Overview

Biocon (NSE:BIOCON) is a global biopharmaceutical company changing patients’ lives in over 120 countries by finding new and affordable ways to treat diabetes, cancer and autoimmune diseases.

Powered by advanced therapy platforms, its 12,000+ employees blend heart, science and creativity to make better healthcare solutions.¹

The company's 4 global businesses include generics, biosimilars, research services and novel biologics. They represent Biocon’s risk-balanced strategy, underpinned by agile network connections, a robust pipeline and a timely ‘emerging markets’ orientation. Biocon has leveraged India’s value advantage of unmatched scientific talent and cost-competitive manufacturing to deliver scale, speed and quality. By making medicines more easily accessible for patients across the globe, we’re working towards achieving health equity.

Biocon is committed to providing everyone, everywhere, affordable access to a speciality portfolio of medicines.

Biocon is steadfastly investing in developing novel therapies for diabetes, oncology and immunology. Biocon is strengthening its global reach and economies of scale.

Key Therapeutic Areas

At Biocon, its focus is on the three key therapeutic areas – Diabetes, Oncology & Immunology. Through its unique R&D story, which is built on world-class competence and capability, robust infrastructure, and a talent pool with extensive global development experience, the company aim to improve lives by making affordable life-saving solutions more accessible globally.²

• Diabetes
• Oncology
• Immunology

Business Review

Small Molecules API and Generic Formulations

The company's Small Molecules business is built on its unique strength in fermentation technology and entrenched presence in the chronic therapies. The company's differentiated portfolio spans complex molecules ranging from cardiovascular and anti-obesity agents to immunosuppressants and narrow spectrum antibiotics. The company will continue to invest in and grow its portfolio of differentiated Active Pharmaceutical Ingredients (APIs) which may have technical barriers to entry, e.g. complexity in manufacturing, potent compounds or a mix of both.³

Over the years Biocon has built a good track record with the leading regulatory agencies across the globe including FDA and EMA. The company's global scale coupled with its good compliance record at its manufacturing facilities has made it a preferred global partner for APIs for its customers. By investing further in expanding capacities of its complex APIs and by investing in newer and complex molecules, the company believe there is much promise for continued growth based on its selected portfolio.

Currently, the API business contributes significantly to the Small Molecules business segment. , However, going forward, the growth in this segment will increasingly be driven by building on the generic formulations opportunity across global markets, notably United States.

A few years ago, the company started developing generic formulations pipeline primarily focused on developed markets and targeting niche therapeutic areas such as oncology, diabetes, autoimmune diseases and immunology. The product pipeline was focused on leveraging in-house APIs to ensure supply reliability due to vertical integration in the chronic areas. Over the next five years, the company aim to continue to leverage its strengths in fermentation technology and characterization techniques to build on this vertically integrated pipeline in the niche formulations space. The strategy is to build a robust pipeline of difficult-to-make, technology-intensive molecules which can be commercialized in several global markets including the United States. The combination of a strong R&D team, worldclass manufacturing facilities approved by international regulatory agencies and a dynamic commercial team have helped this fully integrated business expand the available commercial opportunities globally.

The company continue to be judicious in pursuing the generic formulations opportunity, which is reflective of the current and expected market dynamics in the United States. The company will continue to pursue select opportunities which meet its internal selection bar for complexity in manufacturing or development and vertical integration.

FY20 Highlights:

Geographic expansion into China: Biocon extended its footprint to China, the world’s 2nd largest pharma market through a license and supply agreement with a subsidiary of China Medical System Holdings Limited (CMS) for three generic formulations products. This agreement will allow Biocon to take its US approved generic formulations to patients in China, allowing an early entry into the Chinese market. Biocon will be responsible for the development, manufacturing and supply of the products while CMS will be responsible for registration and commercialization. The total addressable market size for the three products in Mainland China is a little under $1 billion as per IQVIA data.

API capacity expansion: During FY20, the company started work on a greenfield fermentation-based manufacturing facility in Visakhapatnam, Andhra Pradesh to cater to strong volume growth anticipated in the small molecules APIs business. This expansion will enable it to deliver on its vertically integrated strategy of developing and commercializing its own ANDAs and also service the needs of its global API customers. Expected investment in this capacity is roughly R 600 Crores and the facility is expected to be operational over the next three years, followed by commercialization based on regulatory approvals in major markets.

