All participants will be in a listen-only mode, and there'll be an opportunity for you to ask questions once the management commentary concludes. Should you need to raise questions, please select the Raise Hand icon under the Reactions tab of this Zoom application. We will call out your name and unmute your line to enable you to ask a question. Asking, please begin with your name and your organization. Please note that the chat box is disabled, but you can raise any technical concerns by sending us an email to investor.relations@biocon.com. I would like to bring to your attention that this conference call is being recorded. The recording will be available on our website within the day, and the transcript will be uploaded subsequently. Today, to discuss the company's business performance and outlook, we have Dr. Kiran Mazumdar-Shaw, our Executive Chairperson, Mr.
Siddharth Mittal, CEO and MD of Biocon Limited, along with other senior management personnel from business segments including Generics, Biosimilars, and Research Services. As I move on, I want to highlight the safe harbor related to today's conference call. The comments made during the call may be forward-looking in nature based on management's current beliefs and expectations. It must be viewed in relation to the risks that our business faces that could cause our future results, performance, or achievements to differ significantly from what is expressed or implied by such forward-looking statements. After the end of the call, if you need any further information or clarifications, please do reach out to me. Now, I would like to turn the call over to our chairperson for her opening remarks. Over to you, Kiran.
Thank you, Saurabh. Good morning, everyone. I would like to start with the national budget, which was presented by the Honorable Finance Minister on the first of February this year. The budget has a favorable impact on our business, especially with respect to research. While details are yet to be published, the increased focus for R&D in pharma and healthcare through centers of excellence is certainly a step in the right direction. Coming to the Viatris transaction. Biocon Biologics has successfully completed the acquisition of the Viatris Global Biosimilars business on the 29th of November, 2022. Incremental revenues and profits post-deal closure are reflected in its earnings this quarter. Viatris continues to provide commercial and other transaction services to Biocon Biologics as a part of a pre-agreed transition services agreement.
In parallel, Biocon Biologics is designing a bespoke country-specific strategy and business model that optimizes for revenues and profitability. This, we believe, will create value for all our stakeholders. We've also drawn up a comprehensive integration plan and intend to start migrating business operations in a phased manner. There are several upcoming launches, including biosimilar Adalimumab in the US, making business continuity one of the key imperatives of our integration plan. Coming to debt reduction. I would like to take you through our debt reduction efforts. To fund the acquisition of Viatris' Global Biosimilars business, Biocon Biologics had made an upfront payment of $2 billion and issued $1 billion of convertible securities to Viatris.
The upfront payment was funded through $1.2 billion of debt raised by Biocon Biologics, $650 million of equity infusion by Biocon Limited, and $150 million of equity infusion by Serum. Biocon Limited had raised $420 million of mezzanine financing to part-fund the $650 million of equity infusion into Biocon Biologics. I am pleased to report that Biocon Limited has entered into definitive agreements with Kotak Special Situations Fund for a structured funding of up to INR 1,200 crores. This funding, together with the recently concluded stake sale in Syngene, will help to reduce our net debt. It is important to point out that Biocon continues to maintain majority control in Syngene at 54.9% post this divestment.
Furthermore, we believe the divestment achieves two key objectives: reduction of the group debt and an increased public float for Syngene. Biocon Biologics is also in discussion with private equity investors for additional fundraise to pay down its acquisition debt. I would also now like to touch upon recent concerns around regulatory inspections. The post-pandemic recommencement of facility inspections by the US FDA in India has reportedly seen a surge in the number of Form 483s issued to companies, which has caused delayed approvals across the industry. Biocon's new product approvals, post pre-approval inspections have also been impacted with the issuance of Complete Response Letters or CRLs by the agency. However, I would like to mention that Biocon has received facility and product approvals from other regulatory agencies, including EMA.
With the US FDA set to resume face-to-face meetings from March, we hope that this will allow us for greater engagement to address these issues. In the meantime, we are of course, you know, looking at this e-event as an opportunity for us to upskill and advance our quality management systems so that we future-proof our quality systems. In terms of leadership update, I am pleased to share that Shreehas Tambe was appointed CEO and Managing Director of Biocon Biologics in December 2022, following the retirement of Dr. Arun Chandavarkar, who will continue to serve as a non-executive, non-independent director on the board of Biocon Biologics. I would like to thank Arun for his long-standing contribution to the Biocon Group, and my best wishes to Shreehas for the transformational journey ahead. I will now present the key financial highlights of the quarter.
At a consolidated group level, revenues for Q3 FY23 were up 36% on a year-on-year basis at INR 3,020 crores. Revenues from our biosimilars business and research services business delivered strong year-on-year growth of 54% and 23% respectively. Our generics business grew at a healthy 18%. Core EBITDA, which I would like to explain as EBITDA excluding R&D, licensing income, Forex movement, dilution gain in Bicara, and mark-to-market movement on investments, grew 49% to INR 1,069 crores, which indicates a very healthy core operating margin of 36% versus 33% in the same quarter last year.
Growth in Core EBITDA was offset by higher R&D ex investment at INR 337 crores, an increase of INR 199 crores compared to the same period last fiscal, representing 16% of revenues ex Syngene. This is a clear reflection of our advancing pipeline that will drive our future growth. We also recorded a Forex loss of INR 44 crores as compared to a gain of INR 19 crores during Q3 FY 2022. Reported EBITDA for the quarter was up 35% at INR 723 crores versus INR 537 crores in the same period last year, with EBITDA margin sustained at 24%. Profit before tax and exceptional items stood at INR 246 crores compared to INR 269 crores during the same quarter last fiscal.
The drop in PBT is attributable to certain amortization and interest costs related to the acquisition of the Viatris business. The net profit for the quarter, excluding exceptional items, stood at 140 crores versus 187 crores in Q3 FY22. It must be mentioned that there is a part impact of state dilution of Biocon's shareholding in both Biocon Biologics and Syngene in the consolidated results. I would like to also turn to exceptional items during the quarter amounting to INR 182 crores, net of tax and minority interests, which primarily pertain to deal related expenses of the Viatris transaction. This, of course, then leads to a net loss of 42 crores this quarter. This, I would again emphasize, is a one-off event, and we expect it to return to normal from next quarter. Coming to segmental, you know, comments.
I would like to start with generics. Our generics business for this quarter. The generics business delivered revenues of INR 718 crores during the quarter, a year-on-year growth of 18%. Profit before tax for the quarter was at INR 72 crores versus INR 67 crores last year. Sequentially, revenues grew by 15%. The performance during the quarter was driven by an increase in demand for immunosuppressant APIs as well as generic formulations, especially patents as well as recent product launches. Margins compared to previous year were muted on account of continued pricing pressure in the U.S. market. During the quarter, we entered into agreements with Zentiva, a leading European pharmaceutical company, under which Biocon will manufacture and supply liraglutide to Zentiva for its commercialization in 30 countries across Europe. As you know, liraglutide, we are vertically integrated.
This is a complex formulation, it includes a drug-device combination used in the treatment and management of type 2 diabetes and obesity. Another agreement, we have also secured approvals for some of our key formulation products in Europe. We have also entered into a long-term strategic partnership with Farmanguinhos in Brazil for the supply and tech transfer of immunosuppressant finished dosage formulation. Collectively, these agreements and approvals that we have received, it's important for me to state, will actually allow us to drive that mid-teens growth for over the next five years and beyond. On the quality compliance front, we were issued a good manufacturing practice certificate by EDQM, the European Authority, for our active pharmaceutical ingredient manufacturing facility in Bengaluru, following a GMP inspection of the site conducted in September.
With respect to our Visakhapatnam project, we continue to make progress in terms of our greenfield immunosuppressant API facility and in terms of new peptide facility in Bengaluru, this also is on track. We expect to complete the validation batches in both sites by H1 of FY 2024. Now coming to biosimilars. Biocon Biologics recorded revenues of INR 1,507 crores with a year-on-year growth of 54% pursuant to the closure of the Viatris acquisition and steady growth in the Biocon Biologics-led business. The revenue for Q3 FY 2023 includes contribution from the acquired Viatris biosimilars business effective from the date of closing of the deal on the 29th of November, 2022. Previously, Biocon Biologics recognized only transfer price and profit share of biosimilars marketed by Viatris.
