Biocon Limited (BIOCON) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the JPMorgan Conference. I'm Bansi Desai, India Pharma analyst at JPM. Please join me in welcoming the team of Biocon. We have Mr. Shreehas Tambe, CEO of Biocon; Kedar Upadhye, CFO of Biocon. We have Matt, who heads the Advanced Markets. And Stephanie, over to you guys.

Thank you, Bansi, for that. Good morning to everyone. I know it's an early morning here at JPMorgan. Thank you to the JPMorgan team for the opportunity to present the Biocon story and the impact that we are having on global health care, particularly in trying to make medicines affordable and accessible to patients, globally. I'll skip through the safe harbor, but it's there. Let me start with talking a little bit about who we are. Biocon has been in business a little over 47 years. We started back in 1978, founded by our dynamic founder, Kiran Mazumdar-Shaw. Of the 47 years that we've been in business, a little over 27 years, we've been in the pharmaceutical space. And what you see behind me is the legacy that we've had where a market cap of a little over $6 billion. We've always been a science and ops-driven company, a high science company, if you see and if you see to that chart there, you will see a little over 1,500 patents that we've been able to work with overall. So that's the investment we've made in terms of creating intellectual property. We've always believed that it's not enough to just create and develop products. We need to have global scale manufacturing, which is why you see that we've got very large-scale manufacturing across 11 different locations, and I'll talk to you a little bit about it as I go forward. We have a very large commercial reach. We reach -- we have a presence in over 120 countries. But to talk to you a little bit about how we are structured. If you see to the bottom of the slide, you will see that Biocon's incubated 4 different businesses over a period of time, the Biocon Biologics business, where we have the biosimilars. We've got the Generics business, which is in the listed entity. The Research Services business, which is amongst the leading Research Services business in the country -- company in the country, which is Syngene was listed back in 2015. And the Novels Antibodies business, which also had the opportunity to present here at JPMorgan on day 1, where it was listed on NASDAQ and another $1 billion listing within the Biocon family. So we've had a very rich history. That's what and that's who we are. And when I talk about the science in terms of how we've grown the business, I just want you to look at that slide. I know it's a little small looking from back there, but it's on our website. It gives you a sense of the last 20 years that if you look back, there have been a series of firsts that we've had, whether it was the first human -- recombinant human insulin that we brought to the world outside of the Big 3, whether it was the first trastuzumab, which was approved in India or the first trastuzumab ever to have been brought to the United States, likewise with the first biosimilar pegfilgrastim. So a series of this, including the first interchangeable long-acting insulin, glargine. And to the more -- if I fast forward this to '24, '25, you will see that we were the first to bring the interchangeable rapid-acting analog, which is insulin aspart, which is another first as well for the company, not to mention the ophthalmology drug, Eylea, which was also the first that the FDA approved. So that gives you a sense of the focus that we've had on science and innovation over the years. So if I look back in terms of how our journey has been, so of the 47 years, the first 20 years were focused on enzymes, where we were a part of the Unilever group at that point. And then if you see the next 27 years, which is '98 onwards, we've started from the small molecule space, insulins, moved into the monoclonal antibodies where we partnered with an American company, Mylan back then, which became Viatris later on. As we move that forward, we decided that the growth driver for us was biosimilars. And we specifically carved out the Biocon Biologics entity. And we realized that if we were to take this forward because we are very successful in developing products along with Mylan for a little over a decade. But to actually make a difference to patients, we needed to be fully integrated. And which is why back in 2022, we decided that we were going to acquire Viatris' Biosimilars business. They had a 2/3 stake. We had a 1/3 stake. We bought that entire business back in '22, and we went on to become amongst the top 5 biosimilars company in the world with the presence in 120 countries that I just talked about. So that was a little bit about what we did until '22. But the question is, what is it that we are doing now? So what I showed you in the first slide is the 4 companies that we had. We've looked at a situation where we had biologics and insulins in one entity and the generics in another one, which is the listed entity. We decided and we're now looking to consolidate this, in fact, and I'll have more updates to talk to you about today, is we moved from this to a very simpler structure where we have 2 broad companies within the Group. One is the products company, which is Biocon and the Research Services company, which is Syngene. And that gives