Good morning, everyone. I'm Saurabh Paliwal from Biocon Investor Relations team, and I would like to welcome you today for the Q4 and Full Year Ended March 31, 2023 Earnings Conference Call. I would like to indicate that all participants are in the listen-only mode, and you'll get an opportunity to ask questions once the opening remarks conclude. Should you have any questions, please select the Raise Hand option under the Reactions tab on your Zoom application. During the Q&A session, we will call out your name, unmute your line, and enable you to ask a question. When asking your question, please begin with your name and your organization. Please note that the chat box has been disabled for this conference call, but you can raise any technical concerns by sending us an email at investor.relations@biocon.com.
I would like to also bring to your attention that this conference call is being recorded. The recording will be made available on our website within a day, and the transcript will be made available 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 Managing Director of Biocon Limited, along with senior management colleagues across our business segments, including Generics, Biosimilars, and Research Services. I would like to allude to the safe harbor related to this conference call. Comments made during this call may be forward-looking in nature, based on management's current beliefs and expectations. They must be viewed in relation to the risks that our business faces that could cause future results, performance, or achievements to differ significantly from what is expressed or implied by such forward-looking statements.
At the end of this call, if you need any further information or clarifications, please feel free to reach out to us. With that, 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. Let me start with a high-level summary for FY 2023. Biocon has delivered a total revenue of INR 11,550 crores, a growth of 38% over FY 2022. All business segments contributed to the growth, with operating revenues in biosimilars growing 61% to INR 5,584 crores. Research services by 23% to INR 3,193 crores. Generics by 13% to INR 2,637 crores. The year gone by saw the completion of the landmark acquisition of Viatris Biosimilars business, which has contributed to the year's growth. In fact, Q4 reflects the full contribution of the Viatris acquisition. This strategic investment, we believe, will accelerate our journey to global leadership as a fully integrated biosimilars player.
Syngene delivered a strong performance led by its manufacturing services business, which includes the signing of a 10-year biologics manufacturing agreement with Zoetis, expected to be worth around $500 million over the contract period. The generics business continued its geographic expansion initiatives with strategic partnerships across markets. FY 2023 marked the launch of products in a few ex-U.S. geographies such as the U.K. and other emerging markets. This, coupled with a strong performance in the base business, contributed to the segment delivering 13% year-on-year growth. Investments in R&D and CapEx towards a pipeline of complex products, including peptides and oncology molecules, are expected to play out positively in the coming years. Sustainability is integral to Biocon's business purpose.
The company continues to develop a progressive agenda for its ESG practices in alignment with stakeholder expectations, as well as, of course, the company's objectives. Our efforts continue to receive global recognition reflected by our improving scores from leading global sustainability indexes. Biocon improved its score in the Dow Jones Sustainability Index over 2021 from 45 to 62. Based on this performance, we were inducted into the S&P DJSI's prestigious annual sustainability yearbook under the Industry Mover category. Biocon was also awarded a silver medal by EcoVadis for its sustainability accomplishments. It has certainly been a transformative year for the Biocon Group. All three business segments are at an inflection point and poised for significant growth in the years ahead. Let me now start with the Viatris acquisition. The integration of the Viatris biosimilars business is progressing well.
Viatris continues to provide commercial and other transition services to Biocon Biologics as part of a transition services agreement. We remain on track to integrate a major part of the acquired biosimilars business region-wise in a phased manner during FY 2024. As far as net debt reduction is concerned, we continue to work towards reducing our net debt. As of December 2022, Biocon had a consolidated net debt of $1.9 billion. Since then, net debt has been reduced through the following events. $270 million was brought in through the stake sale in Syngene. $130 million investment by Kotak.
$150 million conversion of loan equity in BBL by Serum, and $98 million investment by Edelweiss. Post these investments, the net debt has been reduced by $650 million to a level of $1.25 billion, excluding, of course, structured investments. Whilst the present debt level can be comfortably serviced, we plan to raise additional equity at the BBL level during FY 2024 to provide us flexibility for any business development opportunities. Coming to the financial highlights. First for the quarter four and then the full year FY 2023. Let me start with the quarter four numbers. At the group level, total revenues for the quarter was up 59% year-on-year to INR 3,929 crores.
The biosimilars segment revenue more than doubled on the back of the acquisition of Viatris' biosimilars business, with Q4 reflecting the first full quarter of consolidation. Research services grew 31%, while generics remained flat. The total revenue also included INR 109 crores of the stake dilution gain in Bicara pursuant to their Series B fundraise. Core EBITDA grew by 56% to INR 1,260 crores, representing continued healthy core operating margins of 35%. R&D spends stood at INR 342 crores, which is an increase over INR 152 crores for the same period last fiscal, and it corresponds to 12% of revenues ex Syngene. EBITDA for the quarter was up 75% to INR 1,152 crores versus INR 659 crores in the same period last year.
EBITDA margins stood at 29% as compared to 27% for the same period last year. Depreciation, amortization, and interest increased by INR 389 crores over last year, and this is primarily related to the biosimilars business acquisition cost. Consequently, profit before tax and exceptional items stood at INR 500 crores, up 30% year-on-year. Net profit for the quarter, excluding exceptional items, stood at INR 335 crores versus INR 262 crores in Q4 FY 2022, up 28% year-on-year. It must be highlighted here that there is an impact of higher minority interest due to stake dilution of Biocon's shareholding in both Biocon Biologics and Syngene in the consolidated results. Now, coming to full year numbers. Total revenue for FY 2023 was up 38% to INR 11,550 crores.
Revenue from operations in biosimilars, research services, and generics were up 61%, 23%, and 13% respectively. The total revenue includes INR 217 crores of stake dilution gain in Bicara pursuant to their fundraise during the year. Core EBITDA was up 43% to INR 3,807 crores, representing core operating margins of 34% versus 32% last year. I come to R&D spends for the full year, which were at INR 1,119 crores. A big jump over INR 524 crores last fiscal, representing 14% of revenues ex Syngene. We also recorded a Forex loss of INR 160 crores in FY 2023, as compared to a gain of INR 58 crores during FY 2022.
EBITDA for the year was up 32% at INR 2,888 crores versus INR 2,183 crores in the same period last fiscal, with EBITDA margins at 25%. Profit before tax and exceptional items stood at INR 1,189 crores, which is up 9% year-on-year. The growth in PBT is not commensurate with growth in EBITDA due to additional depreciation, amortization, and interest charges primarily related to the biosimilars business acquisition cost. Consequently, net profit for the year before exceptional items stood at INR 787 crores to INR 722 crores in FY 2022, which is still up 9% year-on-year. Coming to exceptional items for the full year FY 2023.
For the full year FY 2023, there were exceptional items amounting to INR 324 crores net of tax and minority interest, as compared to INR 74 crores last fiscal. These include deal-related expenses of the Viatris transaction and a MAT credit balance charge as Biocon decided to adopt the new tax regime of 25%. As a result, net profits stood at INR 463 crores. Let me turn to the segmental business performance during the quarter. Let me start with generics. The generics segment reported an operating revenue of INR 717 crores for the quarter, similar to Q4 last fiscal. Profit before tax stood at INR 75 crores. For the full year, the generics segment recorded an operating revenue of INR 2,637 crores, delivering a growth of 13% year-on-year, which is in line with our guidance.
Profit before tax stood at INR 264 crores with PBT margin at 10% in line with last year. Now coming to the key highlights for the generics business. Q4 performance was driven by API immunosuppression sales, as well as growth in the base business of generic formulation products in the US, as well as certain new product launches. Margins were lower compared to previous year, mainly due to price erosion in our base business products, particularly statins. During the quarter, we secured 4 product approvals, 1 each in the US and EU and 2 in emerging markets. On the regulatory front, our API manufacturing facility in Bengaluru underwent an EU GMP inspection in February with no critical or major observations. Most recently, last week, the US FDA concluded a pre-approval inspection for Site 3 located at Hyderabad, Telangana, with no observations.
