the impact of the fire incident that happened in December 2016. The damaged facility is expected to be fully operational during the first quarter of FY19.

Product Development Updates

  • The review of Biologics License Application (BLA) for biosimilar Pegfilgrastim by USFDA is progressing. The target action date for a decision by USFDA is June 4th, 2018.
  • In Europe, the regulatory review of Marketing Authorization Application (MAA) for biosimilar Trastuzumab and biosimilar Pegfilgrastim are also progressing and decisions by CHMP is expected by the end of this calendar year.
  • In the US, Mylan and Biocon’s application for Insulin Glargine under the NDA pathway is under review by the FDA.
  • The global Phase III trial of biosimilar Bevacizumab continues. For Insulin Aspart, Biocon has recently completed global Phase I study and expect a PK/PD readout shortly.

Revenue from licensing

  • A lot of Biocon’s licensing income has been related to local partnering of their biosimilar assets and clearly looking at the biosimilar asset opportunities, their focus to date had been largely on Trastuzumab. 
  • Biocon still have opportunities with the other biosimilar programs to do partnering which are in late stage of development.

Interest costs & expenses

  • The majority of the interest cost is on their debt in Malaysia, a debt of almost $180 million and the interest costs on that net of the subsidies which they receive from the Government of Malaysia is in the P&L.
  • Apart from that, Biocon have smaller debt facilities for other plants, and again bulk of that is in the P&L, and a very small component is capitalized along with the plant cost.
  • At some point in time Biocon are open to divesting a small stake in Syngene to raise additional funds if management prefer not to taking on too much debt on balance sheet.

Capitalized expenses

  • Although the filing for Trastuzumab and Glargine is over, it does not necessarily mean that the expenses are over. 
  • Biocon still have some expenses coming for these two molecules. The bulk of the capitalization is now for Bevacizumab which is in global Phase III.
  • As per Biocon’s capitalization policy, they only capitalize molecules where they have got an approval for that particular molecule in one of the markets, thereby establishing scientific proof of concept and also the technical and the commercial feasibility.
  • For Toujeo and Perjeta, all the initial expenses, till the time of first approval will be in the P&L.


  • Last year, the cash outflow at the Biocon level, excluding Syngene was around 400 crores. A small component of that was for the new antibiotics facility. 
  • Capex for FY19 & 20 should be anywhere around Rs.500-600 crores per year.
  • Majority of this is coming from our new antibodies facility, construction for which had started last year.
  • Mylan will also be contributing on that facility, so the numbers would get reduced. But the combined capex for next two years, at a Biocon level excluding Syngene, is expected to be around Rs.1000 crores.

Future Outlook

  • Biocon expects the absolute numbers to go up next year and spends to be in a similar range of 15-16% of revenue. On an absolute basis, Biocon expect gross R&D spend to be in the range of Rs.450-500 crores.
  • The two new drugs that have been added to the pipeline with Mylan and molecules with Sandoz are in early stages of development. Greater spends from them will come when these molecules move into the clinic.
    The increase in R&D expenses next year will be on account of our novel molecules pipeline and ANDAs.

Gross Margin pressure

  • If comparing with last year, there was a reduction of 4% and that’s mainly on account of Small Molecule pricing pressure. But if comparing it with the third quarter, then both the quarters had gross margin of ~55% which is in line with the trends seen in this year.

IP issues

  • From Trastuzumab perspective Mylan and Roche are reaching to a global settlement. 
  • As far as Pegfilgrastim in the US is concerned, there is an on-going IP process as part of the BPCIA Act.

Branded India business slowdown

Main reasons:

  • Shortfall of biologics because of the upgradation and requalification of the plant
  • Biocon also had the impact of GST and had some unfavorable pricing which they had to take to face competition.

Secondary reason: 

  • Biocon had some operational issues leading from attrition which impacted execution. So the next year, Biocon will not have these shortage issues and the impact of GST is behind.
  • In order to tackle pricing issues, Biocon have installed a key account team, which focuses on business and on key accounts and therefore to be able to guard the business more closely.