us tremendous strategic advantage over everything in the industry that you see because it brings to bear all the R&D capabilities that we've got in over a 30-product biosimilar portfolio, a rich 3 or 4 product GLP-1 peptide portfolio, targeting an opportunity of over $200 billion. So that's a very, very significant opportunity in the R&D space. In the manufacturing facilities, we just talked about and you'll see more, we have a very diversified base. We are now amongst the top 15 manufacturing capacities globally, and we'll talk to you about that. And a commercial footprint, which allows us to cross leverage, the capabilities that we've built at Biocon Biologics to bring the GLP-1 peptides and the other small molecules to patients and customers around the world. So what does that look like? So this is the rationale that you see behind me that allows us to do this. First is it's a very simplified corporate structure. It allows us to have a clarity in terms of where you're going to have products, which company is going to look at services, which is Biocon and Syngene. And then you have a much stronger balance sheet. Your financial metrics are much stronger than before, which allows you then to bring in some more operational synergies than you had before. So it will strengthen this further. You are going to see that there will be group resources that will be deployed towards this. And I just talked to you about cross-leveraging the commercial capabilities, which we see happening as we leverage the commercial footprint that we've built at Biocon Biologics. But then with all of this that we've built over the years and in the recent 3 years, particularly, what's the impact that we are having? Because the whole vision has been to see how can we make a difference to global health care. I think the first thing to understand is where is this paradigm shifting. And over the last couple of decades or a little more than that since 1990, we've been seeing that it's shifted from being focused on communicable diseases, the disease burdens move towards noncommunicable diseases. I think this is already established, save for that blip of COVID-19, we've really seen a rise in noncommunicable diseases. The 3 top disease areas or therapy segments, as we would like to call it, would be in oncology, diabetes and musculoskeletal diseases or immunology. If you look at oncology, health care spends in oncology have been the highest in the last few decades. And that's also because you see that the prevalence of this has increased significantly. There's been a tremendous rise just in the last 3 years. So it's something that we need to be very, very watchful of, and there needs to be solutions which are affordable to address this. Diabetes is another epidemic which people tend to ignore until it creeps up on you. There are 800 people who are living with diabetes globally, just 40 million of that is in this country alone. So it's not an insignificant number, and it's a global crisis, which leads to several comorbidities. And immunology is a very vast segment, which almost 10% of the industrialized world is already dealing with. So it's a very sizable segment of people, and it's also in the developing world that you see this on the rise. So we are focused on debilitating diseases, and we want to see how we can make a difference with all that you saw in the beginning of the presentation. This is the portfolio with which we are trying to address some of these global challenges. What you see on this slide, and you can access this on our website as well, is a bunch of products which are synergistic both between our biosimilars and the complex generics that we've invested in. These target oncology, immunology and diabetes therapy areas because really, these are treatment where availability is a challenge. Most importantly, affordability is a challenge, which then limits access. What you see on the right-hand side is something that we've announced on the -- as we got into the JPMorgan conference. We just talked about our expansion into the oncology portfolio, where we would be amongst the few who would have a biosimilar pertuzumab and probably amongst several who would have the PD-1s as well. But the fact that we've worked closely with regulators to bring these products, strengthens our oncology franchise with over 17 biosimilars and an overall biosimilars portfolio with over 30 assets. Last year, when I was here, I talked about our product portfolio being around 20 products. But with how the regulators have seen the landscape evolving, the lowering of the costs for developing the biosimilar products into the -- bringing them to market has allowed us to do more with the same R&D dollars. And that's why you're seeing us now bring to you a portfolio which is amongst the leading in the industry. I talked to you about manufacturing facilities, and this just gives you a sense of the vast reach. This is -- we have a global expanded network, a network of manufacturing facilities. These are facilities which are in-house. You see them spread across the world. You see them spread across development, manufacturing, technology platforms, whether it comes to mammalian cell culture, microbial, fermentation synthetic platforms, drug product facilities, whether it's injectables or whether it's oral solids, tremendous investments that we've made in capacity, 