Post completion of the deal, it now recognizes the full value of sales and associated expenses. The reported numbers include one-month profit from the acquired business and a provision for interest expense and non-cash amortization charges related to the acquisition. Core EBITDA for this business stood at INR 663 crores, which is up 83% year-on-year. Core EBITDA margin jumped from 38% last year to 44% this fiscal. This of course was then, you know, impacted by R&D investments for the quarter, which increased to INR 280 crores or 19% of Biocon Biologics revenues. We will see R&D investments normalize to around 12% levels of sales as we accrue full revenues from Viatris' biosimilar businesses. We continue to make very good progress on our R&D pipeline.
Denosumab and Ustekinumab biosimilar programs have completed recruitment for their global phase I and phase III clinical trials. Biosimilar Pertuzumab has entered phase I trials for global markets. Viatris has initiated an interchangeability study for our biosimilar Adalimumab, allowing us to maximize at the commercial value of Hulio in the US. We have filed our biosimilar Aflibercept in several global markets, including the US and Europe. EBITDA, post the R&D and other expenses, stood at INR 361 crores, which is up 53% year-on-year. EBITDA margin was stable at 24%. Depreciation and amortization and interest expense for the quarter increased by INR 146 crores year-on-year, of which INR 95 crores is attributable to the Viatris acquisition. Profit before tax and exceptional items for this business stood at INR 102 crores.
Advanced markets continues to see a strong penetration of our commercialized products, holding now double-digit shares in the U.S. Glargine's total prescription market share is trending around 12%, while new prescriptions are at 14%. We continue to see strong momentum in our biosimilar PenFill Glargine market share, which has crossed 11%. In Europe, our biosimilar Adalimumab continues to see a strong uptake in key markets such as Germany and France, where it has 18% and 10% market share respectively. We also saw an uptick in Trastuzumab market performance in Europe, achieving 17% and 20% market shares in France and Italy respectively. We continue to launch our products in new markets with biosimilar Bevacizumab in Australia and biosimilar Glargine and aspart in Canada last quarter.
The emerging markets business continues to deliver strong performance underpinned by the insulin portfolio and biosimilar Trastuzumab. We have expanded our reach through 8 new launches across emerging markets, and the franchise will be augmented by the integration of Viatris' emerging market territories. On the regulatory front, US FDA has accepted our CAPA plan pertaining to the pre-approval inspection of insulin aspart in Malaysia, which was cited in the CRL. The bevacizumab CRL requires us to address the observations made during the site inspection for which we have submitted a CAPA plan and are awaiting a response. We are committed to for the closure of the actions within the simulated timeline, and we are confident of being able to resolve the asks from US FDA.
In summary, the business continues to see healthy and profitable performance with several catalysts for growth, such as the launch of biosimilar Adalimumab in the U.S. We believe that the acquisition of Viatris' biosimilar business is a very key inflection point for Biocon Biologics as we transform into a unique leading global biosimilars enterprise, which we strongly believe will drive huge value for all our stakeholders. Comment on our novel molecules. As a part of the ongoing pivotal phase 3 clinical study of Itolizumab in patients with acute graft-versus-host disease, enrollment continues to ramp up. There are now 45 clinical study sites up and running. Enrollment also continues in phase 1B clinical study of Itolizumab for lupus nephritis. Equillium expects to announce top-line data later this year.
I think it would be prudent for me to mention that many acute GVHD studies that were being conducted in, by various companies have actually not succeeded, this particular molecule is the only one showing robust data. We hope that this will actually hold its promise and really get approval in the foreseeable future. Patient dosing for the phase 2 trial in India for the clinical study of itolizumab in patients with ulcerative colitis began in December 2022. Based on the very encouraging and promising data in acute GVHD, Equillium recently entered into an option and purchase agreement with Ono Pharmaceutical Co., Ltd., Japan, where Equillium has granted Ono the exclusive right to acquire its rights to itolizumab.
We believe that this is a very important event, as Ono is a very highly respected company that is, that has brought several important molecules to the market through partners. Coming to research services. Revenue from operations grew 23% to INR 786 crores over the corresponding quarter last year. Reported EBITDA was up 15% to INR 248 crores. Profit before tax was at INR 140 crores, up 9% over the corresponding quarter last year. The third quarter results saw positive performance across all divisions, with solid growth in research divisions, discovery services and dedicated centers. Development services benefited from repeat orders from existing clients, as well as an increase in the number of collaborations with emerging biopharma companies. Manufacturing services, the highlight of the quarter was the successful inspection of its biologics facilities by the US FDA, EMA and MHRA.
With good manufacturing practice certifications from the regulatory agencies in place, the company is now well-positioned to fulfill its long-term contract with Zoetis and progress its biologics growth strategy. I'd like to conclude by saying that we expect to end FY 2023 on a strong note with healthy growth across all our businesses. Biocon Biologics will be the key growth driver as it begins to reflect the full quarter's revenues of the newly acquired Viatris business from Q4 FY 2023. Directionally, Biocon Biologics will be exiting FY 2023 at a billion-dollar trajectory, excluding vaccines. Growth in FY 2024 will come from the launch of Adalimumab in the U.S. and continued growth in Glargine, Trastuzumab and Pegfilgrastim. Launches of aspart and Bevacizumab in the U.S. post-approval will provide additional upside. Biocon also is confident of delivering mid-teens growth in the coming fiscal.
With this, I would like to open the floor to questions.
Thank you, Kiran. We'll take a moment for people to raise their hands to ask a question. I would request participants to please limit their questions to two to allow other people in the line to get an opportunity.
I think you can start, Saurabh. There are many hands up.
We will start with Tushar Manudhane from Motilal Oswal. Tushar, please go ahead.
Yeah, thanks for the opportunity. Interesting. For our strength, what would be the market size?
At this stage, if you really look at it, the market from a innovative perspective has been moved to the high concentration, but we do not see high concentration or a low concentration really being the differentiator. We've seen a similar commentary from other incumbents who've come there, other players who've also looked at bringing products. We've also seen payer acceptance from other biosimilars which have been launched. That may not necessarily be a criteria for success, Tushar.
Maybe you should add that we have had a huge success in Europe, where we have a very, very positive patient experience and, we believe that that will translate to the US market.
Yeah, that's so true, Kiran. I think to add to what Kiran just said, Tushar, we're one of the few players who've been very successful. We've got a product launched in Europe. We've got over 18% market share in Germany alone, and we've crossed 10% in France, some of the big markets in Europe. We've come on the back of previous success and we're quite confident in how our product will be received when we launch it in the US.
Interesting.
Matt, if you want to make any further comments.
I would just add that we're in already prepping with the Viatris sales force. We're getting ready and already getting out there and speaking to key physicians. That process is starting. We're not waiting to be able to talk about the key elements that both Kiran and Shreyas spoke about.
Interesting. Interesting. That's. Secondly, also if you could share some clarity or rather visibility on the business from the vaccines segment.
The voice is very weak, but I think If I understood you correctly, you are talking about any visibility on the vaccines business. Was that correct?
Correct. Correct. Correct.
Okay. Well, we have said that we will move past Once we've got the definitive agreements done, we are in the regulatory phase right now. We've secured the approval from the Competition Commission of India. The next phase is to get the National Company Law Tribunal approvals. It requires us to get approval at Karnataka, where we are based, and also for Serum to do it in Maharashtra, where they're based. We are in the last stages that are in Karnataka, and Serum has to move their application through the Maharashtra end as well. That's still pending.
Effectively 2 QFY 2024 to be the timeline to look for.
Yeah. We have not been able to reflect the vaccine numbers, this quarter, is what I can say.
lastly, if I may, on this agreement with Zentiva, any commercial outlook or guidance on this, business?
Maybe Sid, you might want to...