On a full year basis, the business recovered from a muted performance in FY 2022. Growth during the year came from API sales, again from immunosuppressants and specialty APIs, as well as generic formulations, where a higher volume market share of products launched in FY 2022 contributed to revenue growth. During the fiscal, we had 32 filings and received 19 approvals for our generic formulation products across U.S., EU, U.K., and emerging markets. We continue to focus on the enhancement of our manufacturing capacities and capabilities throughout the year. Our facility in Vizag and for immunosuppressants and peptide facility in Bengaluru were commissioned during FY 2023, with validation batches at both sites expected to be completed by the first half of FY 2024. We are also investing in a new injectables facility as well as expanding our larger scale peptide, synthetic and non-immunosuppressant API manufacturing capabilities.
To reduce costs and development timelines, various cost improvement initiatives and projects were undertaken, and the benefits of these are expected to accrue in the quarters ahead. In summary, FY 2023 has been a good year for the generics business, backed by cost improvement initiatives, strategic partnerships, and product approvals. Now coming to the biggest segment in our consolidated, you know, financials, which is biosimilars. Q4 is the first full quarter with consolidated financials from our base and acquired Viatris biosimilars business, representing the new reference point for Biocon Biologics as a fully integrated enterprise. Biocon Biologics recorded revenues of INR 2,102 crores for Q4, ending the year on a billion-dollar trajectory as per our guidance.
Core EBITDA, which excludes R&D, Forex licensing income and MTM on financial instruments, was at INR 742 crores with margins at 39%, demonstrating continued healthy profitability post-consolidation of the acquired business. EBITDA was at INR 573 crores with a margin of 27%. Depreciation, amortization, and interest pertaining to the acquisition impacted the quarter's profit before tax, which stood at INR 152 crores, which is up 5% year-on-year. Moving to the full year performance, Biocon Biologics recorded revenues of INR 5,584 crores in FY 2023, a year-on-year growth of 61%. Core EBITDA for the year was at INR 2,216 crores, up 68%. Net R&D spend for the year was at 16%, which is higher than our guidance of 12%, on account of the closing timelines of the Viatris transaction.
I might remind you that we concluded this deal at the end of November. We had expected to, you know, conclude it a little earlier, but this has impacted the R&D spend in terms of percentage of revenues. The R&D spend we expect will normalize to around 12% in the coming quarters. EBITDA for the year, subsequently, stood at INR 1,338 crores compared, and which is a 32% year-on-year growth. Profit before tax and exceptional items was at INR 403 crores, which factors in acquisition-related amortization and interest costs, which actually amount to INR 379 crores. Let me also, you know, share some highlights, starting with our vaccines collaboration with Serum.
We have restructured our original equity structure with Serum under the strategic alliance announced in September 2021. As per the new arrangement, BBL will have access to 100 million doses of vaccines annually, together with distribution rights to Serum's vaccines globally, without any assured revenues and EBITDA. BBL will no longer be issuing the 15% stake to Serum, thereby increasing Biocon's stake in BBL. Serum will now have an aggregate equity investment of $300 million in BBL. Moving on to business performance, we continue to see a strong performance of our biosimilars globally. There were more than 35 launches in FY 2023, increasing the depth and breadth of our reach. In the U.S., Fulphila or pegfilgrastim achieved a 14% market share, growing from 11% in December.
Ogivri continues to maintain its 10% market share, and our biosimilar insulin glargine's market share has improved to 12%, in line with the new prescription trends or the NRX trends observed in the prior quarter. There is a strong interest in the upcoming launch of Hulio, backed with its performance in Europe, which will be a key growth driver in FY 2024. In Europe, Fulphila, Ogivri, and Hulio continue to experience improvement in performance. For instance, in France, each of these products have Our franchise continues to be robust with Ogivri having a 35% market share. Hulio, which was recently launched in Canada, has already attained a market share of 6%. We continue to see strong demand in our emerging markets business, driven by a growing portfolio coverage and several new launches.
Through our partners, we have won tenders for glargine in Mexico, Trastuzumab in Belarus and Bevacizumab in Algeria. On the regulatory front, our new BC maps facility certificate of GMP compliance for our biosimilar Bevacizumab from Europe's Health Products Regulatory Authority. We have responded to the CRL for our biosimilar insulin aspart, wherein the US FDA had accepted our CAPA plan pertaining to the Malaysia facility and expect this to be followed by a site inspection. We are in discussion with the US FDA on our CAPA plan submitted for biosimilar Bevacizumab. We continue to progress our pipeline with biosimilar Denosumab, Ustekinumab, and Pertuzumab, and we are on track to complete the studies for Ustekinumab and Denosumab by the end of 2023 and 2024 respectively.
In summary, FY 2023 has been a transformational year for Biocon Biologics, driven by Viatris, the acquisition of Viatris' biosimilar business. This has enabled us to create a unique, fully integrated biosimilars enterprise with clear growth catalysts. The focus in FY 2024 will be on integration, transition, and execution in the commercial arena. Coming to novels, I will now provide you with an update on the novels business, starting with itolizumab, which continues to make progress. Patient enrollment has ramped up with 670 clinical sites operationalized as a part of the ongoing pivotal phase EQUATOR study of itolizumab in patients with acute graft versus host disease. The phase 1B clinical study for lupus nephritis also remains on track.
Equillium expects to report top-line data from the EQUALISE study on lupus nephritis in the first half of 2024 and remains on track for the interim review of phase 3 EQUATOR study later in 2024. Coming to Bicara Therapeutics, its lead candidate BCA-101 continues to make good progress in phase 1, 1B development in head and neck cancer. Based on the promising data generated thus far, Bicara completed an oversubscribed $108 million Series B financing, which will help to advance this asset. As mentioned earlier, fundraisers during the year resulted in a step-up gain recorded in Biocon's consolidated P&L statement. Biocon's stake in Bicara currently stands at 38%. It is expected to reduce to a little over 23% post receipt of the full amount from the Series B financing in FY 2024.
Coming to research services, Syngene ended the year on a strong note with positive performance across all four divisions. It was the strongest quarter ever for Syngene. Revenue from the operations grew 31% to INR 994 crores over the corresponding quarter last year, and reported revenues crossed INR 1,000 crores for the first time. Profit before tax was at INR 231 crores, up 29%. Strong performance in the Q4 added to performance over the course of the year and ensured that Syngene delivered full year results ahead of its upgraded guidance. It delivered the highest absolute year-on-year increase in revenue and EBITDA in the last 5 years.
Operating revenues were INR 3,193 crores in FY 2023, a growth of 23% over last year, while reported EBITDA was up 18% to INR 1,005 crores, with EBITDA margins at 31%. Profit before tax was up 15% to INR 594 crores. For the quarter, the research services business, discovery services, and dedicated centers delivered sustained good performance. In the manufacturing services this quarter also saw the start of manufacturing of drug substance at commercial scale for Zoetis, which added to the strong year-on-year growth for Syngene. To conclude, I am pleased to announce that the board of directors have recommended for approval by the shareholders a final dividend of INR 1.50 per share, representing 30% of the face value of each share for the financial year 2023.