300,000 liters in fermentation scale, over 100 million units in injectable capacity and over $2 billion in solid doses. I think that's probably something which is a force to reckon with in the biosimilars, generics industry. That brings me to the commercial footprint because you can have great science and you can have capacity, which is important. But then if you can't reach the customer, then it's a little incomplete. And that's why when we acquired this global footprint, today, we are amongst the few players outside of the originator companies that have a commercial footprint that's that strong. What you see on the slide in front of you is we've established boots on ground in several countries. I talked about our presence in 120 countries, but we have boots on ground in over 30 countries between our small molecules and generics portfolio. We have partnered with strong regional players in close to 100 countries. So that is really how we've grown this business. It allows us to bring products to patients in an affordable manner, making them accessible as we bring these life-changing therapies to patients. But it's not just bringing them to patients. It's about how significantly we've done it. This is the image on the screen that you see on how effectively we've done it. We've taken a snapshot of how we have done it in the U.S. On the left-hand side of the screen, you will see the biosimilars' performance over the last few years. And it's been 1/4 of the market with the products that we've had, which is very, very sizable. The insulin's numbers look small because IQVIA reports only the commercial payers. We do have a significant business with closed door networks, integrated networks as well as the government business, which doesn't get reported here. So that's a sizable chunk. So we have always said we aspire to serve one in 5 insulin-dependent diabetics. And I can tell you, we are well on our way to do that with the products we've got. A glimpse of what's coming next because I talked to you about what's happened so far. The future is far more exciting than the past. We've talked about 4 or 5 products so far that we've launched since 2018, up until now. But in 2026 alone, we are looking to bring 5 products here in the U.S., 4 of them that you see in the oncoimmuno space, which you will see coming up shortly. The type on the Yesafili biosimilar is that it's not H1, but it's H2, which is where we will bring that. The Kirsty biosimilar to insulin aspart is the only biosimilar that really can make a difference. So we believe there's a very, very exciting path in 2026. And on the small molecules front, we are looking forward to an approval for our Gen 1 Liraglutide biosimilar or complex generic, as you would call it. And we will look to bring the semaglutide generic as well shortly, although we have filed it in the U.S., but in other parts of the world. I'll skip this slide, but I'll get you to the financial performance in the interest of time. And it just gives you a sense of how we've done over the last 3 years because it captures a sense of how our strategy has evolved. We had set out a strategy, which was about preserving value in the acquisition that we had done, consolidating the business that we had acquired and built, and we are now in the accelerate phase. And why I say that as the business has grown, you've seen the R&D numbers rationalize to a more balanced number. And you're seeing the EBITDA numbers actually grow from 20% to 26%. And that's really the strength of the balance sheet that you see on the right-hand side, where you're seeing how the business has evolved over time. A quick look at how we've managed the debt to be able to make this more powerful than what it has been in the past. In the last 2 years, we've had significant corporate action, which has allowed us to strengthen the balance sheet significantly. The first column that you see focuses on how we've been able to package our acquisition debt into a long-term bond at a very low interest rate. And these have been trading at a very, very comfortable rate. So that tells you that the investors have been very happy in terms of how our bonds have been packaged. In the last 6 months alone, we've been able to raise $1 billion in terms of capital fundraise from the Indian market. And the recent one, while it says ongoing here because that fundraise got done this week. So it's as fresh as it can be, was oversubscribed 4x. And that was another phenomenal success. It just tells you that the confidence that the Street has in the story that we are building shows in terms of how they've supported the capital fundraise that we've gone to the market with this. It just improves the way the balance sheet has strengthened over time. It allows us to retire all the structured debt. It also allows us to now integrate Biocon Biologics into Biocon as a wholly-owned subsidiary. So a very strong position and gets us into a place where we can now accelerate the business. This is the management team that has been driving this growth. I have on stage with me, the CFO, the CCO, the Chief Communications Officer. I think we've built a very, very strong team. And that is what has driven this growth over the last 3 or 4 years and over 47 years that we've built the company. So I'll pause, and thank you for your patience and looking forward to your questions. Thank you.