Yeah. There is no revenue outlook I can give. All that I can say is, liraglutide for us is a very important product. It is a differentiated product, and we feel we are very well placed to launch this drug, along with Zentiva. At the time of market formation, Zentiva has semi-exclusive rights, so we also will commercialize directly. We feel that the total value of this opportunity will aid to the growth in the coming years.
All right. Thanks. That's it from my side. Thank you and all the best.
Thank you, Tushar. The next question is from Cyndrella Carvalho from JM Financial.
Thanks for the opportunity. I just wanted to understand the $1 billion exiting guidance that you are sharing for the Biocon Biologics. Can you please help us understand this in more detail?
Perhaps Chinni, you want to explain it. Let me start by saying that you've already seen that we are at a INR 1,500 crore, you know, level this fiscal for Biocon Biologics. We expect this number when we capture the full financials of the Viatris business in Q4 to cross INR 2,000 crores.
Cynderella morning. Just the way Kiran put it, INR 2,000 crores was our expected revenues for Q4, excluding vaccines. That translates to a run rate of $1 billion per annum. As you look into FY 2024, you need to add growth from the existing molecules, the big opportunity in Adalimumab US, then the addition of the, I mean, once you get regulatory approval for both Beva and Aspart, we would see incremental revenues coming through.
And of course-
Thanks for that.
Existing products.
Yeah.
Thanks for that. How should we understand the facility planning? I mean, we are still receiving CRLs and what is our mitigation-
Cyndrella Carvalho, we are already selling products. Please understand that we are still marketing Trastuzumab, we are marketing Clarine, and we are marketing Pegfilgrastim in the U.S. Europe has all products being marketed. Please understand that we are looking at products that need approvals, and these numbers exclude those products. We have actually factored the fact that there may be a delay in that approval. We are hoping that we will get approvals in this calendar year, which will then be incremented to that $1 billion, is what we are saying. This, you know, excluding all those products, we are still at a billion-dollar run rate, is what we want you to understand.
That's helpful, ma'am. Just wanted to understand in terms of where are we, I mean, what are the US FDA's requirement which is taking or creating these delays? Any color that you can help us understand?
I think we have I mentioned it in my comments, saying that our CAPA plan has been accepted by the US FDA and in Malaysia. They will. You know, we have also provided a CAPA plan for the Bangalore facility, which I'm sure will also be accepted by US FDA. We are in the process of basically implementing that CAPA plan that US FDA has accepted in Malaysia. Maybe I will ask my colleague, I don't know whether Michael is on this call, but I will ask Michael to also in you know, add to what I'm saying.
Shreehas, you want to pitch in? Michael is not there.
Let me just add to what Kiran just said, Cyndrella. I think what is important to note is that all the facilities that we are talking about are supplying product to the United States already. It's not something that is fundamentally wrong with it. That's the first thing that I want to state. These are also products that have been approved by EMA and continue to be commercial in several parts of the world. The way to look at it is that certainly there is a, you know, greater expectation from the agency which, you know, we're more than happy to upgrade our standards and meet. That's the exchange that Kiran referred to when she talked about the engagement.
We have provided a comprehensive response to the agency to see how we can meet with their expectation. We've got a response back from them saying they accept our proposals. That's why we are quite confident in Malaysia with the aspart submissions that we made to be able to resolve it to their satisfaction. We recently received the CRL for Bevacizumab in Bangalore earlier this month. We're quite confident we will be able to get that also to the satisfaction of the agency. These are always standards that we have to work to improve upon. We look at this as an opportunity to improve and strengthen our systems. We do not see this as necessarily a lacuna overall, but an opportunity to strengthen it further.
That's very helpful. Yeah, Shreehas, that's very helpful. Just on the timeline for interchangeability and how do we expect the market formation for Adali. Any comments on that?
Specific to any product, Cyndrella, that you're talking about?
Adi. Adalimumab.
Again, interchangeability is an important topic to understand how it really plays out commercially. We've seen already contracting happen in the U.S., where the first biosimilar is not an interchangeable product. It's received a formulary listing, clearly it's not a condition precedent to moving forward. We've seen similar things happen on the insulin end as well. That's the first piece, that it's not mandatory to success on the commercial side. The second piece which is related to this, how interchangeability plays out in real life is you can have one player who can get interchangeability approval and gets an exclusivity post-launch for a period of 12 months. Which effectively means even if you were to have interchangeability approved, you would probably have to wait until that exclusivity runs out.
Again, from a commercial standpoint, it would really be another contracting cycle before you can get there. I would think that interchangeability is something which is, you know, nice to have. It is something that we are confident of anyway, but it's a very U.S.-specific phenomena. We do not see that in rest of the world. We, as I said before, and as Kiran rightly pointed out, we've seen great success with the product, with Hulio Adalimumab in Europe, and we're quite confident that we'll be able to get that success. The real piece here is the patient experience and hub services, which Matt can talk to you about in more detail. It's about our device, and we're very confident about the kind of device we are bringing to the market.
It's a 2-click device, which should really be very, very helpful for the patients. So that really gives us that right to win, Sundara.
Thank you so much. Just one last, if I may, and that is on when do we expect consolidation from the serum side timeline? I'm asking, would it be Q1 or as the earlier participant highlighted it, is first half of FY24. What should we try and building in terms of our models?
Yeah, I think right now, we don't have clear visibility of the regulatory completion. Yes, maybe we can look at next fiscal for those numbers to be consolidated.
Thank you so much. I'll join back the queue.
Thanks, Cyndrella. Next question is from Damayanti Kerai from HSBC.
Hi. Morning. Thank you for the opportunity. My question is again on adalimumab. You have mentioned it's not mandatory for you to succeed in this market, the interchangeability studies which you have initiated, what is the completion timeline which you are aiming for?
Damini, We can get you the exact dates on the interchangeability study, but as I said, it is the real dates of this would matter only after the first commercial launch of the interchangeable product, which we believe will be in July of 2023. Until July of 2024, even if you had an interchangeable product, it's really not going to make a difference.
by which time I think we will have the interchangeability data. If that's your question.
Sure. This Adalimumab launch, which you're prepping for. In the current contracting cycle, how do you see your positioning so far, in view of your discussion with payers, et cetera? Once you are ready to launch, so far, like how do you see your reach within these contracting cycle?
Maybe, Matt, do you think you want to comment on that?
You're mute. Unmute.
Yeah. Thank you. Yeah. Sorry. Thank you for the question. Yeah. We are in right where we need to be in our preparation. We are speaking to key payers as well as the key to these are really four channels. The first channel is speaking to the payers. We're having great discussions as we look for the paying cycle starting in July. The next piece of this is we're having additional discussions, as I mentioned, getting out with physicians and understanding our product and the two-click, as well as being citrate-free, latex free, all those key attributes so they understand our product, Hulio. The other facet here, we're speaking to and we don't mention it a lot, but it's key to this, is the specialty pharmacies. We're starting those discussions with specialty pharmacies.
Those are the ones that send a product to patients and act. It's not really a retail component. They act as that pharmacy to be able to get the products to the patient that the doctor has prescribed. Shreehas had mentioned the other key channel is really the patient services. How do we help the patient, help the physician through the process that they're used to from the innovator? All four of those will be standing up and as I said, we're having detailed discussions with key payers right now in our anticipation of our launch that will occur in July.
Thank you. My second question is on some of the launched biosimilars where you have gained notable market share, as commented by Kiran ma'am in her opening remarks. I just want to understand how do you see pricing scenario for these products? Although like we have gained market share, but what's your view on the pricing situation right now?
Shreehas, would you like me to start and then jump in?
Yeah. Why don't you go ahead, Matthew Erick.
Okay, great. Again, thanks for the question. We do see some of that deflation, but as far as to our models and our plan, they are aligned. As you look at the different channels, the medical side as well as the pharmacy benefit side, on the medical side in the trastuzumab and the pegfilgrastim you're speaking about, we're seeing nice steady states in our average selling price. This has allowed us to continue to grow share as well as to be able to maintain that deflation that is occurring that, you know, you have seen in the marketplace. Also, we have a extensive sales force that we're seeing great success in our commercial plans as well as our clinical side.