DMF and API Filings: During the year under review, the company filed new Drug Master Files (DMFs) and equivalent for multiple APIs, mostly in the regulated markets

Regulatory compliance and recognition: At Biocon, the company remain committed to global standards of Quality and Compliance and are proud of its track record. The company had a number of key inspections during the financial year, including those conducted by the FDA.

Biocon’s Oral Solid Dosage Manufacturing Facility completed a Pre-Approval Inspection (PAI) conducted by the FDA with no observations in January 2020. This fiscal, the company also received approval from Medicines and Healthcare products Regulatory Agency (MHRA), United Kingdom for this facility as well.

On the API side, the FDA conducted a PAI and GMP inspection of the Small Molecules API Manufacturing Facility in January 2020. At the conclusion of the inspection of the Bengaluru facility, which took place between January 20 and January 24, 2020, the agency issued a Form 483, with five observations. The company responded to the FDA with a Corrective and Preventive Action Plan (CAPA). In May 2020, the FDA issued an Establishment Information Report (EIR) for the same and closed the inspection.

Health Canada conducted a GMP inspection of its Small Molecules API Manufacturing Facility in January 2020. At the conclusion of the inspection, the company received multiple observations. The company responded to Health Canada with a Corrective and Preventive Action Plan (CAPA) and are working to address these observations expeditiously

In February 2020, the FDA conducted a post-approval and GMP inspection of another Small Molecules API Manufacturing in Bengaluru and issued two observations on Form 483. Biocon responded to those observations. In March 2020, the FDA issued an Establishment Information Report (EIR) for the same and closed the inspection.

Apart from the FDA, its API manufacturing facility in Bengaluru successfully underwent an inspection by COFEPRIS, the Mexican health regulatory agency and reported zero observations and its Vishakhapatnam site was also inspected by KFDA, South Korea without any major observations.

The company's Small Molecules APIs manufacturing facility in Hyderabad won the ‘Annual Greentech Environment Award 2019’ for ‘Outstanding Achievements in Environment Management in the Pharmaceutical Sector’.

The API Manufacturing facility at Visakhapatnam was recognized for ‘Outstanding Achievements in Safety Management’ in the Pharmaceuticals sector during the Annual Greentech Safety Award’ Program in New Delhi.

Performance of Small Molecules Segment in FY20 - Small molecules is the largest segment for its Company, contributing 32% of consolidated revenues from operations in FY20. Revenues were R 20,937 mn in FY20, as compared to R 17,728 mn in FY19, reflecting a growth of 18%. The performance in FY20 over the previous fiscal was driven by a strong performance of its generic formulations in the US on the back of consistent client acquisitions and increased market share for all its products. This was aided by API business performance driven by a better product mix and an overall better pricing environment over last fiscal.

Biologics (Biosimilars & Novel Biologics)

Biosimilars

Biocon’s subsidiary Biocon Biologics India Limited is uniquely positioned as a fully integrated ‘pure play’ biosimilars organization in the world. It aims to be the ‘Most Inspiring Global Leader in Biologics’ delivering affordable access to innovative and inclusive healthcare solutions, transforming patient lives. It is engaged in developing high quality, affordable biosimilars that can expand access to a cutting-edge class of therapies to patients globally

Biocon Biologics is an established and vertically integrated global biologics player that has invested ahead of peers in this exciting field. Over 40 years of experience in science and manufacturing at Biocon laid the foundation for Biocon Biologics. It entered this area over 15 years ago with focus and determination to take the path less travelled, which has enabled it to be an early mover in biosimilars.

Its rich pipeline of differentiated assets aims at serving unmet patient needs associated with non-communicable diseases in emerging as well as developed markets. Biocon Biologics’ therapeutic focus is in developing molecules in the area of diabetes, oncology, immunology, dermatology, ophthalmology, neurology, rheumatology and inflammatory diseases. Five of the portfolio of molecules have been taken from lab to market, of which three of them having been commercialized in developed markets like EU, Australia, United States, Canada and Japan. Biocon Biologics’ expects a steady stream of launches every year in these developed markets over the next few years. Biocon Biologics aims to touch touching 5 million patient lives by FY22 and cross a revenue milepost of US$1 billion.