I would like to conclude by saying that all business segments in Biocon are well positioned to grow in FY 2024. We expect a mid-teen growth trajectory for the generics business, driven by its enhanced capacities in our API business, volume growth in our base business, and new launches in generic formulations in the U.S. and other geographies. With the Viatris transaction concluded in FY 2023, Biocon Biologics is also well positioned with clear growth drivers in place. The upcoming launch of Adalimumab in the U.S. and the anticipated approvals and launches of Aspart and Rivaroxaban should help us to build upon the $1 billion revenue run rate which, on which we have concluded FY 2023. Syngene sees the healthy demand for its services continuing in FY 2024 with the start of commercial manufacturing in biologics spurring the growth momentum.
With this, I would like to open the floor to questions.
Thank you, Kiran. The participants, we'll wait for a few moments before we start the Q&A session. I'll request all participants to please limit the questions to 2 per person to allow everyone in the line to get a chance to ask the question. The first question is from Cyndrella Carvalho from JM Financial. Please go ahead.
Thanks for the question. Congratulations on consolidating the entire Viatris. How should we see any synergies do you see from this transaction as we go ahead? Would you like to highlight, on the balance sheet size, you said that, you know, you have reduced the net debt from December level, but what is the plan for the FY 2024? Could you help us understand what would be the further debt reduction that we are looking at? On the R&D side, you also highlighted that, numbers should look more close to 12%. Just to clarify, is it ex Syngene we are looking at, or is this overall sales that this number should look closer to 12%? These are my questions at this point in time. I have more questions.
I'll join back in a bit.
Let me answer your second question and I turn over your other questions to both Chinnapa and Shreehas. As far as the 12% R&D spend is concerned, obviously, the large part of, you know, R&D is attributable to Biocon Biologics. We, as we said, we would like to be at a 12% of revenue level, right? As you heard this, you know, this fiscal we've been much higher than that. It's been at 14%. We would like to reduce that level. Both Shreehas and Chinni Chinnapa to answer that question. Over to Shreehas.
Thanks, Chinni. Cyndrella , your question was more about the synergies that we would look at once we integrate, now that we've integrated the Viatris business. Just to, you know, bring you back to how we've structured the contract with Viatris, we've of course now started consolidating the revenues and the profits, and you're seeing the first full quarter of revenues and profits flowing in into the Biocon Biologics books. We've also signed with them a TSA or a transaction, a transition services agreement through which they provide us services for a period of 2 years.
At this point in time, Viatris continues to provide us services and our numbers factor in the charge that Viatris levies on us for the services that it provides in the geographies that they operate in. Going forward, like we've said in the past, that we, you know, being an integrated, a fully integrated player, we would be looking to see how we, you know, become more nimble and flexible. At this point in time, that's not what's changed. We've got a fixed charge through the TSAP that flows into our P&L. Chinni, if you'd like to add something, over to you.
No, you covered it, Shreehas. Thanks. Cyndrella , any follow-up to these two questions?
Yeah. I mean, the follow-up is there any synergies, as you're saying that there is a charge with us, so, where do you see this charge going beyond 2 years? I mean, the numbers that you had earlier shared with us, does that change? More from a synergy perspective, do you see the market share ramp up? We've seen our gross margins being more stable, but do you see any scope of improvement here with Numera launch coming up? Are we prepared for the launch? Are we in the preparation mode already? You can help us understand that.
Cyndrella, I'll take the first part of your question and then hand over to Shreehas. Just to clarify on the charges, Viatris is still running the commercial engine and they cross-charge costs that actual, as actuals to us. It's a cost that's currently they incur and cross-charge us. Once we transition out of Viatris, we would be incurring the cost directly on our books.
Yeah. To answer the other part of it, as we look to get past into this year, into the full fiscal, we are looking at, you know, making sure that we take on the Hulio launch. Viatris is right now the marketing authorization holder. Matt and his team are fully involved in leading that launch. Obviously we are looking at a very successful launch that we expect in the US. We expect things to move forward. At this point, the important message is, as we've integrated the full quarter revenues, you've seen the health of the business is very strong and you've seen the Core EBITDA margins at the same levels as at that 39%, 40% that we've had in the past.
It reflects the basic health in a very, very strong position.
We are also seeing some good uptick in some of the market share of key products in the U.S. and other markets.
On the debt side, if we can have that number for FY 2024, where do we bring the debt down? Any number?
I think, you know, we will share this information with you as and when we progress. At this point in time, I think what we have done thus far is what we can share with you. We will aim to reduce it further.
Thank you. I'll join back the queue.
Thank you, Cyndrella. The next question is from Tushar Manudhane from Motilal Oswal.
Yeah, thanks for the opportunity. Just on this licensing income, if you could, you know, share further details related to this of INR 175 crores?
Yeah. Shreehas, would you like to take this?
Yeah. Yeah, let me, let me respond to that, Tushar. The licensing income is a part of our routine business. You know, as we develop our portfolio, we've seen opportunities where we in-license products and we out-license some of the assets. There are some assets that we see may or may not be synergistic to our portfolio. We see an opportunity to out-license them. We see an opportunity to in-license some where we see gaps in our portfolio now that we are a fully integrated organization with a commercial engine, there are so many more things that we can do. These are things that you will see happening during the course of the year. You'll see some in-licensing asset and revenues, and you'll probably see some out-licensing happening during the course of the year.
What's happened in this particular quarter is we saw that there was an opportunity for us to out-license a particular asset in our portfolio, and that's something that has flown through. These will happen as and when we proceed, you know, when we see opportunities to either out-license or in-license products.
From that perspective, this 175 seems to be not to be taken as a sustainable number, right?
It will be as and when the things happen. You will see that as and when things will progress.
Just to add to this, if this licensing income, while considering that as and when it comes, the PBT margin excluding this seems to be much lower for biosimilar segment.
Tushar, I want to interrupt you right here. Please understand that our R&D spend has increased significantly. I keep reminding people that this business has to be looked at in, at the core EBITDA level. Please do not look at isolated numbers because if you can see what we have done, we have actually offset some of this increased R&D spend with this licensing income. If you look at it in that context, you will see that the core EBITDA margin is what you really need to look at.
Sure. Considering the vaccine or serum deal going away, but at the same time, Adalimumab launch happening. If you could refresh in terms of biologic sales for FY 2024.
Yes. You know, I did indicate that we were exiting this fiscal at a $1 billion trajectory. We believe that we will build on this $1 billion trajectory in FY 2024. Like you pointed out, yes, the Serum income will not be available to us this fiscal. We will look to building momentum on the $1 billion trajectory that we have exited at.
Just lastly on this new, the debentures which have raised to the tune of INR 800 crores. Would there be any provisioning on account of this in P&L and at what rate, if so?
Chinappa, would you like to take this?
Tushar, hi, good morning. Yes, the fundraise from Edel is like a quasi-equity. It is a loan, but to be repaid to the sale of BBL shares. They would carry an accounting charge, but no cash interest cost associated with it.
Got it. What would be that, so while it would not consider cash, but the accounting charge would be how much on INR 800 crores?
It would be linked to the fair value movement of the BBL shares, but for modeling, you could take 12% would be.
Fair point. Thank you. Thank you. That's it from me.
Thank you, Tushar. The next question is from Prakash Agarwal from Axis Capital. Akash.
Yeah. Hi, am I audible?
Yeah.
Yeah. Hi, good morning. Congratulations on good operating performance. First question, trying to understand, you know, the outlook better on the upcoming product, Dali. If I see Amgen's performance, I mean, the first 6 months, it's been a very slow start on that molecule. How should we look for us, like, you know, modeling in for fiscal 2024 and 2025, is it gonna be a slow start and then ramps up or we are better prepared? If you could help on that. Second, you mentioned uptick in key products. I mean, if I see, you know, Traztu and the other products, so it seems to be stabilizing. Do you expect them to improve and include Glargine outlook, that would be helpful. Thank you.