I think that's attributed definitely to our sales force and the relationships we have and the understanding of our product and the pull through. So I feel we're in a very good spot based on our modeling and our plan. Also being vertically integrated, we have the staying power as well as we have the broadness of the portfolio, when we think about oncology and the products we have there. We're in a good position to be able to compete.
Okay. You expect market share to go up further as you push more on the commercial efforts?
We're seeing a nice trend in that continued upside in the market share, and it's showing in the NRxs and TRxs that you can see in the IQVIA data. We're making good progress.
Sure. My last question is, what's your debt reduction goal? Obviously, effort again ongoing there, but anything, say, in next six to one year, how much debt you want to reduce on your books?
Damayanti, if you will give us a little bit of time, we are in the process of raising this debt, and we would like to share it with you once the process is complete. Needless to say that we want debt at a very, very manageable and low level as much as we can get it to. Let us share this data with you as soon as we complete the debt, you know, the equity raise.
Sure, ma'am. Thank you. I'll get back.
Thanks, Damayanti. The next question is from Dhawal Balooria. Your question, please identify your firm.
Hello. Yes, yes, hello, good morning. I have the two question. first question is, for most of our, you know, current biosimilar, our, you know, market share stuck around higher single-digit to the lower double-digit, except for the Lantus biosimilar. Since we have now full control of sales and contracting, is there anything we were doing differently than Viatris used to do so we can increase our market share, and penetration?
Matt, you might want to answer this.
I had a little hard time understanding, but I believe it was.
Basically, I think the question being asked is, are we going to do something different to what Viatris used to do?
-to market and get better market penetration? The answer is yes, because...
Yes.
let me start, you know, comments by saying that, you know, we are looking at dedicated, you know, sales efforts, for biosimilars, but I'll leave it to Matt to add to this.
Yes, Kiran, absolutely. We are doing more, we're seeing the opportunities, particularly in additional customers in the conversation that we're having. As we mentioned in previous calls, a lot of this is that we have 100% focus, we have some great opportunities as we look at not only the payer side but the retail pull-through, our ability to talk to physicians. The integration is going well, we're continued to see that progressing as well as being able to talk to new customers, especially as we look at the vertical integration that we have at Biocon Biologics.
Okay, thank you. Second question is, you know, majority.
It is not in feature because that's a separate...
Yeah, sorry. My second question is, since most of our new biosimilar, like Avastin and HUMIRA, you know, we may be the fourth or fifth player in the market, versus first or second, you know, in case of the, I mean, Neulasta and Rituxan. Are we have any particular strategy since we are fourth or fifth player to address, you know, to come with any particular strategy? The second thing, HUMIRA has a wide use. Like it's a dermatological product, it's a gastro product, it's a autoimmune disease product. most of our biosimilar product is only the oncology. We have the separate sales staff to, you know, for the HUMIRA or any other thing we are doing for that?
Shreehas, would you like me to start and then chime in?
Yeah. Yeah.
Great. Let's start with our product, Hulio. We are going to be in that, what I would call the first wave. Amgen did launch here over the last month or so, but in that first wave, as you know, there's no one going to be exclusive. We have a tremendous opportunity to be part of each one of those formularies. Each of the payers has said that they will have at least a biosimilar plus one or plus two. We'll be in that first wave and have our plans to be able to participate and win with those payers. Being exactly a little bit later than Amgen is not, in my opinion, a hurdle, because the way the payers have opened this up, and we're well-positioned to win these formulary positions.
We're also, as I mentioned, we're in a good position after winning the formulary with the sales force that we have coming from ViiV and adding to it, we have that ability to pull through. We also have a great understanding of the specialty pharmacy. The specialty pharmacy, as I mentioned, is how the products are dispensed. We're in the process of continue to stand up and add additional patient services to what we're developing with ViiV to be able to have the patients have those discount co-pays or the ability for them to get additional services. We're in a good position with our Hulio product. As Shryas and Kiran also mentioned, we have history. A lot of our competition doesn't have history.
We have global history and market leadership in Germany and France to be able to talk about, as well as our product, has that 2-click mechanism. We mentioned that it also is citrate-free, which won't cause any pain at an injection site. As it relates to, I believe you're asking about the oncology products.
We are well established in our sales force as well as our relationships with key physicians. As we launch products, even though we're not first, which ideally we would love to be first, we have that mechanism and the understanding of how that medical benefit works, and to be able to pull that through on the oncology side with our sales force, as well as our payer, as well as our ASP understanding of how the industry works.
I might remind Mr. Bhalotia that Biocon was the company that received the first USFDA approval for trastuzumab or biosimilar Herceptin.
Yes, ma'am. Yes. Thank you so much, and all the best for the whole year.
Thanks.
Thank you, Mr. Bhalotia. We move on to Harit Ahmad from Spark Ventures. Please go ahead.
Hi. Good morning, thanks for the opportunity. You previously guided for $1.8 billion revenue for Biocon Biologics in FY24 and $100 million EBITDA. Are we maintaining that guidance given there's some delay in the closure of the transaction with Serum?
Yeah, maybe Chinni would like to respond to this, but basically, I think we will be focused on, you know, these numbers that the market has... I mean, that we have shared with the market. We will basically look at, you know, as you know, there have been delayed approvals of aspart and bevacizumab. We are also trying to catch up with that particular gap, but we are looking at how to basically stick to these numbers. Of course, this does include, as you know, $300 million of vaccine revenues. I think we will be looking at all these numbers and making sure that we share with you any changes to these numbers.
There's also been an impact, I think, of the currency, you know, parity between the dollar and euro and dollar and yen. I think that also has impacted some of these numbers, but we are trying to see how close we can get to those numbers.
Got it, ma'am. My second question is on the R&D spend at Biocon Biologics specifically. We've seen almost INR 100 crore delta on a quarter-on-quarter basis, and this with just a month of consolidation of the acquired business. How should we think about the spend for next year? Do we still maintain that 12%-15% of revenues guidance that we've given in the past on the much higher revenue base? Is that how we should think about it?
Yes. I think that's what I meant by saying that we will see normalization, because this quarter you've only seen the impact of, you know, a month's, you know, contribution from the Viatris business. Going forward, we expect to basically normalize R&D spends to that sort of 12%-15% levels.
Thank you. Last one, with your permission. Siddharth, there's a increase in the share of loss from JVs and associates, and we were under the impression that given that we've lowered the stake in Bicara, this number would be trending down. We've seen an increase on a quarter-on-quarter basis, so how should we think about this number going forward? Is this a one-off quarter for that particular line item?
I won't call it as a one-off. Our shareholding is down to 55% and the expenses of Bicara has gone up as they are in middle of clinical trial and of course, the advancement of the lead program. We do expect over the next few months, further fundraise by Bicara, which will further dilute our stake. On an absolute number, which we are treating as a loss from a associate, shouldn't materially change, because as they progress in clinic, the expenses would go up. They're also spending money on their pipeline, the follow-on pipeline. Of course, that's at a very early stages. The expenses will not be significant. For just from a model perspective, I do expect, you know, something in the similar range over the next few quarters.
Got it. That's all from my side. Thanks for taking my questions.
Thank you, Harit. Next question is from Surya Patra from PhillipCapital.
Thanks for this opportunity. First question is, or a couple of questions rather, to understand better the integration of Viatris operation. In fact, when we see what we believe that, okay, with this acquisition of Viatris, the biosimilar operation, we have seen vertical integration. Theoretically, that should have supported gross margin sequentially. We are not seeing any change this quarter, although this is not a reflection of a full quarter performance of the acquired operation. Is it fair to believe that the gross margin should see a kind of sequential up move post integration? That is one.
Secondly, wanted to understand a bit more on the distribution charges, what we are paying to Mylan, in which line item that is getting captured?
You're muted.
I'm audible?
Yeah.
Okay. Sorry for that. I'll repeat my question. About the integration, some clarity I wanted. Theoretically, with the acquisition of the Viatris operation that provides more integrated activity now, and hence the gross margins should have seen sequential improvement. This quarter we are not seeing anything like that. It is slightly lower only sequentially. Can you give some clarity about should we see and expect a sequential improvement in the gross margins after the integration?