Biocon Biologics’ unique position as it aims to be the ‘Most Inspiring Global Leader in Biologics’ is highlighted in the few points in paragraphs below.

High barriers to entry: The development of biosimilars requires the confluence of multiple high-end skills in physicochemical and biological characterization, sensitive orthogonal analytical techniques for demonstrating biosimilarity at the molecular level, pharmacokinetic (PK) and pharmacodynamic (PD) studies against the chosen reference product as well as extensive human clinical trials. Thus, R&D costs for developing biosimilars are significantly high and the time for their development is long in comparison to the cost and time for development of conventional chemical synthesis-based “small molecule” generic pharmaceuticals. Technical know-how needs to be well supported by infrastructure investments of global scale, coupled with a strong focus on profitable commercialization, to support a long term play.

Along with its partners, Biocon has invested over a billion dollars to develop its portfolio assets, and in creating commercial scale manufacturing capacities to address global volume requirements across multiple manufacturing platforms. The company remain committed to making additional investments in R&D and in enhancing its manufacturing capacities. Biocon is now building strong commercial, policy and access expertise to build differentiation and providing further credence to its unique position as a fully integrated ‘pure play’ biosimilars organization in the world. The company expect this to help it move closer to its aspiration of being the ‘Most Inspiring Global Leader in Biologics’, delivering affordable access to innovative and inclusive healthcare solutions, transforming patient lives.

Quality focus and global scale: Biosimilars are expected to provide affordable and accessible alternatives to originator biologics for patients and an opportunity for Governments across the world to rein in burgeoning healthcare spends. By nature, development of biosimilars requires quality focus and global scale to deliver these efficacious therapies across the world. Biocon Biologics has been an early mover in the development and commercialization of biosimilars and has become the leading player based out of India (based on number of US and EU biosimilar approvals) and in other key markets, like Brazil. Biocon Biologics would like to feature itself as a true global player. Its commitment to provide access to high quality, yet affordable, biosimilars to a global patient pool led it to develop the technology, critical mass and skillsets for producing these complex molecules at a time when there were few credible global players.

Strategic partnerships: To become the ‘Most Inspiring Global Leader in Biologics’ delivering affordable access to innovative and inclusive healthcare solutions, transforming patient lives required the company to have marquee partnerships with large global companies to help develop and make accessible its disruptive and differentiated portfolio of biosimilars consisting of 28 molecules across the globe. Of the 28 molecules in the pipeline, 11 are partnered with Mylan, a global generics major and, several partnered with Sandoz, the current global leader in biosimilars by revenue. These major partnerships are well supported with strategic tie ups with major local commercialization players in key emerging markets. The balance portfolio is being developed independently by Biocon Biologics while trying to maximise innovation.

Biosimilars: Highlights FY20

Product Launches: Ogivri™, biosimilar Trastuzumab, co-developed with Mylan was launched in the United States during FY20. Ogivri™ had already received approval in the United States in December’17, where it was the first biosimilar Trastuzumab to be approved. It is the second biosimilar from its partnered portfolio commercialized in the United States after Fulphila®, biosimilar Pegfilgrastim which was launched in FY19. Ogivri™ was also commercialized in Australia, Canada and additional EU markets by Mylan. It was launched in Europe towards the end of FY19. Through its biosimilar Trastuzumab, the company continued to enhance access to a critical biologics therapy for cancer patients in several emerging markets as well.

Semglee®, its biosimilar Insulin Glargine co-developed with Mylan, was launched in Europe during FY19. During FY20, Mylan expanded access for Semglee® in more markets within Europe. The FDA conducted a pre-approval inspection (PAI) at its Malaysia facility in February’20 as part of the review process of its application for the US market. At the conclusion of this PAI, the agency issued a Form 483 with three observations which were procedural in nature. The company responded to the observations within stipulated timelines and have received the Establishment Inspection Report (EIR) from the US FDA with a “VAI” (Voluntary Action Indicated) classification indicative of a successful closure. The closing of the Malaysia facility inspection is an important milepost in its journey of making available its Insulin Glargine product in the United States in the second half of CY’20.