Matt, you might want to take these questions.
Yeah, sure. Thanks. Thanks for the question. I think from a standpoint, as we're looking at this, the opportunity still remains very large. As we think about our Hulio product and the timing of this launch, I see that from the channels that we have in regards to the payer channel, we see a lot of inquiry about our Hulio product. We see a lot of interest in our product from specialty pharmacy, and we also remember we're very well-positioned and have been talking to key prescribers about Biocon Biologics, not particularly about our product because of the settlement date. There's a tremendous amount of interest as these new products are coming to market. I think what we're seeing is a steady state from the payers in waiting.
This is why you're seeing the slower uptake with Amgen. Also I think, you know, if it was the other way, it, you know, the size of the opportunity would be much smaller. We feel very confident in our 4-channel strategy from payers to our prescribers to the specialty pharmacies and then the end patient. As we look at our position with our portfolio, our patient assist programs are top-notch. Our product from a standpoint of our auto-injector, there's a lot of excitement about our product. And I think when we go forward and start being able to see the recognition at the time of launch, which will occur July 1, you'll see a tremendous amount of interest with our Hulio product as we progress.
I'm happy that the market is still large, and we have this opportunity from the payer perspective and also from a prescriber perspective. We'll be able to compete as the market evolves, either on the high rebate side or on the low side from a WAC standpoint, because we will have our Hulio branded product, and we'll have the authorized that would be the adalimumab. We're able to play in all channels, and we're in a good position.
Well, that's great to know. If you could just give some color on, if there's a, could be uptick in the existing large products, the 3 products we have in the market in the U.S.
I'm sorry. Could you repeat that question? I couldn't hear you very well.
Could you give us some outlook on the, you know, the market share, outlook on the three products, Trastuzumab, PEG, as well as Glargine?
Yes, certainly. Let me talk about this from a franchise perspective. When we look at our pegfilgrastim and our Traz, as well as our bevacizumab, from a therapeutic area, we see tremendous amount of growth. In the first time, in the U.S. on the PEG and Traz, we're over 10% in market share. Particularly on the pegfilgrastim, we've crossed that 14% mark, and I think this is attributed to our franchise with our selling team and understanding of ASP and being good stewards of balancing our rebates with the payer, but also understanding how physicians are looked to be incentivized for the work that they do. We're seeing great tremendous uptick in our insulin glargine, as you've seen with the market share, as well as the new RXs.
We continue to be optimistic about continuing to add new customers with our insulin glargine because of a lot of interaction we're getting today with current customers. When you think about the franchise, though, of Traz and PEG across all advanced markets, remember from a trastuzumab, we have over 35% in Canada. In Australia, Germany, and Italy, we are approaching 15%-20% market share. We have a great franchise and the opportunity to continue to grow those, not only in North America, but also in our European as well as our Japan's opportunities.
Okay, you do expect some improvement in the market share versus stability?
Yeah. I think what I would say from a market share, we've seen continued improvement in our insulin glargine or Semglee, and continuous improvement in our market share with pegfilgrastim. We see a steady state in the US and other places on our Trastuzumab, but that's where we're seeing the growth in our PEG as well as our insulin glargine.
Perfect. That helps. Second question is on the cost side. We did fairly well in, you know, stabilizing the staff cost. Is there any one-off there? Also outlook on the interest cost. You mentioned about, you know, trying to reduce the debt, but these are quasi equity. While accounting interest would still be there for the quasi equity that we have taken from Kotak and Edelweiss. One is on the staff cost and the second is on the interest cost outlook for fiscal 2024. Thank you.
Hi, Prakash. I'll take that. Staff cost is about 10% of revenues. We see it in that range. Interest cost has been higher than what we had previously expected, let's say, at the beginning of last year, and that's tracking the increased interest rates. It's roughly 50% more than where we want it to be. That should largely get corrected through the additional fundraise that came this
...
Financial year.
Can you repeat that, sir? What's that? How will it reduce?
Through the equity fundraise. Equity fund infusion into BBL.
Okay, which is expected in fiscal 2024.
Yes. That's correct.
It would also convert the quasi-equity into equity, so that accounting interest will also not be not there, and you will raise additional fund in the company. Is that right?
Yes. We'll clarify this closer to the fundraise or when we announce to you.
Okay, got it. Staff cost, you said 10%.
11%. That's.
No. This quarter you were 15, and for the year you were 19.5, so I don't know. You are talking about BBL level, I was talking more from company level, sir.
Sorry, I was just referring to BBL.
I think, Prakash, this quarter, if you look at INR 529 crore was the staff cost. Of course, this is time for the annual increments, so we will see increments come in quarter one. Apart from that, Chinni or Shez, maybe you can just talk about the incremental absolute staff cost from BBL perspective as the transition happens in FY24.
Yeah. I mean, it's really on the consolidated revenues. BBL is at above 1 AK gross quarter-to-quarter, which is a 9%, but you see this at the 10%.
Okay.
For BBL, according to the values.
Okay, got it. Thank you. All the best.
Thank you, Prakash. The next question is from Damayanti Kerai from HSBC.
Hi. Thank you for the opportunity. Coming back to cost, actually, I'm not clear on the operating cost movement since the Viatris integration. Staff, if you look at the console level, it remains like flat more or less compared to the December quarter, despite the fact that last quarter only had one month of Viatris cost, right? If you can clarify that. Also wanted to understand the TSA cost which will continue for two years. Right now, I believe it's not part of operating expense and we are booking as professional expert fee. If you can clarify on that part also, please.
Damayanti, hi. I'll just clarify on the, from the BBL perspective. One, we just, on the TSA cross-charge. There are two components in the TSA cross-charge. One is a reimbursement of expenses at actuals. They're incurring the SG&A, as carrying the employees and other contracts on their books, and it arches across charges then. There is an additional for a year of, or charge of $44 million per year, which is a TSA fee that they charge. That's been announced along with the deal. That cost, there's a fair value of that that gets charged to the P&L and the value goes into purchase consideration. That really covers for the overheads. Once we absorb the business, we would have, we would incur those overheads on, directly on our books.
Just to clarify, once right now, this cost is getting reimbursed by Viatris. After 2 years, once it's part of Biocon, it will be coming into your PNL.
The-
Which is right now not flowing into the numbers.
That's right. On TSA exit, we would incur the cost directly. During the TSA period, they incur the cost and cross-charge it to us.
The exception which we are booking, that include both this, cost reimbursement as well as the, exit fee, if you can also.
Exactly. Book, both, include both. We don't really see any savings coming there as they transition out of Viatris onto BBL.
Okay. Any cost synergies, which we are looking from this portfolio, will likely happen once everything comes into your book and then, you see, pick up on the top line, et cetera, to see the better leverage.
Yes. Yes.
Okay. My second question is on, ma'am mentioned there are plan to further raise equity for BBL in 2024. Right now, what is parent stake in BBL and how, where you would like to, you know, settle it down finally?
I think, Chinni, I think the question is what is the Biocon's stake in Biocon Biologics at the moment.
Uh, uh-
Where could we expect it to finally land?
Right now, Biocon's stake is 70%, Damayanti. If you raise additional 10%, you'll get diluted accordingly.
As you know, Damayanti, it all depends on the value at which you fundraise. It could be maximum 10, but much lower than that is what we are aiming.
Okay. Up to 10% stake dilution we can see, but obviously it depends, like as in when things happen.
Yeah. The valuation you get.
Okay. My last question is clarity on your net debt. The current position which you have given is excluding the structured asset as mentioned in the presentation. Just to clarify that Goldman Sachs investment is not included here, right?