Thank you for the presentation. So clearly, in terms of financial restructuring, the structure is now simpler and strategically, this is positive. You shared color on your pipeline. The portfolio breadth is also quite impressive. So the focus, I think, now just moves onto execution, right? And I would say we've had challenging periods in the past, but we've also seen recent uptick on that front. So what are the milestones that we should be watching out for over the next 12 to 24 months? And I'm sure some of the products like trastu, pegfilgrastim, bevacizumab has a lot more to contribute. So when do we see these products contribute meaningfully?

Yes. No, thanks, Bansi, for that question. But I'll maybe have Matt respond to that question because he's been the one driving a lot of that growth that you've seen. Matt, over to you.

Thank you, Shreehas. So the oncology portfolio remains very important, as you can see. And I think you're just starting to see the tip of the synergies that we can drive. So as we introduce more of these oncology products within the U.S., it's synergistic, so we can continue to build on it. What we have great expertise on, and you've seen this since we've taken it over from Viatris is we've been able to grow market share, but it's been profitable market share. And if you understand the U.S. market, that is in the Part B. It is not a race to the bottom. It is not about price. It's not about total market share. It's about balancing that ASP and the profitability. As we look, it's just not U.S., but we have a very successful oncology platform in Europe. So we're very diversified and able to ride those tailwinds and overcome any headwinds as we look at different markets and shaping up. As we have bevacizumab, that will continue to accelerate that, not only in the United States, but also in Europe. And then as we continue to launch new products, a lot of those are synergistic because we look at this by country and also by portfolio. So as we launch more products, we can leverage our current platform, which we built. And you can see that in the EBITDA that Shreehas showed, it continues to grow year-over-year, quarter-over-quarter. And I think that shows the OpEx and the opportunity that we're doing to drive those synergies.

Can you talk about your expectations for the denosumab biosimilar launch, both in the U.S. and in Europe? And my second question would be what your expectations are for the first wave of semaglutide generic launches in markets like India and Brazil and Canada and Mexico?

Maybe, Matt, you can take the first one and I'll take the semaglutide.

Okay. So on the denosumab, clearly, it's going to be a strategic approach. When you think about this is a unique product, it crosses in the United States between Part D and Part B. And so we will take a path of looking at the most economical and most profitable piece of this. So if you play in the Part D space, which is the pharma side, it's hypercompetitive. You play in the Part B side on the ASP side, which is the oncology side, it follows the format of ASP and the discipline around launching those in the market. So you'll see us start to your question, in the Part B space, we'll watch the ASPs and how they fluctuate, and we'll take a commercial approach towards the tail end as we see others that eventually will fall off, but we'll have a slow, steady profitable growth over that year-over-year. In Europe, we're going to compete aggressively in those key markets like Germany, France, U.K., Spain, Italy and the CE part. Those are very much tender driven. We understand the tenders. We understand when to launch. And so we're prepared to be very successful there as well.

I didn't want Matt to reveal all of our commercial strategy to you, but it looks like we've actually let the cat out of the bag. Having said that, in terms of how we are looking at semaglutide. There's a significant opportunity in ex U.S. that we see evolving. We look at bringing these products. We have partnered in Brazil. We also have our own sales force in Brazil. We commercialize our oncology portfolio and our insulins portfolio in Brazil. We have also made progress with Canada. We are waiting to see how the Canadian regulatory authorities treat this. So we will be looking to commercialize this in not just these 2 geographies, but several other parts of the world as U.S. comes along. But as I was saying in my presentation, we believe that the Gen 1 opportunity for Liraglutide in the U.S. is a little underrated at this point in time because between now and the end of the decade, there isn't access to any other GLP-1 other than these 2 and the impact that this can have, can be significant. Okay. Thank you so much. I appreciate your attention. Thank you.