Transition of insulins to be regulated as Biologics from March 23, 2020 – In the United States, although the majority of therapeutic biological products have been licensed under section 351 of the Public Health Service Act (PHS Act), some protein products (which also include insulins) historically have been approved under section 505 of the Federal Food, Drug, and Cosmetic Act (FD&C Act). As per the Biologics Price Competition and Innovation Act of 2009 (BPCI Act), insulins transitioned to be regulated as a Biologic from March 23, 2020. This transition would have caused problems for generic insulin developers who had filed their application for review but had not received their final approval before the transition date, including Biocon Biologics/ Mylan. However, a legislation was passed into law in December’19 mandating the FDA to continue review of pending insulin marketing authorization applications under section 505 of the Federal Food, Drug and Cosmetics Act even after the transition. As a result, the transition did not affect its application review by the FDA. The continued review is expected to help Biocon Biologics and Mylan enable access to Semglee® to patients in the United States at the earliest. With the target action date for its application in June’20, its partner Mylan expects to launch Semglee® in the United States in the second half of CY’20.

Mylan commercialized biosimilar Adalimumab (Brand name Hulio™, in-licensed from a third party - Fujifilm Kyowa Kirin Biologics) in FY19 in Europe in which Biocon Biologics receives economic benefit. It extended the commercial footprint of Hulio™ to additional markets in Europe during the year under review and Biocon Biologics benefitted from higher sales and market shares of Hulio™ across key markets. Mylan also extended the commercialization rights for Hulio™ from Europe to global markets and Biocon Biologics under the terms of its global partnership with Mylan for monoclonal antibodies, retains its economic interest in this expanded in-licensing arrangement, and will gain a share of profits from global markets.

Pipeline development updates: On the development front, its partner Mylan filed a Biologics License Application (BLA) for its proposed biosimilar Bevacizumab in the United States and a Marketing Authorization Application in Europe. In the United States, FDA has accepted Mylan’s BLA for review under the 351(k) pathway. The FDA goal date set under the Biosimilar User Fee Act (BsUFA) is December 27, 2020. The European application has also been accepted and is under review.

Nepexto®, brand name of an etanercept biosimilar, in-licensed by partner Mylan from a third party (Lupin) for Europe and other markets, gained a positive opinion from the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP), recommending use of the product. Biocon Biologics retains its economic interest in this arrangement vis-a-vis Mylan in accordance with its existing collaboration agreement.

Capacity enhancements: The company's investment strategy for manufacturing has been to build capacity in a modular manner, in-line with its projections of the market opportunity. This has allowed it to scale up capacity in response to higher-than-expected demand, even as the company balance exposure to any underutilized capacity and costs in the early phase. The company will continue to invest in expanding its manufacturing capacities to address volume growth on account of increased penetration of its products in developed and emerging markets and also to support new biosimilar pipeline development and launches.

In October’19, Biocon Biologics and Mylan received US FDA approval for the supplemental Biologics License Application for an additional production line to manufacture Ogivri™ 150 mg per vial drug product. The same manufacturing line is also certified by the EMA and significantly enhances its drug product capacity for supplying Trastuzumab to the US, EU and other markets. The approval follows a pre-approval inspection of Biocon Biologics’ new drug product facility as what the company refer to as the B2 biologics facility that was conducted in September’19.

In November’19, Biocon Biologics and Mylan’s supplemental Biologics License Application (sBLA) for Pegfilgrastim drug substance to be manufactured at Biocon Biologics’ new Biologics manufacturing facility was approved by the FDA. This approval enables Mylan and Biocon Biologics to scale up capacity multi-fold and address the growing market opportunities in the United States and other global markets for the product.