Kiran, can I take that?
Yeah, please.
Surya, can I just clarify, gross margin you mean net of material cost-
Yes.
The Core EBITDA, which is net of all operating costs?
No, net of material cost.
Yeah, net of material cost. At the BBA level, we have seen that improvement this quarter, where it improved by 2 percentage points over the last quarter. Now 200 points.
Possibly at the Biocon consolidated level, it would be pricing challenges or whatever that we would be seeing, that could be one reason. Is that the understanding correct?
Saj, do you want to take this?
Maybe, Indranil, you can just explain.
Yeah. It's also... It's not so much of pricing, but it's also about product mix. You'll see a quarter-on-quarter flux because of product mix. This should normalize going forward.
Okay.
Yeah. Can I just comment, Surya? Really look at the Core EBITDA performance, not so much around gross margins.
Sure, sure.
There, for Biocon Biologics, it's at 44% improvement over last quarter.
Okay. Now, since practically, including the R&D spend by... Because that is a integral part of our business, in the next couple of year time, we are likely to see a upward move only, absolute upward number, in terms of R&D spend. The overall margin profile of Biocon Biologics, how should we see, considering also the integration of the acquired operation?
The SG&A costs that will come through post-acquisition, sort of full effect of the SG&A cost, is absorbed in our when you report our core EBITDA. As I indicated, we're now trending above 40% this quarter and the previous quarters. We see the overall SG&A cost being comfortably. Kiran did mention that we're looking at bringing R&D costs down to about 12%. You would see EBITDA now then trending towards the high 20s, nearing 30 from a margin profile, if that was the question.
Okay. Yeah, yeah.
That's an improvement, as you can see.
Just last question. Let's say for the biosimilar business, so obviously the key product opportunities what we are having for, let's say for FY 2024 is Reva, aspart, Adali as well as Rh Insulin Analogs. How should we think, given the kind of a timeline that is there and the regulatory clearance that we are waiting for, so and the contract, contractual cycle also that is, considering all that, whether these are considered to be the real FY 2025 triggers for us to grow?
Let me answer you, Surya, by saying that FY 24 certainly is going to be focused on the successful Adalimumab launch. I think we are also looking to see how much we can grow our existing products like Glargine, Trastuzumab and Pegfilgrastim in the US. Also we are focused on making sure that we focus on Europe for all the products that are approved there. As you know, in Europe, we have all products approved. In fact, we have seven product approved in Europe, of which the real focus up until now has been just of, you know, not all seven. We are looking at seeing how we can basically leverage and add, you know, to the business in terms of all products in Europe.
I think that's the way we look at the FY 2024. Of course, we're hoping that aspart and Bevacizumab will also be approved this calendar year. In which case, obviously there is some contribution to the FY 2024 growth. FY 2025 growth will see all these products contributing to strong growth.
Sure, ma'am. Just one on the pipeline front. This, what is our now, you know, progress on the Aplivor site front area and what is the timeline that we are expecting given the kind of regulatory progress and our preparedness and our positioning compared to competition, that front? Also briefly on the generic business front. There are. Although we are this year possibly will likely to see a couple of greenfield project contributing, but in terms of the growth visibility for that segment, how should one really build into the models?
Shreyas, you want to take this?
Yeah, sure. Thanks, Kiran. On the Aflibercept asset, Surya, as you know, we've exercised the option from when we acquired the asset from Viatris. It's a first to file asset. It's undergone review with the FDA and at this stage, we are currently in litigation with the originator of that product. Clearly that's in the public domain. It's going through that entire patent dance cycle. We will not comment on the proceedings beyond what's in the public domain. Clearly that's an area where we are leading that effort directly.
We believe Aflibercept is a sizable opportunity, gets us into the ophthalmology space and we can talk to you more about how we are going about doing it, but we believe that this would be a nice area for us to build on. Being the first to file does give us the opportunity to look at such a sizable asset, almost $10 billion in revenues. This could be something which can really be another game changer for us going forward. We are really focused on developing that. On the second question that you'd asked, I'll turn it over to Sid to respond.
Thanks, Shreehas. Surya, we've, I think Kiran mentioned in our opening remarks that our immunosuppressant facility is undergoing qualification. The peptide facility is undergoing qualification, and we expect the qualification to complete in first half of next fiscal, following which, we will of course, file with the FDA to include those sites in our DMF and in India. It could take some time because we expect FDA to come and inspect these facilities, so the revenues from these facilities are not expected to commence until FY 2025. The growth will come from the other products, what we have already commercialized, some of the new launches, which we are expecting in the US. The...
I'm talking about the generic formulation launches and also additional capacities in our existing facilities that we had increased in the last 12-24 months, which will drive volume increase for our API business. Combination of new launches, increased contracts that we've seen recently for statins and immunosuppressants in the US, and increased API should drive the mainstream growth for the next couple of years.
Sure, sir. Yeah. Thank you. To all the best.
Thank you.
Thanks, Surya. Next question is from Shyam Srinivasan from Goldman Sachs.
Hi. Thank you for taking my question and good morning, everyone. Just the first one on the billion-dollar run rate again. you know, Chini, if you could kind of break it down into, you know, developed market and emerging market? I remember, you know, historically, I think, emerging market did about $240 million for us. Just where it is tracking now, in that $1 billion number?
Of course, even from the Viatris biosimilar acquisition, we will have emerging markets in there. Directionally, as you look forward, 70% of our revenues would come from 30% from emerging markets. Now, Shyam-
Got it.
That was part of your question. If you're going back to the building blocks for the $1 billion and from thereon. In the $1 billion you would roughly have about 25% in the emerging markets. As we look ahead, you'll start to see advanced markets pick up to 70% and emerging markets at 30%.
Got it. You seem to suggest that the emerging markets will grow faster, right? Once the 25% today.
Sorry, did I get those numbers wrong?
Yeah. Okay. Take Viatris business. That's up to last quarter.
As you would think, we were up, we're roughly 50/50.
Got it.
At this quarter, as we get to INR 2,000 crores, we will gradually go to 75/25 with advanced markets, but as we build on the emerging markets, we'll finally come at the 70/30.
Got it. Chini, when we look at the margins for these two, you know, segments, is it different or you don't calculate it that way given the infrastructure could be common? Just help us understand, you know, does making, splitting this based on these two geographical spreads, does it make sense or it's one large monolith that we need to actually look at it?
From a operating cost structure, it is one, a large monolith because the manufacturing plants supply both the emerging markets and the advanced markets. From a SG&A point of view, the Viatris acquisition will increase the SG&A cost, which is pertaining to the advanced markets, whereas you would expect advanced markets has a higher revenue profile, margin and pricing and effectively a higher margin.
Helpful, Chini. My second question is to Shreehas. You know, I think you briefly touched about Hulio interchangeability, but what about Rezvoglar, right, which Lilly, I think has gotten approval recently. I think your exclusivity ends in December, if I recollect right, but correct me. Do you expect, you know, 13%, 14% NRX share, are we still on track to do the high teens market share by the end of this calendar year? Is there any competitive activity even beyond Lilly that you think we need to be monitoring?
Yeah. No, thanks, Shyam. I think the let's first look at where this is coming from. I think this whole question on interchangeability was about breaking that myth about being able to not just have a biosimilar product, but given that insulin is a chronic therapy, can the patient who's receiving the dose using our innovative product get the same, you know, the numbers on the pen that they would see, would it be the same or would there be a difference? Then could it be used exactly interchangeably? I think that entire effort was to go past that hurdle and break the myth that there is any concern at all about this.
I think FDA themselves called it a historic moment in how they approved Biocon Biologics' Semglee as the first interchangeable product. It needs to be viewed in that lens first, Sham, to say that why was it needed at that point in time? To put at rest all arguments that not only is it biosimilar, but it can be interchangeably used. Whatever it is that has been prescribed, you can switch it or sub it at the pharmacy level, and you will get the same therapeutic effect. I think that is what we've achieved over the course of calendar 2022. Before we got the interchangeable insulin, of course, there was Basaglar in the market, and there was this increased market share that they had got vis-à-vis Lantus, and that was there in the public domain.