Biologics vs Generics

  • The cost involved in bringing a generic molecule to the market is significantly lower; generally it is between 5 to 10 million dollars. Whereas it takes upwards of 100 million dollars to bring a biosimilar to the market.
  • It takes almost 3 to 5 years minimum to bring a biosimilar drug to the market compared to a generic molecule.
    Taking into account all these dynamics, it is very expensive and very long drawn out in terms of the regulatory time line to bring a biosimilar product to the market.So biosimilars have low competition and high prices.
  • The FDA and the EMA organization are learning along with the industry on how to approve these biosimilars with collaboration of Biocon and other frontrunners in the industry.

Info on biosimilars

  • Pegfilgrastim

    • Biocon has had both resubmissions last year and there are typically changes in rapporteurs that are handling it and so there is some level of fresh look at it, but clearly Biocon benefit from the review that is already completed. So it is not essentially de novo.
    • On the FDA side, there is nothing new to report there. Biocon have their action date coming up in June and they are comfortable where they stand in the review process.
    • Pegfilgrastim will be launched in the second half. However management cannot comment on the Trastuzumab launch date because that is governed by the IP settlement.
  • IN105
    • The program right now is in Phase III, and Biocon have initiated the studies. A few patients have been dosed and the dosing will continue for the next couple of years. 
    • Biocon will look at the data on an interim basis sometime next year. It is all in discussion with the DCGI office. Biocon is very enthusiastic about this program.
  • Adalimumab
    • Biocon and FKB will participate in whatever costs and profits Mylan has as part of its deal.
    • They participate in their share of that as per global arrangement. So to that extent it would be a three-way.
    • However, Biocon’s own product has completed phase III clinical in the first half of 2017. There is time to take a decision on which option to pursue in the US and in other markets. So the management have not ruled in or ruled out any option outside of Europe at this stage.

Malaysian Operations

  •  In FY18, Malaysia reported an operational loss of $5 million at a standalone level, when excluding the impact of R&D. In FY19, the fixed expenses are projected to increase to $50 million on account of increase in operating expenses.
  •  Biocon’s Malaysia insulin facility is making good progress and receiving approvals for both the facility and the products from various regulatory agencies globally which will help them aim for operational breakeven in Malaysia after excluding R&D expenses in FY19.
  • At an operational level the P&L would have a delta of 7 million dollars. However due to various moving parts, one cannot necessarily correlate the delta with the top line growth with accuracy.

ANDA filings

  • Biocon have filed 2 ANDAs in FY18 and our plan is to file more in FY19.
  • R&D ramp up on small molecules is also likely to be seen going forward, largely because of management’s focus on submitting some of these ANDAs which are not just regular, but difficult to make products.

Bangalore Plant

  • The construction for this new facility started last year. It will take about two years to commission the facility, a year after that to qualify and file for approvals, and then one year to get the approvals.
  • So by next year, the facility itself should be commissioned and in 2020 Biocon will do the development work to file in various markets. Finally, in early 2021 commercial sales are expected to start from that facility.

Contribution of Biologics

  • With increasing performance of biosimilars portfolio in the market place, a better contribution from the Biologics is expected. The percentage contribution of the Biologics segment to the overall business pie is definitely going to trend upwards. 
  • Being a high value and a high margin business, margins should also improve once biosimilars become a significant part of the business.
  • Aspirational target of $1 billion dollar
  • Biocon is well on track for Biologics and Research Services.
  • However, Biocon are likely to face some challenges and headwinds in their Branded Formulations numbers and also in terms of their Small Molecules numbers.
  • Because of the kind of market dynamics that are prevailing in the world, there have been tremendous pricing pressures, price enforcement by NPPA etc.
  • There are a lot of challenges that Biocon had not anticipated, maybe five years ago which are proving to be a hindrance in achieving $1 billion revenue in FY2019.


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