Yeah. At the control level, no. No. We have taken out Goldman Sachs and Kotak for the purpose of net debt calculations in our company.
Edelweiss is part of that.
Edel is coming only in.
Oh, okay.
In May, it's not reflected in that.
Okay. I have 1 question. I'll get back in the queue. Thank you.
Thanks, Damayanti. The next question is from, Harith Ahamed, Spark Capital. Please go ahead.
Hi, good morning. Thanks for the opportunity. In your press release, you mentioned a tentative approval for lenalidomide capsules. It'll be helpful if you can give some details around launch timelines. Just trying to understand if it's a FY 2024 opportunity for us or FY 2025. Some color would be helpful.
It's confidential, settlement terms with Celgene. We cannot disclose the dates. It's not imminent. Let me just say that it's not definitely in FY 2024.
Okay. My second question is on aflibercept. We've have a deferred consideration that's due for this product. Can you refresh on the exact amount and when the payment is due? Any comment again on updated launch timelines and whether we'll have exclusivity post our launch for this particular asset?
Jimmy, why don't you talk about the amounts and I can take the second question.
Yeah. Harith, the consideration, the deferred consideration is $175 million, payable in FY 2025.
Okay.
On the question related, Harith, to the launch, you know, at this point in time, when we acquired the asset from Viatris, we are first to file. We are currently in a litigation with the originator, Regeneron. That litigation is currently ongoing. It wouldn't be fair on our part to talk about launch dates at this point in time, but we will, you know, update you as things go in the process of the litigation.
Okay. You know, last one is on insulin pricing. We've seen a lot of developments in recent months around insulin pricing in the U.S. The major innovator brands have seen a significant price reduction on their list prices. Does this in any way impact pricing for our glargine product now and, you know, when we think about our future insulin launches, do these developments have any kind of impact on, you know, our pricing?
Matt, you might want to take it.
Sure. Currently what we're seeing, remember, some of these don't go into effect until 1/1. Right now, of 2024, right now, we don't see a lot in changing in our model. We certainly are taking a look at it, we're well-positioned in regards to our cost structure and well-positioned in the market to be able to play within both the channels, meaning the rebate channels with the payer and then the lower side on the low WAC channel. It's pretty much in line with what we're seeing right now, and we don't anticipate a lot of change. Remember, we're well-positioned, and this growth in our market share and the opportunity really says a lot about our franchise, particularly in the U.S., on how we are able to play and adjust.
I think it says a lot about our platform, our manufacturing, as well as how we're vertically integrated. Well in line with our expectations, and we see continued growth, as I said, with our market share uptake as well as the new Rx's and interest from customers within the U.S.
Thank you. That's all from my side. Thanks for taking my questions.
Thanks, Harith. We'll take the next question from Shyam Srinivasan from Goldman Sachs.
Hi, good morning, and thank you for taking my question. Just the first one on the biosimilar overall revenue, INR 2,100 crores, like roughly making $250 million. Talked about the billion-dollar run rate annualized. Can you split this revenue into your top products? You know, maybe it's a request going forward as well that from a disclosure perspective could give us what the top three, four products are and how these are trending. If you could on this call at least, maybe rank order and how should we look at that particular revenue pile?
Well, there are very few products, so all of them are key products for us. I don't think we would be able to give you, granular, you know, data on each product because there are multiple markets. Multiple regions, it will be very difficult for us to give you, share with you that kind of data. You know, we've heard what you said, and we'll try and see how we can give you some indicators going forward.
Just maybe getting the rank order also is helpful. Which are the largest products, you know? Say, is it insulin glargine? Is it Adalimumab in Europe? You know, you have talked about the Europe market share, any sense that we could get? You know, I'm just adding a follow-up here on how. What are the learnings from Europe, Hulio, which will help us gain share? Are the numbers at 18.5% for Germany or at 10% in France? Is that the numbers we need to kind of extrapolate in the U.S., or it would be a different ballgame?
I think you have to wait for the business to come into our hands. You have to also wait for the market to actually start shaping up, because, you know, these are very, very early signals. I don't think we are the kind of company who wants to forecast things without really understanding very comprehensively what we are talking about. Please bear with us for some time. This is an early days of our acquisition. We would like to really do, you know, good job of presenting the real business prospects, but please bear with us for a while till we actually integrate the business fully.
All right. That's helpful. Second question is on the status of the plans and the pending applications because of plant compliance issues. Is there any refreshed timelines around either Beva or insulin aspart, please?
Like I said, in terms of compliance, you know that all our facilities are fully compliant with EU GMP and others. We've got all the approvals that we had applied for under the EMA. The only two pending, you know, approvals that we are, you know, waiting for is, of course, aspart, biosimilar aspart from our Malaysia facility and the m-bevacizumab from the Bangalore facility. We are, as you know, we have already submitted the CAPA plan to the US FDA for aspart, which they have accepted. We are hoping that we will get an inspection soon. We are in the process of providing the CAPA plan to US FDA for bevacizumab from Bangalore. Again, we hope to be inspected thereafter.
Hopefully in FY 2024 we are expecting to be inspected and approved. That is our hope. We are in a very high state of preparedness. We have taken all the steps that are required to, you know, ensure that we are in a state of readiness and preparedness from a US FDA point of view.
Got it. Helpful. My last question is on the mid-teens guidance for the generic business. That maybe if you could help us understand, you said that generic rev limit is also not there. What are some of the drivers? Is it more on API? Is it linked to the capacity that we have added? Thank you.
Yes. Shyam, it's a combination of both, the new capacities that we have added. We will also have our immunosuppressants and peptides facility commission qualified in FY 2024, and some of the additional capacity enhancements we had done last year. We will see a full year impact of those capacities in the coming fiscal. Apart from that, generic formulations, as we've got additional contracts on our base business in the US, which will lead to the growth in FY 2024, plus some of the new launches in FY 2024. Combination of these three would drive the growth and to that mid-teens level next year.
What is your, what are you penciling in for base business erosion? Is it different versus 2023 versus 2024? Has it seen an improvement, you think?
The pricing part is similar lines. We have not really seen any significant change. Both on our API as well as formulations business, the price erosion would be anywhere between 7%-10%.
Got it. Helpful. Thank you and all the best.
Thank you, Shyam. We'll take the next question from Surya Patra from PhillipCapital. Please go ahead.
Thanks for this opportunity. First clarification, let's say about the licensing income and and the INR 109 crore kind of stake sale gain, whether these are two different things or this INR 109 crore of stake sale gain is part of the licensing income. If you can just first clarify that, sir?
Let me clarify that. Both are very different, Surya, Bicara had done fundraise of INR 108 million, which led to the step up of the investment that Biocon has. That led to the one-time gain. Licensing income, of course, is as Shreehas had mentioned, business transaction, and it was considered in the other income under the licensing line. That you can see in the fact sheet as well as INR 175 million, INR 175 crore as licensing income.
Okay. Sir, then, just from the licensing, this is one of the highest ever licensing number that we have seen. Is it possible to kind of indicate to what asset that is possibly bringing in this kind of, income? Since, now that we are progressing with our pipeline and all that, any visibility on this licensing front on how focused and serious about this revenue stream that?
I might remind you that we've had much higher licensing deals in the past, so it's not correct to say that this is the highest licensing deal.
Yeah. basically, in the recent past, ma'am.
I'm just saying that this is part and parcel of our business, and we keep reprioritizing our pipeline. Please understand that, as I mentioned earlier on, this is to calibrate the R&D spends, which, as you know, we would like to maintain at a 12% level of revenue. When we look at these opportunities and see the ability for us to out-license certain assets, we will also calibrate it with in-licensing certain assets. Like aflibercept is a very important in-licensing opportunity for us. I think you have to view this business very differently. You will have, you know, opportunities to out-license, you will have opportunities to in-license, overall, we would like to calibrate our R&D spends at a 12% level by and large.
