In Q3 FY19, the biologics segment revenue more than doubled to Rs 449 crore, growing 136 per cent YoY. Increased sale of Fulphila, biosimilar Pegfilgrastim launched by partner Mylan in the US and Trastuzumab sales in key emerging markets along with robust sales of the insulin portfolio in Malaysia and Latin America markets led to a robust performance in Q3. Recent approvals of Fulphila, Ogivri (Trastuzumab) and Semglee (insulin glargine) in the EU, Canada, and Australia augur well for our biologics business.
What is the outlook for the US business, and how has it done during Q3?
Our small molecules business grew 27 per cent due to an increase in core API sales to India-based customers who use our drug substances to formulate drugs for US.
Biocon’s niche API portfolio comprises statins and immunosuppressants. Over 30 per cent of statins used in the US have Biocon’s APIs. Our relatively nascent generic formulations business in the US has been gaining traction and grew seven-fold in Q3. We successfully launched Atorvastatin calcium tablets and garnered higher market share for Rosuvastatin and Simvastatin formulations. Fulphila commercialised by Mylan continues to gain traction in the US.
With Trastuzumab approved and poised for launch in the US and insulin Glargine being reviewed by USFDA, we are positioned to do well in the world’s largest pharmaceutical market.
The Ebitda margins have improved in Q3. What are the main drivers?
We are seeing rising contribution of our biosimilars sales to overall revenue, which is leading to an improvement in the quality of our earnings. Biocon’s year-to-date earnings have more than doubled over last year, led by the biologics segment. The biologics segment EBIT margins in Q3 saw a huge improvement from a negative single digit percentage to 30 per cent. This contributed significantly to the consolidated Ebitda margin, which grew 300 basis points to 26 per cent, this quarter. Core Ebitda margins (Ebitda margins, net of licensing, forex and R&D) improved from 27 per cent in Q3 last year to 32 per cent this quarter.
The branded formulations business has turned around. What led to this growth and is this the new normal?
The branded formulations business, which includes sales in India and the UAE, reported a quarterly revenue growth of 36 per cent YoY at Rs 212 crore. Our positioning as a specialty products company is also paying off with 70 per cent of our overall India business being accounted for by biologics/biosimilars products. The top 10 brands of our India portfolio, grew by 26 per cent this quarter. Key brands like Insugen, Basalog, and Tacrograf reported a strong double-digit YoY growth.
In UAE, the business reported strong growth, driven by higher branded generic product sales, resulting in strong overall growth for the Branded Formulations segment. During the quarter, we introduced our biosimilar Trastuzumab under the brand name CANHERA in UAE. We expect our branded formulations business to report a strong double digit growth.
Your net R&D expenses have gone up substantially in this quarter? What will be the ongoing trends?
In line with our commitment to innovation, the net R&D expenses have grown 45% YoY to Rs 77 crore on account of increased spending in biosimilars and insulin analogs development programs. We expect the full year gross R&D spends to be in the Rs 450- 500-crore range,which is 12-15% of Biocon revenues ex-Syngene.
What is the progress on your Malaysia facility? When do you expect to break even?
We are progressing as per plan and regulatory approvals from various agencies globally are enabling launch of Insulins in some of these markets from this facility. We expect an operational breakeven in Malaysia in FY19, excluding R&D expenses.