The first phase of its state-of-the-art, new 250,000 square feet Drug Substance facility for monoclonal antibodies at Biocon Park, Bengaluru has been commissioned in late FY20 and is undergoing qualification which will be followed by validation activities. Commercial operations from this new facility are expected to start late FY21 or early FY22. This facility once fully ready for commercialization will expand its capacities significantly and will enable it to address the growing patient needs across markets

Expansion of R&D footprint: Biocon Biologics expanded its R&D footprint during the year by acquiring Pfizer Healthcare India Limited’s R&D capital assets to set up a 60,000 square feet world-class integrated R&D facility at TICEL Bio Park in Chennai. The high end facility will enable Biocon Biologics to expand its R&D capability and fast forward the development of its biosimilars from lab to pilot scale. The facility, post qualification has the capacity to house over 200 scientists.

Novel Biologics

The Novel Biologics portfolio has both in-house as well as partnered and in-licensed products targeting diabetes, immunology inflammation and oncology including immuno-oncology. Biocon’s focus on innovation for global markets continues to be strengthened by directing efforts at increasing scientific depth and emphasis on bolstering its in-house research capabilities – including access to novel IP, therapeutic modalities, in-vivo and in-vitro models, toxicology studies, early regulatory filings, academic collaborations etc. In the development phase, broader global advancement of its novel program assets will likely be driven via external collaborations to further fund the larger studies required to bring these novel molecules to market and realize the full value of its innovations

The company's basket of novel assets under development, represent an interesting combination of early and advanced stage programs, comprised of therapeutics that aim at treating diabetes, oncology and auto-immune/inflammatory diseases. These therapeutics span across multiple modalities - including recombinant proteins, novel fusion antibodies and monoclonal antibodies (mAbs),

BIOMAb EGFR® (Nimotuzumab) was India’s first indigenously produced novel monoclonal antibody for the treatment of head and neck cancer, launched by Biocon in 2006.

The company also launched ALZUMAb™ (Itolizumab), world’s first novel anti-CD6 monoclonal antibody, in India, for psoriasis in 2013. It was the second novel biologic the company had taken from ‘lab to market’ after Nimotuzumab.

Performance of Biologics Segment in FY20 – This year saw the biologics segment deliver an encouraging performance and once again being the strongest performing segment for Biocon, with revenues growing 29% over last year to R 19,513 mn, representing 30% of consolidated revenues from operations. Growth was led by higher revenues from Pegfilgrastim in the United States and Trastuzumab in developed markets.

Strong revenue growth did not translate into improvement in segment profit margins as this was negated primarily by increased cost of operations with respect to remediation costs in Malaysia.

Branded Formulations (India and UAE)

Branded Formulations business segment comprises products sold under Biocon brand in the regional markets, currently in India and the UAE. This business focuses on specialty brands in critical therapies offering affordable and differentiated medicines of worldclass quality to thousands of patients in India and UAE. These include biologics (including biosimilars, novel molecules and others), in-licensed products and branded generics for acute and chronic conditions. The business focuses on therapeutic areas such as metabolics (diabetes, cardiovascular), oncology, nephrology, autoimmune diseases among others.

Branded Formulations India (BFI) – BFI is its flagship business because it represents its home country. The company's primary focus is to serve patients and healthcare systems by delivering high quality biosimilars and medicines at an affordable price.

Despite many headwinds in FY20 its strategic products represented 70% of its sales. Although the overall business declined by 6% this was driven primarily by i) Significant downward pricing pressures, in its leading assets, and increased competition for both insulins and CANMAb™, its biosimilar trastuzumab in India ii) Supply issues related to the well-known challenges with the Malaysia plant also impacted the business and iii) In Q4 FY20 (Jan-March 2020), the company were impacted by the COVID-19 situation but not as much as expected. Team BFI rose to the challenge to do everything to support its patients and everyday were innovating to partner with physicians to support patients and to innovate to ensure that patients that needed medicines received them. The company even leveraged military cargo flights, rented cold chain trucks to ensure patient supply.

UAE – The company's UAE is well diversified across a portfolio of products that include, biosimilars in-licensed second brands and branded generics. The business operates across therapy segments with key focus on cardiovascular, diabetes, gastrointestinal and respiratory therapy. The company's top brands contributed to around 69% of sales.

