Biocon Research Services Revenue Dips In Q1 | NDTV Profit
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00:00All right, on Earnings Edge today, we're speaking about Biocon.
00:08Peter Bains, the Group CEO of Biocon, joining us in to talk about the quarter gone by and
00:13the outlook ahead.
00:14Hi, Peter.
00:15Thank you so much for speaking with us here at NDTV Profit.
00:18Always a pleasure.
00:20Good morning.
00:21All right.
00:22So when I'm looking at your numbers, I think what a lot of analysts are a little worried
00:27about are the EBITDA numbers.
00:29And let me just jump straight to that.
00:31Because if I take out the 1057 crores from your net profits, it's seeming like a bit
00:37of a weak quarter.
00:39EBITDA has also come down in large part because of the generics business.
00:44Is this something that you were expecting?
00:46Has quarter one gone by as planned?
00:49Yes.
00:50I mean, quarter one has come in very much in line with our expectations and our outlook.
00:57I think we've seen on an underlying basis, so stripping out the year's transaction, we've
01:03seen a relatively flat revenue performance.
01:06But that's a mix across the businesses.
01:08And important to point out that in the biosimilars business, which is the largest business in
01:14the group, we saw underlying growth of 11% on the quarter on a comparable basis.
01:19And that offset degrowth in the services business of 2% and the generics of 6%.
01:27On the EBITDA question, that also came in in line with expectations.
01:31A group EBITDA is still a healthy 20%.
01:35And in the generics business, it's lower at 9%.
01:39In the biosimilars business, it's a pretty healthy 23%.
01:43So we're not uncomfortable with that at this point in the evolution of the business.
01:48And we'll see that expanding in the second half of the year and beyond as we begin to
01:54sort of transition toward a more consistent acceleration.
01:58Absolutely.
01:59And we'll come to each of those segment-wise businesses in a bit of detail.
02:03But just a word on the margins.
02:05Now, some of that impact has come because of employee expenses, which have come to 22%.
02:14Just trying to understand if this is a trend that continues, Peter, because now you also
02:20have a higher base?
02:22And I think that's the key.
02:23I mean, we've completed the transition now.
02:26It's largely the biologics business with the transition now complete.
02:31So we've taken on all the headcount, all the teams, all the expertise now to support the
02:36business.
02:37You'll have seen a reduction in some of the one-time costs that offset that.
02:42But now we're stabilizing and consolidating post the transition, and we'll build forward
02:47from there.
02:48Okay.
02:49Let's come to biosimilars.
02:50You talked about how you saw a year-on-year growth of 11%.
02:54The EBITDA margins are pretty robust at 30%.
02:58Do you see this at a sustained level, which then, of course, contributes to your consolidated
03:03margins, 18% this time?
03:06Where do you see that growing, and how big or how fast does the biosimilars business
03:11move?
03:12Sure.
03:13So, yes, we do see this, obviously, moving forward.
03:17And in some ways, this is the consolidated business profile now.
03:23We've grown 11%.
03:24That's been through growing market share in key markets like the United States and our
03:29oncology franchise and then our insulin franchise, stable market share performance in Europe,
03:36and some very good growth in the emerging markets coming from existing products and
03:41extending our reach into new markets.
03:44Now, looking forward, we continue to see that traction this year, and then beyond that,
03:51the growth will be driven by new product introductions that we are lining up, and that's an exciting
03:59prospect with five new product launches coming in the next two years.
04:04This is mid- and longer-term now in the United States, and three products coming into Europe
04:09in that same timeframe.
04:11So we're consolidating the business this year, but there's good traction, as we've seen,
04:17on the comparable growth in the first quarter.
04:19That will transition to acceleration with the introduction of this new product flow,
04:23and, of course, we believe that will play through the P&L and expand the margins as
04:28well.
04:29Let's talk a little bit more in detail on that product flow.
04:33What are the big drivers coming in there?
04:36In your con call, you talked about the GLP portfolio.
04:39Can you expand on that?
04:41Sure.
04:42GLPs are a very, very exciting prospect and priority for us in the generics business,
04:50the GLP peptides underpinning both diabetes and obesity, very, very large markets with
04:59long-term growth due to the development of those diseases right across the world.
05:06We're at the front of that in the generics with our liraglutide product, but that is
05:11just the front.
05:12Behind that, we are developing semaglutide, tazepatide, and others, and intend to play
05:19a lead role in the GLP generic market opportunity.
05:25Importantly, this has a very strong read across to our biosimilars business, which
05:31has a longstanding insulins business and a strong heritage there as a global player.
05:38Of course, insulins play to diabetes, and diabetes and obesity are very strongly linked
05:45in terms of comorbidities and disease progression.
05:50We have a lot of opportunity there and a very unique position.
05:54I think one of the only companies with both GLPs and insulins to play into this very,
06:01very large diabetes and obesity market going forward.
06:06What is the timeline you see for GLPs availability in India and in other markets as far as you're
06:11concerned in terms of permissions?
06:14I won't say controversy, but a lot of different views on GLP as well out there in the public
06:21domain.