The question was about whether Biocon Biologics and Viatris, when we brought our product to do that, we were able to successfully demonstrate that even going past the regulatory hurdle of being an interchangeable biosimilar, and the first one at that. Going forward, what we clearly see and you're seeing that in the indices that you mentioned, which is the NRXs are already trending towards 14% and thereabouts, clearly indicated the acceptance of the product. Now you'll of course expect competitor action. You'll also expect some innovator action. From here on, it's you laid to rest the argument about efficacy, about, you know, overall effectiveness, immunogenicity, all of that is behind you. Now it's a level playing field to go and win the market share.
Clearly, 2023 is about building on all of this and seeing how we can not only grow market shares, get the pull-throughs that Matt talked about in existing formularies, but also winning more accounts to see that we grow that confidence beyond what we've got. I hope that gives you a perspective of how we are approaching Glargine overall.
Got it. Thank you. My, just my last question is to Siddharth.
uncertain
Yeah, go ahead. Go ahead, Chinni.
I wrongly classified certain markets, particularly JANZ, Japan, Australia, New Zealand and Canada. If I really look at it, today we are roughly between 60%-65% advanced markets, and that would go towards the 70%-75%, particularly with the Adali launch and the launch of the new molecules.
That's helpful. Chinni, last question to Siddharth, quickly, if I may. You know, the confidence for mid-teens growth, I think, and maybe I clarify here, we are only talking mid-teens growth for generics, right? Because every other segment, I think Syngene has their own guidance. I'm assuming, you know, and Biocon Biologics has its own guidance, looks like. So the mid-teens we are referring to only generics. That is question number 1. 2, what has given us the confidence for this mid-teens growth? I know this quarter we have done 18%. We've grown QOQ also. You mentioned in the opening remarks about even generic pricing pressure. What's changed that has given us a little bit better visibility? Is it just the launch momentum in, from our products?
Yeah. It's correct that the mid-teen growth is only for the generics business. The confidence is based as two things, as I mentioned. One is we have already got certain additional volumes in the U.S. for the formulations we have launched, and we are gonna launch additional products in the coming fiscal. We do have couple of important launches coming up later part of this fiscal itself. We know that generic teriflunomide, which is a first-to-launch opportunity, even though it's a competitive market with many players, but we are gonna be one amongst others. We do have a few other filings which were done where we are awaiting FDA approval in the next fiscal. That would drive growth in the U.S.
Yes, I did mention the pricing pressure does continue. We have seen normalization of pricing pressure more recently with some disruption in the US and supply chain caused by some of these facility issues in from other Indian companies. What was a steeper price erosion last year, we're seeing normalizing trend. I also mentioned that we are expecting additional volumes to come in from our API business, where we had expanded capacities in our existing facilities. There were a couple of, again, important molecules, which were launched by our partners in Europe, specifically, the later half of this calendar year and 2022 calendar year, and that will drive additional volumes in fiscal 2024.
Thank you. Thank you, Siddharth, and all the best. Thank you.
Thanks, Shyam. Next question is from Nithya from Bernstein.
Thank you. On Aflibercept, can you tell us what your tag date is? I think Viatris had communicated that It's more than three quarters since they said they filed the product. Second, would you have already worked with the regulatory agency to ask for a switching study waiver for this product, obviously on the back of what happened with the Lucentis biosimilar?
Just a quick thing. I didn't follow the second question, Nitya, very well, but for the first one, given that Viatris is the first to file will be not just linked to market formation on the. The market formation will be linked not just to patent expiry on the molecule, but also the data exclusivity. That runs beyond the patent expiry into 2024. We will be watching that date and that will be the date that FDA can grant your approval. Technically, they can't grant an approval until the end of data exclusivity.
Understood. My second question was, Coherus actually was able to get interchangeability for their Lucentis biosimilar on the back of the immune privilege argument. Have you also made a similar request to the FDA, or is this something you will do later? Just thoughts around that.
I think you'll grant us that for competitive reasons we would not want to share that discussion right now. Clearly Lucentis is a precedent for most companies to follow at this stage.
All right. one on Adalimumab, Shreehas. I think interchangeability has actually made a difference. It's made a difference for you in Blazyme, it's making a difference for Coherus, in Ranibizumab, even though it's a medical benefit product. I'm just surprised with your commentary that you don't see that as an important factor. But come, let's say, July 2024, you will have... There are at least four of your competitors who are going after interchangeability for the 80 mg version. In that scenario, how do you see a 40 mg product as being competitive?
Fair question, and we could argue it several different ways. First thing I will point you out to the success that we've enjoyed and are limited right now to Adalimumab in Europe, where we've seen success regardless of whether you had or didn't have interchangeability. That's one point just to look at. The next thing to see and classify the U.S. market also for Adalimumab, you're seeing the first product being put on the formularies not having interchangeability, clearly not a condition precedent to being listed on the formulary. That is the second piece that I would point you to.
Point number three, you would have almost five of us launching on, I would say, effectively the second wave of launch or the first wave of real launch after the first innovator. Not everyone, and actually other than one company will have, nobody else will have interchangeability. Almost every payer in the U.S. has publicly stated that they would have at least an N of two, if not N of three, which means the signal is that it's important to have and nice to have an interchangeable product. Certainly, you know, it gives you the advantage, nobody's saying you shouldn't have it, but it's not going to be the sole determinant of commercial success. I think that was the context to my comment.
If it led you to believe anything different, then I would like to correct myself there.
Thanks, Shreehas. Just to follow up on the fact that formularies are actually not restricted, and they're fairly open in terms of the number of biosimilars, they're adding. If let's say there are two or three biosimilars at parity with Humira, which is a sense we are getting from some of the payers' commentary, then Does your commercial muscle therefore become more important? If there are two biosimilars and Humira at the same out-of-pocket expense level, what will help you differentiate it?
Yeah, and I'll let Matt respond to that, this in a little more detail because I think there's a lot of, you know, questions around this. But I think the first piece is the getting onto, you know, the discussion, what gets you to the table is price. Interchangeability, as we discussed just now, is something which is a nice to have. But what will determine success and pull through is gonna be the device that you have, whether it is the citrate-free, latex-free product that will reduce injection site reactions and how are you gonna be able to provide patient services so that you do not have a pushback from the patient to the payer or the prescriber that they're not comfortable given that they've got so many options now.
I'll let also, you know, Matt talk about the specialty pharmacy piece, because given that you've got so many options in the U.S. now, there's an opportunity that you can get subbed even if you were to get prescribed. I'll let Matt. Maybe, Matt, you can comment and give just a little more color in this.
Yeah. Shreehas, you explained it very well. I'll just add a few other key attributes to that. You know, one thing too, remember interchangeability is only to the innovator, and we're watching very closely how that shapes up. You are correct in your comment that it is an important piece of the commercial side to be able to have those relationships, have the doctor understand, the product itself and what we have in our Hulio product. When they write that name of Hulio on there, it's in a great position for us. I don't wanna underestimate, there is a lot that we have to understand, which we are, and there's a key component of this that's a little different than what we've seen prior, and that is the specialty pharmacy.
There are relationships that we are growing, establishing, and understanding the economics there as well. We're not subbed at that pharmacy, specialty pharmacy level. I'll reiterate, the four key components of winning in Hulio is definitely getting the economics right on the payer side, understanding the ability for the sales force to create those relationships, have the physicians and patients comfortable with our Hulio product in the two clicks and the other attributes. Thirdly is to making sure we understand and develop and continue to work with specialty pharmacy. At the end of this, if you aren't standing up, which we are, the right patient services to be able to support the physician as well as to be able to support the patient, then we'll see people fall down.
As we go through these, we have a great understanding, especially what Viatris has already built, and we're adding to that for that growth to be able to be very competitive, whether it's interchangeable or not interchangeable, as we think of the different channels that we have to be successful.