FY20 was the first full year of sales post launch of its world’s first biosimilar Trastuzumab Canhera™ in UAE. Within a span of a year Canhera™ has cornered a 30% volume market share in UAE retail market. Similarly, in FY20 its in-licensed second brands Jalra range and Imprida range have shown a substantial growth. With products like Jalra and Glaricon™, its diabetes franchise is ranked at 8th position in UAE diabetes market, clocking a 30% growth during the year under review.

While in FY20 volume for its branded generic products increased, this business faced strong headwinds as UAE Ministry of Health has effected a price revision across a range of its products. Overall there was a 40% price reduction across 60% of its product range. This resulted in a subdued performance for the business during the year under review

Performance of Branded Formulations Segment in FY20 - In FY20, the Branded Formulations segment revenues declined 18% from R 6,564 mn to R 5,362 mn due to subdued growth in India and UAE. The UAE business continues to be impacted by re-pricing of branded generic products mandated by the Ministry of Health.

Research Services (Syngene)

Contract Research Organisations (CROs) undertake R&D activities on a contract basis for other organisations. Over the past decade, the contract research industry has witnessed rapid growth as companies increasingly outsource R&D activities to improve productivity and efficiency across their value chain.

The global CRO market is estimated to grow at a CAGR of over 7.6% during 2019 to 202 , to surpass $61 billion in terms of value by the end of this period . Rising R&D investment, along with the increased focus on novel drug development for the treatment of cardiac diseases, cancers, neurological and infectious diseases, will be a major factor in driving the demand for CRO services.

Syngene was established in 1993 and is an innovation-led leading global contract research organization providing integrated research solutions spanning the discovery, development and manufacturing continuum for small and large molecules, antibody drug conjugates, and oligonucleotides.

Syngene operates in a range of collaboration models from long-term relationships and dedicated R&D centres to contracts based on number of scientists Full-Time Equivalent (FTE) and Fee-for-Service (FFS) arrangements. Clients can select any one – or a combination – of these models to deliver their R&D programs. It has three business divisions – Dedicated R&D Centre; Discovery Service, Development and Manufacturing Services.

FY20 highlights:

Dedicated Centres: Syngene operates four dedicated R&D centres for Bristol-Myers Squibb (BMS), Baxter Inc., Amgen Inc., and Herbalife. The long standing collaborations with these global leaders, extending between five and fifteen years, reflect the confidence Syngene has secured for its services. During the year, the Company achieved steady performance in its dedicated R&D Centres.

The Discovery Services division, comprising the scientific disciplines of chemistry, biology, safety assessment, and research informatics, delivered robust growth throughout the year as the result of contract renewals and expansion of partnerships with existing clients, as well as the onboarding of new clients. Several FFS-based collaborations moved to an FTE-based model, reflecting the maturing of these partnerships and affording additional value. In addition to expanding Syngene’s presence in the human life sciences sector, the division saw growing demand from clients in other sectors, particularly animal health.

Robust integration of the core discovery-related disciplines, as well as enhanced collaboration with Development Services, has augmented Syngene’s position as a service provider for fully-integrated therapeutic discovery. Syngene’s range of capabilities and extensive drug discovery knowledge, spanning from early stages of target identification and validation, through to preclinical evaluation and preparation of drug substance and drug product for clinical testing, makes the Company a very attractive partner and offers opportunities to provide services to new customer groups such a start-ups, academia, venture capital, government and nonprofit organizations.

A key highlight of the Discovery Services during the year was the opening of a state-of-the-art research and development centre in Hyderabad, India; a location that offers a strategic advantage due to its excellent infrastructure, good connectivity, and extensive scientific talent pool. With strong environmental credentials, the first phase of the centre will house 150 Discovery Chemistry scientists. It is equipped with an anytime, anywhere automated control system and electronic laboratory notebooks – an important step towards digitization

A key scientific advance for the year was the extension of the company’s cellular and gene therapy research capabilities into CAR-T therapy, an innovative and leading-edge approach to treating cancer. Several projects within Discovery Biology covering hypothesistesting and validation of new biological targets, as well as the exploration of novel mechanisms related to CAR-T therapies, are underway.

The Development Services sub-division delivered steady performance during the year. New client projects were undertaken across the full range of services and multiple modalities. In particular, two new strategic collaborations in animal health increased the focus on that sector.