Even in the past, we have mentioned licensing income is lumpy, so you really cannot,
Yeah.
predict or, put a trend on what it would be. Yes.
Sure, sir. Since just continuing on the Bicara, whether the charges relating to Bicara would meaningfully come down for 2024, or how should we think, sir?
Right now we consolidate, 35%. I think once the Bicara raises the remaining $70 million, which is expected sometime this quarter, Biocon would be down to 24%. We will be consolidating only 24% of their R&D expenses. It would keep coming down. As the, you know, at some point in time, Bicara will also look at raising Series C funding.
I think it will be fluctuating because it depends at the value at which they raise their Series C funding. I think it's very difficult for us to project, but I hope you have also appreciated the value creation opportunity that the Biocon group has created through this very interesting asset.
Sure, ma'am. My first question is on the benefit of this integration, ma'am. In fact, obviously we have successfully completed or in the process of integrating fully the business of this Viatris biosimilars. On like on the revenue side and, let's say on the EBITDA side, we have seen progression because of the integration, but because of the multiple divestments and the kind of finance cost, capital cost, what we have witnessed, so that has suppressed the overall earning contribution by the acquisition.
I think, Surya, I would like you to focus on the business fundamentals. Okay?
Sure, ma'am.
The business fundamentals are about revenue and Core EBITDA.
Yeah.
I keep, you know, trying to remind you that R&D is a very, very integral part of this business. Under normal circumstances, R&D should be a CapEx rather than an expense. Unfortunately, accounting systems require us to treat it as an expense. I would like you to look at it in that context. You know, our pipeline is our lifeline, and as you know, as we continue to deliver on this pipeline, we actually can surge the growth prospects of our business in the coming years. In the meantime, of course, we are also trying to see how we calibrate our R&D spends and contain them as much as possible. I think we've done it. We've actually demonstrated to you this quarter what is possible in terms of operating performance and the Core EBITDA performance.
Now, of course, because we've made that acquisition very recently, there are going to be charges and accounting treatments of some of the quasi equity that we have taken to reduce debt. I think if you look at it holistically, it's a very, very good business with huge growth potential. I think that's the way I would look at this whole business.
Sure, ma'am. My last question on the-
Not just looking at the PAT. You know what I mean?
Yeah, yeah. Sure, ma'am. My last question is on Syngene. The commentary in the press release indicates about 10,000, 1,000 kind of job additions. This is for the FY 2024 that we're talking about or anything?
I think, Sibaji, if you can answer that question.
Yes, I will. Surya, if you can please repeat, what 1,000 you said.
1,000 more job additions that has been mentioned in the press release. Is it for FY 2024 or it is that you have been talking for the recent past?
This is about the recent past. We added 1,000 jobs in FY 2023. You know, we are an expanding company, we'll continue to expand jobs as we expand our both research and development and manufacturing businesses.
Sure. Okay. Yeah.
Yeah.
That is it. Thank you.
Thank you, Surya. We'll take the next question from Neha Manpuria from Bank of America.
Thanks for taking my question. My first question is on the core margins. You know, as we go ahead into next year, you know, with the commentary that you've given on improving share in some of our products and new launches possibly, how should we look at the core margins? Is there scope for improvement from the, you know, high 39% odd level that we've seen? Or, you know, give and take, this should be the level that we continue.
I think, we have guided for the You know, mid-30s to 40% margins. I think, 39%-40% is a very, very strong margin that we think we can go for.
And, and-
I think, Neha, if guided. Sorry, to add to what Kiran said, we had said mid-30s%, mid-30s% to high-30s%, and we've been able to continuously deliver above that. I think that's really where the range is.
Okay. more in the 35%-40% range rather than the 39 that we have done this quarter?
Well, 35%-40% is the range we've given, you know, anything in that range I think is a good performance.
Yeah.
Shreehas, is it fair to assume that as, you know, we see new launches coming through and probably even existing products ramp up, there is some operating leverage that could come through, you know, with the TSA charge, et cetera, and therefore there's hope for improvement in margins?
Like Kiran said, earlier on, Neha, these are still early days in the acquisition, and we are still in the TSA period, for a while. Unless we get past it wouldn't be fair for us to comment on how things will move. We certainly expect things to get better and hopefully we should be in a higher, in a better operating performance range. We will you know, state that as we get closer to those dates.
Understood. Kiran ma'am, on, you know, Biocon's stake in Syngene, you know, what is the comfortable level that we are okay to, you know, stay, you know, hold in terms of Syngene stake?
We've already indicated we do not plan to reduce below this level, which is at a roughly 55% level. I think we will stay. We will maintain it at this level. We do not need to divest further.
Got it. Thank you so much, ma'am.
Thanks, Neha. We'll take the next question from Ishita Jain from Ashika Group.
Hi. Thanks, and congrats on being on the billion-dollar trajectory for BBL. My first question is on Semglee. We have a US market share you mentioned of 12%. Can you provide some color on how interchangeability helped in this journey? Would the market share look any different without both the interchangeability and the exclusivity?
Matt, do you want to take this question?
I'll take it, and Shreehas, please dive in here. We look at it from a standpoint, not just interchangeability, but how does the product perform throughout the market. Interchangeability on this particular product definitely gives us extra opportunities to talk about, but it's really the franchise of the product itself. And this is the power that we have in regards to the Semglee, the insulin glargine interchangeability, also the power that we've acquired from Viatris in understanding how market access works, as well as, you know, all the different influencers in the value chain and how do we position our products. The more opportunities we have between interchangeability or existing products, it's really helps us within formulary design.
I think this is why you're seeing the success that we're having, whether it be from an interchangeability point with the payers or a straight up, more market access that you would see where it's more formulary design with the payers. We're well-positioned in both channels.
Yeah. I mean, just to add to what Matt said, Ishita, if you really look at it, stepping back from it, the interchangeability is just a U.S.-specific phenomena. The real piece, you know, even when FDA approved-
Yeah.
Semglee as the first ever insulin, which they had approved as an interchangeable, they said it was a landmark moment overall. That was because they had to break this myth about whether biosimilars can be interchangeably used. I think to that extent, Semglee or our insulin glargine was, you know, that watershed moment in the entire biosimilars industry, and it's paved the way. It's taken away that whole myth that you cannot use a biosimilar interchangeably, and that's really helped us gain that market share. Certainly, it's broken that barrier for anyone to have any apprehension of whether a biosimilar would be as effective, and I think that's really paved the way.
We've seen after that several other products getting approved, and now if you see biosimilars have got over 80% acceptance in the launches that we've seen in the U.S. It's really helped, and we see this getting better as we get more products into the U.S.
To your point, I don't think it is absolutely imperative to get an interchangeability label to succeed in the market.
Got it. Thank you. My next question is, you have given the guidance for % of revenue that will be R&D spend. What part of that would be earmarked for the generics segment?
Generics R&D will be around 10% of the revenue.
Uh, ten percent of the-
No, no. I think she's asking about the total R&D spend in the group, how much of it is contributed by generics. I would say the large part of the spend would be-
Contributed by biosimilars.
Generics spend last year was roughly INR 250 crores of R&D, full year, and will be closer to INR 300 crores next year.
Understood. Thanks. Just a final question, I'm not sure if you already mentioned, but do we have an overall timeline on Itolizumab, which is our novel biologic, and what is our expectation from this opportunity?
