Trying to lock in vendors who don't want to buy from China: Biocon CEO & MD

Siddharth Mittal, CEO & MD, Biocon, elaborates on his plans to grow this business further

Biocon’s generics and active pharmaceutical ingredients (API) business clocked 18 per cent year-on-year (YoY) growth in Q2FY23. Generics account for roughly 26 per cent of the company’s consolidated turnover. Siddharth Mittal, CEO & MD, Biocon, in an interview with Sohini Das, elaborates on his plans to grow this business further. Edited excerpts. 

Tell us about your plans to grow further in emerging markets?

Insulin is largely a tender-based product in many emerging markets. These markets have been growing for the past few years, and we expect this growth to continue, not only in insulin but also non-insulin products. For non-insulin products, some countries are tender-based, while others are retail. In the retail business, it takes time as our partner needs to launch these products in the market. In the tender business, we see a jump in some quarters. In relation to overall revenues from biosimilars (on a consolidated basis), the share of emerging markets will continue to grow.

Is biosimilar Glargine (Semglee) also growing its market share in emerging markets?

In some of the large markets like Mexico and Malaysia, we see Semglee (biosimilar insulin Glargine) doing well. Some markets are price-sensitive and Semglee is a more expensive product than human recombinant insulin.

Is there room to grow market share in insulin glargine in the US?

Based on the contracting cycles in the US, we expect mid-to-high-teen market growth in Semglee -- around 15-18 per cent.

Are you trying to tap customers who are looking to have a China-plus-one supplier in APIs?

The API business is a very important part of our generics business, and 80 per cent of our (generics) revenues come from the API segment. We are focusing on fermentation-based API molecules, peptides, and oncology molecules. We see an unmet need for oncology molecules API globally. We are expanding – locking in customers and doing geographical expansion. These efforts will give volume growth. The generics industry is under pressure due to pricing. The price erosion in synthetic molecules continues – 8-10 per cent annually. During certain years, we see deeper pricing pressure.

In the areas where we focus on – fermentation and statins – we have competition from within and outside India. Our customers want to have an alternative source, given there are geopolitical tensions, assuming that Indian companies can also supply at the same price. More and more customers are asking for de-risking in the long term and not be dependent on China. We are also taking various steps to ensure that we can lock in vendors who don’t want to buy from China. This process takes some time as they have to qualify a new API (for their product) before they can completely switch over (to the new source). From a development point of view, our APIs qualify but commercialisation shall take some time. We see high single-digit growth in our API business

How far insulated is Biocon from dependence on China for raw materials?

We are trying to have alternative sources apart from China for raw materials and key starting materials (KSM). More than 60 per cent of our KSM and raw material sources have alternative sources other than China. Our primary source continues to be China.

Tell us about your plans for the Indian insulin business…

We have a strong insulin franchise in India. We have licensed out our rights for insulin glargine to Eris Lifesciences. Insulin is a game of scale, not like antibodies. One needs global scale, cost-competitiveness in this market. Biocon is the fourth-largest insulin manufacturer globally -- we have that advantage. We have a head start here. Out-licensing and partnering will be the way forward. But we want to have a prescription market share, too. New prescriptions will drive the business. Having more than one brand will make commercial sense. Insulin glargine is priced competitively here -- compared to (Sanofi’s) Lantus, our biosimilar Semglee (insulin Glargine) is priced 20-25 per cent lower. For those who cannot afford Glargine, this price difference is a lot.

What can we expect from the Serum Institute and Biocon deal?

The merger will be effective from October 1, or whenever the court order comes. We will realise the benefits from the third quarter. We get guaranteed top-line and profits which do not depend on what Serum Institute of India sells. We will have $300 million in revenues on an annualised basis and $100 million in profits independent of what performance Serum Institute has.