Sorry. Thank you for that. I just went on mute. One last quick one, if I may. On the SBII, I think your guidance was $300 million revenues, and that was in the context of COVID vaccines at a $3-$4 pricing. Now we know that the COVID vaccine demand has come off, so I'm assuming you'll be selling a different set of products. That being the case, does the margin guidance of 35% EBITDA still stand on the $300 million revenue?
Well, that is the agreements that we have, Nitya, so I don't think there will be any change to those.
Okay. Thank you so much.
Thanks, Nithya. Next in line, Sameer Besiwalla from Morgan Stanley.
Hi. Thank you, and good morning, everyone. Siddiharth, can you talk about your positioning on liraglutide in the US market? Second is, where do you see the market formation in both US and Europe?
Thanks, Sameer Besiwalla. I think a very good question. I would like to first emphasize our focus on peptides as a company. We see a huge opportunity in peptide. I mean, today the peptide market is almost growing to a $15 billion in sales globally. We expect by 2035 this to be a $60 billion opportunity in sales. I'm talking about three or four key peptides, whether it's semaglutide, liraglutide or tirzepatide. We are very uniquely positioned. We have already done the filing in the U.S. We have seen received our comments from the FDA. We are working on addressing the questions that FDA has. We expect to hear back from FDA soon.
The market formation, as it's publicly known, there are a couple of settlements for launch in the US for Victoza of, which is the weight, which is the diabetes indication. There's been no settlement yet for Saxenda, which is for weight loss and growing steadily. From whatever at least available in public domain, we've heard that the launch is expected in end of 2024/early 2025. We are still under litigation with Novo Nordisk, so Biocon has not yet settled, but we expect to be in the market, as I mentioned, end of calendar 2024, early 2025.
From a competitive positioning perspective, we have seen couple of other generic companies file this drug starting with 2016 and there have been a couple of filings in late 2018, 2019 and 2021. None of the competitors have received approval and we believe that we are very well-positioned with the scientific data that we have provided to the FDA.
Okay, great. You have filed for both Victoza and Saxenda?
That's correct. We have filed for both Victoza and Saxenda.
What's the market formation date in Europe?
Europe is around the same time period, end 2024, early 2025.
Okay. broadly for other peptides, have you done the filings or what would be the flow as you go forward?
Semaglutide, which is the follow-on molecule for liraglutide, is under development. We of course late to be NC minus one filer, but we do expect to file in time to be in the market on 181-day for semaglutide. Of course, there are three different formulations for semaglutide, with the market opening up starting 2029, 2030, and the market, you know, for some of the formulations going as late as 2032. The other drug that we are working on, and again at different stages of development is tirzepatide. As we know, this is expected to be a wonder drug contributing almost $25 billion-$30 billion in sales. We are targeting to file this product as a Day 1 on NC minus one date. There's a lot of effort going on.
We have a very robust pipeline of peptides. I just discussed 3, but we have a pipeline of peptide, which is more than 10 numbers. It's again at different stages of development. We are adding incremental capacities to our peptide API manufacturing facilities. What we mentioned at the beginning of the call, the large volume peptide facilities commission, the validation is gonna start, and we are already looking at doubling the capacity of that facility in the next 12 months, because we see a huge opportunity in the volume growing globally for peptides.
Great. Have you filed any other peptide other than Dero?
Not yet.
Okay. You'll be doing third-party API sales as well, and you're hoping that will be a big opportunity for Tarsus?
Yes. That would be a huge opportunity. In fact, we have seen some of the early filers in the U.S., they had got their API from the peptide specialist companies. The main concern that FDA had was on the characterization of the API and the quality of the data which supported the API. We've been in discussions with some of these filers to qualify our API as source in their file. We have seen very encouraging results when we have supplied them quantity to help them with the analysis. They of course have a comparison of our API with the other API, and we feel we are very well-positioned in terms of the quality of our API.
Sorry, have you crossed that bar with FDA with your API or not yet?
We have received comments from FDA asking for certain questions on our API, and we've, we are in the process of addressing those questions, and we think most of the questions are addressable. We do not see any showstopper in our API quality in terms of the questions that FDA has asked.
Okay, great. Thank you so much. One final from my side. It's on BBL. Kiran, what's the plan for private equity raise? I think you did mention a bit about it, but anything concrete over there and the subsequent IPO that you are thinking of.
Yeah. Sameer, obviously we are in advanced discussions with the private equity investors. As I mentioned, we will be sharing that information with you with more clarity and granularity the moment we are close to signing up, because I think it's not right of me to really talk about that at this stage. Suffice to say that we are in advanced discussions for equity raise to grow the debt, acquisition debt. The other point is that.
The IPO.
As far as the IPO is concerned, we are obviously focused on the right timing of the IPO. It will be based on a number of triggers. We will be looking at some of these triggers in terms of either product approvals, market performance, and those will really determine the timing of the IPO. The moment we start seeing robust growth, I think that is the time for us to go to the market.
Okay, great. Kiran, if I may, I think I must note down-
In any case, Sameer, as you know, we do need to go through the integration process before we can initiate any IPO activity. I think from that point of view, I would like to focus on integration and then start the IPO preparations immediately thereafter.
It looks like 18 months or thereabouts.
Yeah. It could be, sooner, but definitely not earlier than 12 months.
Okay. Kiran, if I may, the valuation benchmark which have been set for BBL based on the previous rounds of private equity and the conversion for Viatris, those stand, that is a benchmark for the new rounds of infusion?
Well, what I would like to comment is to say that definitely the IPO valuation stands as has been discussed for, you know, the Viatris transaction. That absolutely stands. We will be raising funding based on how things play out in the market.
Okay, great. Thank you so much.
Thanks, Sameer. Next is Neha Manpuria from Bank of America.
Yeah. Thanks for taking my question. Shrees, you know, could you give us some color on the filing timeline for Ustekinumab, Deno, and, you know, Pertuzumab since you have started trial for that one too?
Sure, Neha. We are right now in a phase one, phase three trial for ustekinumab. We've guided earlier that N23 we should be able to get to filing. For denosumab, we've got Prolia and Xgeva. We again are doing a combined phase one and three trial. We're looking at an N24 filing for denosumab. Since you asked about pertuzumab, we've just announced that we've gotten into the clinic for a phase one study that we've started with that asset. As we progress more into that, we will be able to give you more clarity on the filing dates.
Yeah, sorry about that. On the emerging market piece, you know, based on the, you know, 35%, 40% that it's contributing currently, what's the expectation of growth given the amount of launches for Trastuz and the insulin portfolio that we are making there? Would the emerging market piece including you know, including the Viatris portfolio grow, you know, mid-teens, high teens? What is the expectation there? Not emerging market, ROW ex-US, Europe, rather.
Susheel, do you want to comment on that?
Yeah, sure. along with Bioplis, both of us put together, the growth would be in the range which you have mentioned. Overall, the good thing which will happen right now is, between both of us, you know, Viatris and us, we have had strengths in different area. We were stronger in the partner, driven insulin market areas, and Viatris is very strong with their Trastuz and Beva portfolio, and they also had foot in the ground in different markets. Both together, I believe that the growth will be quite significant in the emerging countries, and we will continue to do well as we are doing. The key focus of the emerging countries will remain what it always has been.
We want to create access in more number of countries, and we want to go deeper in the countries where we are already present. I think with the Viatris portfolio and the existing portfolio that we have, the growth will be around the numbers which you mentioned.
Just to add to what, Susheel said, Neha, we continue to see a significant growth in what we've called as the BBL markets in the past.
we were structured prior to the closure of the acquisition and that trend continues. It of course gets better with the Viatris additions to the markets that we've been leading so far. The question, if you were to now look at what has become Biocon Biologics is now a much sizable pie, which has a larger contribution from advanced markets than we had before. As a percentage, you may see that change, but in terms of on a standalone basis, these markets will continue to show growth.
Yes. A last question. you know, on Pegfilgrastim with one of our competitor, competitive biosimilars likely to see the on-body injector, you know, launch sometime in the course of the year, does that impact our ability to take incremental market share? you know, do you see some of the biosimilars probably shifting to the on-body injector along with the innovator shift?