06:22Any comments on that too?
06:23Sure.
06:24On the timetable front, we have approval in the UK.
06:29We'll be looking to launch in the UK and select other markets this fiscal.
06:35Our strategy is really global here, and we are pursuing regulatory approvals on a global
06:42basis to bring those products to patients, and we'll do that in both a direct-to-customer
06:51model and we'll work with partners elsewhere.
06:54As I said, in the Earnings School, we've just partnered with a strong speciality player,
06:58Handok in Korea, for example.
07:02We're in dialogue with the Indian regulator to look at the opportunity to bring our product
07:07here.
07:10In terms of what we see in the marketplace, there's no question that diabetes and obesity
07:17have enormous current epidemiology.
07:2010-12% of global population is the estimate for diabetes and growing, and obesity, I think,
07:30perhaps even higher.
07:32Really, these are comorbid diseases that cause devastating consequences in terms of disease
07:40progression, cardiovascular disease, renal disease, liver disease, reproductive disorders,
07:47and even bone and skeletal problems.
07:51Diabetes is the highest cause of blindness worldwide.
07:55There's huge clinical requirement here and an enormous unmet need, and we intend to play
08:02our part in fulfilling that need on a global basis.
08:06On the second part, my follow-up to both those questions bunched up, but a lot of different
08:11views on this group of drugs.
08:14Obviously, they're being used as weight-loss drugs in some parts of the world.
08:18A lot of talk about the possible side effects, long-term, do we know enough about it?
08:24Just your commentary on all of that chatter.
08:27In terms of the use of them, there is a very, very clear, very large, and very material
08:35clinical utilization.
08:37Obesity is a serious disease, which causes significant downstream pathologies, as I've
08:45described, cardiovascular disease, renal disease, liver disease, and so forth.
08:51These are not trivial disorders as a consequence of clinical obesity.
08:56We're very, very clear on that, that there's a significant unmet need that is going to
09:02grow worldwide.
09:04Obesity is a global phenomenon right across all markets in the world as a consequence
09:09of lifestyle and diet.
09:11We shouldn't underestimate the severity of the consequences of obesity.
09:16Let's come to the research side of the business as well, Peter, and what we've seen with Syngene.
09:24Now, U.S. biotech funding has been down.
09:28The discovery services revenue in line was also hit by that dip.
09:32What is the outlook you see for there?
09:35Do you see some of that funding coming back, and for research services in Syngene?
09:39Yes, we do.
09:41We already see those green shoots.
09:43Funding is flowing back into biotech from USVC.
09:47It does take a quarter or so to play through, and as Syngene has guided, they expect to
09:54see this pick up in the second half of the year and lay on top of the underlying growth
09:59that they're seeing in their dedicated services business and biomanufacturing.
10:05I think Syngene has clearly guided that it's retained its guidance of high single to low
10:13double-digit growth at the top line for the full year, and EBITDA in the high 20s.
10:20I think that's all on track.
10:22We see headwinds that we face that the entire sector has faced easing, and then we see the
10:28tailwind beginning to emerge.
10:31With regard to the Biosecure Act, we're seeing a very high level of inquiry consequent to that.
10:38Again, that won't play through in a quarter or two quarters.
10:42It'll play through over the coming years, but Syngene's strengths and capability here
10:47position it to be very well placed to capitalise on that tailwind as well.
10:53I just want to get a sense from you on how you see price erosion trends in the US moving forward.
10:58A lot of companies in the space that we talk to say that price erosion they see will go from
11:04double digits to single digits.
11:06What is your view here, Peter?
11:08Sure.
11:08I think we're probably aligned with that.
11:11I mean, pricing pressures exist.
11:13They're a function of competitive intensity and supply, and they can fluctuate.
11:21I think we see a little bit of easing on the annual price declines there, and of course, it
11:26depends on the channel as well.
11:27I think you'll see less in some channels than you will in others, but it's a well-known dynamic
11:34that there's a range and there's some fluctuations, and I think we're well aware of those and don't
11:39see any structural changes that will impede our planning going forward.
11:44Just last bit on whether you see this change coming in that you're describing by quarter two or
11:52further.
11:52Is quarter two also going to be overall on a consolidated level, a bit subdued before some of
11:58the changes which you've mentioned in every segment really start kicking in?
12:03Yes, that's clearly our view.
12:07I gave that sort of outlook at the Q4 results, and I repeated it today.
12:14I think Q2 we'll see, again, sort of mirroring Q1, relatively subdued, but then we can now see
12:24these early signals of transition to more acceleration in all businesses driven by the factors
12:30that I've described, shift in headwinds to tailwinds in Syngene, new product launches in the
12:38generic business, and of course, Liraglutide, the outstanding opportunity there, and in the
12:47biosimilars business, continued traction building on the 11% comparable growth that we've seen,
12:53and then moving into fiscal 26 where we're eagerly anticipating new product introductions.
13:00Okay, so FY26 is where you could see some real turnaround.
13:07Thank you so much, Peter Baines, for speaking with us.
13:10That's the management of Biocon talking about the quarter gone by and what they expect coming ahead.