Notable scientific achievements during the year included the delivery of registration batches of multiple, modified-release tablet formulations of a drug that treats symptoms of multiple sclerosis for a Russian client — the result of a four-year collaboration. The Company also developed and validated a Human Papilloma Virus (HPV) assay, a test system increasingly being used for cervical cancer screening.

Manufacturing Services: The construction of the API manufacturing facility in Mangaluru, India, was completed on schedule and the facility will undergo qualification testing in the coming year. Once fully operational, it will allow the Company to offer commercialscale manufacturing for small molecules.

For Biologics development and manufacturing, Syngene has invested in the latest R&D technology for large molecules and the Company’s Biologics unit is an emerging capability. Two 2KL bioreactors were commissioned during the year, and a microbial manufacturing facility is being set up, strengthening the biologics manufacturing capacity. New client wins were recorded in the year to add to the expansion of renewal of contracts with existing clients. It also entered into contracts with leading industry players for the development of biologics in animal health.

Syngene has implemented a variety of initiatives to further improve its track record in the area of quality and compliance. Business specific quality manuals were introduced to enhance the focus on standards and industry regulations. Significant progress was made towards the total digitization of its Quality Management System. Digitization has brought in a high degree of visibility and control over operations and will be fully rolled out in FY21.

Performance of Research Services Segment in FY20 - During the year under review, Syngene’s revenues grew 10% to Rs 20,119 mn. The performance was driven by a broad based growth across all business units, with improved traction in Discovery Services. Segment margins improved over last year driven by lower material costs and forex gain during the year.

Capacity expansion

Biocon Biologics’ key strengths is its reliability in supplying high-quality products to patients globally. Biocon has adequate manufacturing capacity to support its market share projections in all geographies. Biocon has continued to make steady investments in manufacturing capacity as its products make further inroads in markets globally expanding access to high-quality biosimilars. These investments will also enable the development and launch of the next wave of biosimilars from its rich pipeline.⁴

Towards the end of FY20, the company commissioned its new state-of-the-art biologics drug substance facility, which will enhance its manufacturing capacity for monoclonal antibodies manifold and improve its ability to serve many more patients across the globe. The company expect this facility to begin commercial operations in early FY22, subject to regulatory approvals in various markets.

During this fiscal, the company also expanded its manufacturing capacity for Pegfilgrastim drug substance. This new manufacturing facility in Bengaluru received U.S. FDA approval in November 2019 and has started commercial operations since. This facility was also inspected and approved by the European Medicines Agency (EMA). The company upgraded its Drug Product manufacturing capacity substantially with the commercialization of a new sterile injectables facility. This new aseptic processing unit enhances its liquid and lyophilized vial capacity and was inspected and approved by several global regulatory agencies including ANVISA, EMA and U.S. FDA to list a few. The company's state-of-the-art Insulins manufacturing facility in Malaysia has been serving patients over the past four years. This facility, hosted multiple regulatory inspections successfully during FY20 and received EU GMP certification. The facility also successfully closed a U.S. FDA inspection enabling the supply of its rh-Insulin and Insulin Glargine to various markets.

These approvals enhance Biocon Biologics’ capability multi-fold and will enable it to take its biosimilars to more patients worldwide.

The company also expanded its R&D footprint in the quarter by acquiring Pfizer Healthcare India Ltd.’s R&D capital assets to set up a 60,000 sq. ft. world-class integrated R&D facility at TICEL Bio Park in Chennai. The high-end facility will enable Biocon Biologics to expand its R&D capability and fast-forward development of its biosimilars from lab to pilot scale. Post qualification, the facility will house over 250 scientists

Outlook

The COVID-19 pandemic has given it an even larger opportunity to shape the global biosimilar landscape. Healthcare systems worldwide will be compelled to leverage both generics and biosimilars to contain medical costs. As a fully integrated, ‘pure play’ global biosimilars company, Biocon Biologics has the scientific expertise and manufacturing scale to deliver complex biosimilars to patients across the globe. The company's strong portfolio of in-market and in-development biosimilars covering oncology, diabetes & immunology and other therapeutic areas, offer one of the industry’s largest and most diverse global biosimilars pipelines.