Well, see Pegfilgrastim, U.S., has been a very, you know, it's a very different market. Innovator action has been very unique, where we've seen the very aggressive pricing behavior on behalf of the originator. That's one aspect. It's a very different dynamic that we're seeing there. We also had said in the past that given the pandemic, which was an unexpected, unprecedented event, the on-body injector held on to a market share, which was disproportional for a period of time. It even went up beyond 56%, 57%.
We are now seeing that come off to about 45 or lower than that. You are clearly seeing that it's a certainly a nice-to-have. The originator continues to hold that market share. Competition that you referenced, you referred to just now is likely to eat into that market share, but will also release more into the, into the syringe opportunity, which we believe will be for us to look at. Some of the indicators that you would see from the recent market informations that have come in is many of these market shares that have been lost by, you know, by players who had taken away aggressively, who had gone for market share has actually now started to lose that in the, in the syringe market.
We are seeing that pick up in Biocon Biologics. We will see a steady increase because we've always looked at holding on to a value maximized opportunity rather than just chasing market shares, which always put ASPs versus market shares at loggerheads and we've always played that balancing act also. We'll continue to do that.
Understood. Thank you so much, Sheehas.
Thank you, Neha. We'll take Nihal next. Nihal, you are on mute if you are asking a question.
Hello.
Yeah, go ahead.
Yeah. Good morning, everyone. Actually, ma'am, I want to speak in Hindi so everyone can understand. Yeah, actually.
Share price.
Yes.
Understood. Thank you so much, Hayes.
Thank you, Neha. We'll take Nihal next. Nihal, you are on mute if you are asking a question.
Hello.
Yeah, go ahead.
Yeah. Good morning, everyone. Actually, ma'am, I want to speak in Hindi so everyone can understand. Yeah, actually.
जिससे share price और investors को मुझे उम्मीद है कि उनको समझना चाहिए कि हमारा यह business अभी global business हो, बड़ा हो सकता है और हम बहुत ही मेहनत कर रहे हैं कि यह business में हम काफी growth दिखाएंगे। काफी success दिखाएंगे। आप investors को भी मानना चाहिए कि यह business ठीक है, यह अच्छा है, दुनिया के लिए अच्छा है, India के लिए अच्छा है और हम जो कर रहे हैं, कितने company कर रहे हैं, मैं पूछना चाहती हूं। कितने company insulin बना रहे हैं, कितना company biosimilars world class biosimilars बना रहे हैं। यह तो हमारी मेहनत से हुआ है। हम बहुत ही चाहते हैं कि दुनिया में यह ऐसे medicines लोगों को access हो सकता है और यही हमारा business purpose है। investors को भी इसमें believe होना चाहिए ना।
Definitely actually आप जो कह रहे हो बिल्कुल सही है पर मतलब फिर भी कोई ना कोई reason होगा ताकि share price continue down हो रहा है.
मैं share price को मैं कुछ नहीं कर सकती हूं. मैं सिर्फ मेहनत कर सकती हूं और आपने तो देखा है 36% growth हमने दिखाया है. हमने billion-dollar का exit trajectory की हमने वो दिखाई है हमारे Biologics business की और हमारे सब business बहुत ही अच्छे चल रहे हैं. आपने तो सुना है इस call, ये Zoom call में कि हमारा जो generics business भी बहुत ही अच्छा चल रहा है. हमारी research services business बहुत ही अच्छी चल रही है. हमको भी समझ में नहीं आता है कि क्यों हमारा share price कम है. मुझे तो ऐसा लग रहा है कि मैं तो सब कोशिश कर रही हूं लेकिन यह share price क्यों इतना कम है, मुझे भी समझ में नहीं आ रहा है.
Definitely actually आप मतलब India की first lady जो मतलब इतना मतलब entrepreneur मतलब business कर रहे हो तो यह salute है आपको. अभी उम्मीद है आपने जो commentary की है उसके कारण से हमारा Biocon का share price movement में आए और एक अच्छा move investor को मिल सके.
जी, मैं यह भी चाहती हूं कि investors और market समझ सकते हैं कि हम क्या कर रहे हैं और हम leadership कैसे हम you know हम build कर रहे हैं। यह सब हम बहुत ही effort कर रहे हैं और हमारे दवाई से बहुत लोग को फायदा हो रहा है पूरी दुनिया में और हमारी जैसी company एकदम unique है भारत से।
जी, जी specifically invest के 1 साल से invested हूं पर continue loss suffer कर रहा हूं.
मुझे आशा है कि दो तीन I mean अभी बहुत जल्द से जल्द मैं, मुझे आशा है कि investors हमारी business समझ सकें और हमें support दे सकें।
Definitely आपकी positive comment से क्या पता आज से movement start हो जाए share का। Thank you very much.
Thank you.
Thank you Nihal. We have a follow up from Cynderella from JMFL.
Thanks for the follow up. Siddharth this is for you. You helped us understand the pipeline especially on the peptide side. Want to understand the commentary on the profitability EBITDA margin side. How should we look at it and what is the if any guidance that you can provide on the EBITDA side. We have seen some sequential improvement in this business. However, the formulation business in U.S. still has a lot of pricing challenges. What is your view on that? Just one more addition to that is the newer facilities which are commissioning how much of OPEX and depreciation it will add to our P&L over there and is it something significant that we need to consider?
I think let me answer second question first. We the facilities, the new facilities will be capitalized once we receive the approvals from FDA, which is expected at 2025. I do not expect any significant impact in FY24 from these large facilities or OPEX coming in. I think I'll be in a better position to quantify and give timelines. I think as we move along in few quarters. You know, in terms of the first question, of course, the pipeline, we are making good progress. We do see the pricing impact our EBITDA margins. Our Core EBITDA margins were in the range of 21%-22% for the generics business, and we are investing roughly 8%-9% of revenues in R&D. That reduces the EBITDA to anywhere around 14%-15%.
The PBT, which we reported is around 10%-11%. I do expect the margins to continue at these levels. We've of course, the margins are also dependent on the quality of the product mix we supply to our customers. We've had few high, very profitable products which were supplied to our customers in quarter three. For example, fidaxomicin which we supply to Merck or tacrolimus, which we supply to some of our customers in the U.S. We had seen a good product mix in quarter three. Going forward, of course, these could be lumpy in some quarters. There might be no delivery of higher profitable products. We would see a fluctuation.
On a long term basis, I would still say that we will, till we get one of these blockbuster peptide, we will expect the margins to continue in the same range.
That's very helpful, Siddharth. Coming to just a confirmation on Serum, whenever the transaction is cleared from the regulatory aspect, we will be able to see the booking from first October 2022. Is that understanding correct?
That's correct. The effective date would be October 1, once the quarter-
Yeah. As ma'am highlighted, the tracking of $300 million is as per the agreement. That is also clearly understood, right?
Yes.
Any additional CapEx on both the side that we are seeing? I see from a generic business side, you have highlighted the main need to double peptide. Any CapEx that you would like to give a number on that. On the additional side, in terms of Malaysia, do you see the second phase beginning, or what is the status there from a CapEx perspective? That's it from my end.
Generics, I expect CapEx to be around INR 700-800 crores per year, which includes the incremental capacities on our fermentation, non-immunosuppressant fermentation plants for peptide, as well as the injectable facilities that we are building. That should continue for the next one to two years. Over to Chinni for Malaysia phase 2.
Cyndrella, we are within our guidance of $100 million-$150 million CapEx per annum. This year we have spent $70 million. Most of the spends this year and next year is towards the Malaysia phase 2 expansion.
Thank you so much. Thank you, everyone. All the best.
Thank you.
Thanks, Cyndrella. We'll take the last question from Utsav Jakharia. Please go ahead.
Hi. Thanks for the opportunity. My question was on the Syngene stake. Are there any plans for a further dilution in the future?
No.
Not in the future. We are down to 54.9, but we do not have any plans.
Okay, thanks.
That was the last question for this earnings call. I thank everyone for joining us today. If you need any further assistance or clarifications, please do reach out to us. Have a good rest of the day. Thank you.
Thank you.