Well, the clinical trial is ongoing for acute graft versus host disease, which is the lead indication. It's a global phase 3 trial is going on, Equillium, I think, had indicated that they expect to complete the trial in calendar 2024, end calendar 2024, and then do a BLA filing in calendar 2025. Of course, the lupus is getting into a phase 2. We also have a India phase 2 trial for ulcerative colitis which is going on. In terms of expectations, of course, the Equillium had given an option agreement to the Japanese company, Ono, to license the asset. Ono is expected to exercise that right by end of this calendar year, after which the commercialization in the US and Canada would be done by Ono.
We do not expect a commercialization in the near term. As I mentioned, the filing is expected somewhere in calendar 2025, followed by a review process. It's under a fast-track review by the FDA, so it's, the launch definitely is not until calendar 2026, at the earliest. We will have supplies, which will be done by us as well as we'll get royalties and milestone payments, once the asset is commercialized in the US.
Will this be a partnered asset?
It's already partnered, right.
Okay.
Equillium is our partner for US and Canada and Australia, New Zealand. We still retain full rights on Europe, which we will license out at a later date.
Understood. Thank you. All the best.
Thank you.
Thank you, Nithya. Next question is from Balasubramanian from Bernstein.
Yes. Thank you. First question is on glargine. We didn't really see the needle move much in terms of higher number of covered lives in 2024. Please correct me if I'm wrong. It seems like you're capitalizing on the payer wins you had last year. Now come 2025, Lantus is expected to lower their list price quite significantly on the innovative product. Can we expect this to be a meaningful opportunity for Biocon, given that their ability to rebate at a lower WAC level will be much lesser than before?
I'll take that, Shreehas, and then please chime in. I wanna make sure I totally understand your question here. FY 2025, the changing of the WACs of the other three companies, I think there remains an interesting opportunity in covered lives. When you think about the payers, how they look at their portfolio, it's just not always the low WAC strategy. It's an important one for key customers that they have within their portfolio that has covered lives, but there's still a lot of customers on the other side in which, you know, we're talking to every one of the payers of looking at opportunities as this market is changing, of having more shots on goal in regards to getting payer coverage, especially as we're seeing this market start to switch.
I think you're gonna see this play out. Also to remind you, remember some of the things that you're seeing in the data, IQVIA data or this or lives, some of it's not totally reported, when you think about closed-door pharmacies, things like that. This is another opportunity for us. You know, just covered lives is something definitely, but we're looking more in regards to positioning our insulin glargine simply with the payers as we continue through this year and the following year.
Also maintaining the lower WAC opportunity, and thinking about Biocon's platform where we make this product, we're in a good situation, I believe, to play in the US on both the rebated side as well as the low WAC, where you're seeing some of these pricing components that are being indicated from the other diabetes company. I'll stop there. Shreehas, anything to add?
I think you covered it comprehensively, Matt. My only comment would be the financial years that were mentioned. I think we probably were talking about Nithya fiscal 2023 was your commentary, what we've responded to is what happened in the year went by, fiscal 2024 is where we are currently and that's what Matt's talked about. Just correcting for a fiscal 2025 will be for-
Yeah. I think I was talking calendar years.
Right.
I'm sorry. I'm just gonna follow up because I didn't really get an answer here. When Lantus lowers its WAC price, their ability to compete on the rebating channel comes off. They will not be able to give the same level of rebating to the payers. Do you see that as a significantly important opportunity when that happens? You can play in both.
Yeah, let me respond to that so we get a straight answer to that. If you look at how we've priced insulin glargine in the U.S. and I will not right now comment on the competitive play because a lot of that is also to do with the U.S., the way the U.S. system, overall system and the market is structured and how the compensations are passed on back from CMS. I think there's a little bit of that to the action that competitors have taken.
Our insulin has been priced always with the high WAC and the low WAC strategy, which allows you to play on both segments, which allows us to be in the commercial space with that higher rebate opportunity that you talked about, Nithya, and also those with direct purchases of the hospitals or the Veterans Affairs, where you have the lower WAC product. We've been always very competitive, so we do not see a challenge, like Max said, of the lowering of the prices, because we've always been amongst the lower priced products in the U.S. and quite competitive at that.
It does place us in a good position with the payers, given that everyone else has probably moved to a lower WAC position. We would have that opportunity. We really leave it to the buyer and the channel that is procuring product from us to make that decision. We've been basically pricing it in such a way that every stakeholder in that, in the U.S. market has an opportunity, and we have a offering for all these channels. I don't know if that gives you clarity, but we're happy to elaborate if you need later.
Thank you, Shreehas. A quick one on Ustekinumab. We now know that the market formation is in early 2025. You had indicated earlier that your development is slightly behind and you'll probably be in the second wave. Can you help us understand when you expect to participate in that market? I have one more on margins, if you'll allow me.
Just to respond quickly on Ustekinumab, we've seen the 1/1/2025 settlement date that's there. We've said in the past that our product's ready to file end of 2023. We're on track with that. I wouldn't speculate at this point how it places that, but clearly I think there were discussions about an earlier market formation date. I think there's more clarity on where market formation is. It certainly gives us an opportunity to play in that space and brings more clarity on when the market is really gonna open up. It's-
Margins, I think, we were the commercial infrastructure to support both blimab as well as maybe aflibercept. Will we see those numbers actually slide down, and to what extent?
I think we've always said, Nithya, that we will be in that mid to high teens. Sorry, mid to high 30s, and that's what Kiran was also referring to. 35%-40% is where we see ourselves. We've continued to markets, you will see us in that range of mid to high 30s, is our expectation.
Got it. Thank you so much.
Thank you, Nithya. We have a follow-up from Cyndrella Carvalho. Please go ahead.
Yeah, thanks for taking the follow-up.
The 70/30, we were developing, we are developing all of these products, and at this point in time we had filed the R formulation, which is the soluble one. We've received the CRL, which we've talked about in the past. We are at this point in time working with the agency to see what is the best way forward in bringing in the other two products, the NPH and the 70/30 to the U.S. market. We're waiting for their views on Aspart, and then we will be in a position to take the rh-Insulin product and a decision on that, which we will share with you shortly.
On Aspart, we shared that we'll have an inspection, right? Somewhere in Q1 FY 2024, right? Is there any tag along with it or how should we read that? Would that lead to missing the formulary cycle within, with interchangeability?
At this point in time, what we have said is we've responded to the CRL. The agency has accepted the CAPA plan, and they've said that an inspection is needed for them to approve us. There is an indication that the agency will inspect us in Malaysia. We are trying to get clarity whether that will cover both glargine and Aspart as we get on past this year. We should have full clarity on that, on whether they will cover Aspart and glargine both, and then we should be in a position to do that. We are quite optimistic that we should be able to get both these products covered in the inspection and should be able to be in time for the contracting cycle.
There is a lot of interest, as we've said, given that aspart, when approved, will be the first biosimilar, insulin aspart, rapid-acting analog in the U.S. Their customers were really looking forward to us getting that approval and launching it in the U.S.
Yeah. CRL is not pending anything on the study side or anything, right? It is just for the plant inspection. Is that understanding correct?
That's accurate. Yeah.
Okay. One more question, this is, how should we look at our BBL top-line guidance for FY 2024, given that now we have Serum out, what is the number range that we should be looking at? Would you be able to share on BBL, what is our ROW and reg market and if we can start giving the split between U.S., Europe, and ROW, if that is, in future we can incorporate?
First up, I think let me respond to your first question on the 2024 piece. We talked about when we left the last earnings call, Kireet had guided about the quarter run rate being at $1 billion as we exit fiscal 2023, I think that's what we've delivered on. We're building off that base of $1 billion in revenue. We certainly have a lot of upsides coming up. We just talked about adalimumab a bit, you know, a few minutes ago. There is certainly a big upside coming up with that, is the way we see it. It's a big opportunity for sure. We are looking at Aspart and bevacizumab getting approved through the course of the year.