At the same time, all regions are showing strong promise with high single- to strong double-digit growth underlining the tremendous potential that biosimilars offer.

The total global market of all biosimilar monoclonal antibodies and therapeutic proteins is anticipated to grow from ~USD 25 billion today to USD 55 billion in 2025 (Source: IQVIA data and the Company’s analysis).

The company target to have at least eight of its biosimilars available in developed markets through its partner by the end of FY22 viz. Trastuzumab, Pegfilgrastim, Adalimumab, Bevacizumab, Etanercept, Insulin Glargine, Insulin Aspart and rh-Insulin^, addressing an estimated market opportunity of up to USD 33 billion*. The company's pipeline is expected to deliver three molecules between FY23 and FY25. Biocon is currently focused on developed markets such as U.S., Europe, Australia, Canada and Japan through strong partners, but are also preparing to tap the opportunity from the rapid rise in demand for biosimilars in rest of the world markets. The company already have a presence in the majority of the Top 20 markets, and the company plan to expand its geographic footprint even further.

Financial Highlights

During the year FY20, revenues grew by 15% on a consolidated basis from Rs 56,588 mn to Rs 65,286 mn. The Small Molecules segment revenues increased 18%, as it benefited from the launch of generic formulation products in the U.S., better product mix in APIs and an overall better pricing environment over last fiscal. The Biologics segment revenues grew by 29% primarily due to higher revenues from Pegfilgrastim and the launch of biosimilar Trastuzumab in the developed markets. Branded Formulations segment contracted 18% due to subdued growth in India and UAE. The UAE business continues to be impacted by re-pricing of branded generic products mandated by the Ministry of Health, while Contract Research segment (Syngene) turnover grew 10% driven by discovery services and development centers.

Research and development expenses

The net R&D expenditure for FY20 increased 52% to Rs 4,394 mn (Rs 2,899 mn in FY19). Total spend was at ~10% (8% on FY19) of revenue ex-Syngene. The company capitalized Rs 877 mn, taking gross R&D spend to Rs 5,271 mn for the year compared to Rs 4,796 mn in FY19. The gross R&D spend increased due to higher spend in the biosimilar development programs, ANDA programs and expenditures related to inhouse novel programs.

Finance costs

The finance cost for FY20 at Rs 649 mn (Rs 709 mn in FY19), primarily comprises interest cost on borrowings for Biologics and Research Services business The decrease is due to repayment of long-term borrowings

Key financial ratios

Recent developments

Oct 27, 2020; Biocon Consolidated September 2020 Net Sales at Rs 1,744.80 crore, up 10.98% Y-o-Y ⁵

Net Sales at Rs 1,744.80 crore in September 2020 up 10.98% from Rs. 1,572.20 crore in September 2019.

Quarterly Net Profit at Rs. 169.30 crore in September 2020 down 21.51% from Rs. 215.70 crore in September 2019.

EBITDA stands at Rs. 406.90 crore in September 2020 down 7.77% from Rs. 441.20 crore in September 2019.

Biocon EPS has decreased to Rs. 1.43 in September 2020 from Rs. 1.82 in September 2019.

Nov 07, 2020; Biocon Biologics to receive $150 million from Goldman Sachs against convertible debentures ⁶

Biocon Biologics, a subsidiary of Biocon, will receive an investment of $150 million (Rs 1125 crore) from Goldman Sachs against optionally convertible debentures, as the company aims to grow in global markets.

This transaction values Biocon Biologics at $3.94 billion

References

1. ^ https://www.biocon.com/about-us/who-we-are/
2. ^ https://www.biocon.com/products/key-therapeutic-areas/
3. ^ https://www.biocon.com/docs/Biocon_Annual_Report_2020.pdf
4. ^ https://www.biocon.com/docs/Biocon_Annual_Report_2020.pdf
5. ^ https://www.moneycontrol.com/news/business/earnings/biocon-consolidated-september-2020-net-sales-at-rs-1744-80-crore-up-10-98-y-o-y-2-6020371.html
6. ^ https://economictimes.indiatimes.com/industry/healthcare/biotech/biocon-biologics-to-receive-150-million-from-goldman-sachs-against-convertible-debentures/articleshow/79098587.cms