We could figure this out and put that up together and see where that leads leads us to, but at this point, it's best to wait for these approvals to come through and the launch to play out before we can give more guidance, and as we get closer there. We also know very clearly that the vaccine integration of the numbers won't happen, and we had said that would be about 300-350. Those clearly won't be happening. If you look at the math, it's clearly upwards from $1 billion. As we progress through the year, we'll say how far that can go and how much we will achieve, but clearly it's a, it's a build-up from here, Cyndrella, towards where we want it.
Just a clarification. Will Q1 reflect our preparedness for launch for Adi?
Just to understand your question, what does reflect mean?
Oh, our preparedness, I mean the launch quantities and all Should start seeing it from the Q1 results.
I think you should realize that the launch itself is after Q1. It's in July 1st.
Yeah. I'm asking if we will be seeing some preparedness.
How can you
In that, yes.
How can you look at Q1?
What we've got right now it's in the public domain that we have a settlement date where July 1 is our launch date. Given that now we will start accruing revenues only post secondary sales. I think the supplies to the channel stocks is when you can actually do that only starting Q2 is when you will start seeing it. You effectively won't see that in June 1, but you will see a lot of preparation which is going on right now where the teams are getting ready for the launch. We can't really divulge more than that because of the terms of the agreement that we've got with them.
That's appreciated. Can we give the breakup on reg and non-reg for BBL?
Sorry. Again, my apologies.
Regulated market. Regulated market and non-regulated market share.
Yeah.
The split. Do you want to call out the split the way...
Yeah.
We used to call them?
Yeah. Maybe advanced market and emerging market, if that I can paraphrase that, and then Maybe, Chinni, you can respond to that. If you'd like to.
Yeah. Sure thing. Yes. It's about 70/30. 70 developed and advanced markets, 30 emerging markets.
Thank you so much for all this clarification.
Thank you.
Thank you, Cyndrella. We have the next question from Sandeep Joshi, an individual investor. I think you might want to unmute, Sandeep.
Sorry. Can you hear me now?
Yes.
Okay. Thanks for taking my question. just two of them. One is on the Serum deal. it was mentioned in the beginning that the equity would be taken back. Can you explain, for the $300 million that you are getting from Serum, what is the consideration that they get back?
Let me try and start with, you know, answering your question by saying that the original strategic alliance deal, if you recall, was about issuing Serum 15% equity in return for assured revenues and EBITDA pertaining to 100 million doses of vaccines. Thereafter, of course, Serum infused an additional $150 million, and also gave us a loan of $150 million towards our Viatris acquisition. As you know, we were expecting certain court approvals for completing this deal, the original deal, which didn't come through. The two companies decided to withdraw from this alliance.
Instead convert the $150 million loan into equity, thereby giving, you know, Serum a $300 million equity into BBL, at a, you know, average valuation of $6 billion. I think this entails them to about 5% equity stake in the company. I think the original 15% is no longer required to be issued.
Thanks for the clarification. Is Would that be considered pure equity or would this be quasi-equity where-?
No, it's pure equity.
We would take this as a 5% equity being taken by Serum.
Yeah. $300 million would be pure equity.
Okay. Thank you. The other question is on additional borrowing. If we look at the P&L and add back the cash for , it looks like you had a cash flow of over INR 700 crores on the quarter. I'm just trying to understand what would be the driver to raise additional equity, because on an annualized basis, you seem to be generating over INR 2,500 crores in cash.
I don't know whether either Chinni or Siddharth wants to take this question.
Yeah. The intent to raise additional equity is to lower the net debt, there is definitely no concern on cash flow and servicing of debt. We have strong cash flows, as you pointed out, and we can easily service the debt. I think it's an overall improvement in the net debt, net debt position, which we'd like to bring down.
Okay. This would not impact the debt load, the new INR 800 crores that was mentioned to be raised.
The INR 800 crores that we just raised from Edelweiss, that's a quasi equity. I think it is to be repaid through the sale of BBL shares and doesn't have a cash interest charge on it. Not really following your question, Sandeep, and the audio is not the best. Maybe you want to take this offline.
Okay.
Clarity is better.
Thank you very much. Thanks for your response.
Yes.
Thanks, Sandeep. We'll take the follow from Surya.
Yeah, thanks for this opportunity. Just a last clarity. In fact, since we would be approaching a contracting cycle for the subsequent period for most of our products as well as for Adalimumab, given the facility or the pending observations at our plants, whether it has impacted our contracting capability with the customers either in the recent period or for Adalimumab?
Let me-
Because.
Let me answer that question by saying that Adalimumab is not impacted at all because it is not from the facilities that I just, that I mentioned earlier on.
Yeah. Yes.
Okay.
Yeah. Sorry.
As far as our facilities are concerned, we expect to, you know, be inspected and we hope to clear these current, you know, queries at the next inspection.
Okay. Basically, my question was that, okay, since the sustained supply of the materials that is the key for procurement by the customers, so whether it has impacted our volume flow in the recent period and whether we are likely to see improvement on that with the clarity that we might see for our facilities from the regulators in the subsequent period.
To answer your question, none of our current supplies are, you know, impacted by any of these, CRLs or pre-approval inspections. Obviously we are hoping to clear the pre-approval inspections, which will only add to our supply, you know, ability for these other products, which is Bevacizumab and insulin aspart.
Okay. Just on the PAI approval for the Telangana facility, is it possible to say what is that product or for which API product that we are?
See, there were multiple filings in the US, the ANDA filings which triggered the PI. One of them was Cobaxam.
Okay. Okay. Sounds good. Yeah. Thank you.
Thank you, Surya. We'll take the last question for today from Nitin Agarwal from DAM Capital.
Sir, Chini, can you. Two things. One is can you just help us with We said Biocon now owns 70% in BBL. If you can give us a broad sense of the cap table for BBL right now?
Chinni, you need to unmute, please.
Thanks. Sorry. Hi, Nitin. Yeah. That's on a fully diluted basis after taking into account stake dilution in favor of both Reliance and Kotak. That's one. On the, yeah, I think the next largest shareholder would be Viatris with close to 15% stake. We have Serum close to 5% and the other PA holders, shareholders largely representing the balance.
this takes into account as registered refrains, the post quota gain Edelweiss conversion as into equity is what is, that takes it to 70%.
That takes it to 70%, yes. That's a fully diluted basis of assuming dilution for GS, Kotak, Edelweiss, et cetera. Where this is more closer to 14% probably.
Okay, thanks. Secondly, Jimmy, you know, in the present press release, we talk about the Core EBITDA and the net EBITDA. Can you just explain how you sort of, what you include in Core EBITDA and what is it that you subtract to arrive at the net EBITDA number for the Biologics business?
Core EBITDA truly reflects the operating performance, and that excludes R&D's charger cost. We exclude licensing income. We exclude FX gains or losses and any M&A movement. These are the exclusions that we don't take into account when we calculate the core EBITDA. EBITDA is calculated after all these items.
The INR 742 crores that we reported in the quarter on INR 2,100 crores of revenues did not include the licensing income. No.
Yes. Doesn't include the licensing.
Okay. That gets netted off. It's okay. When you're computing the net EBITDA number is when we take the licensing income and we net off the R&D from there.
Yeah.
Okay. Thanks.
Thank you, Nitin. This was the last question for today's call. Thank everyone for joining us today. If you have any follow-ups, please do get in touch with us. Thank you very much. You can hang up now.
Thank you.