Biocon Ltd

NSE:BIOCON

Earnings Call Transcript 2022-Q1

[Chirag Dalal, Investor Relations Officer]

Good morning, ladies and gentlemen. Welcome to Biocon Limited Q1 FY '22 Earnings Conference Call. I am Chirag from the Biocon Investor Relations team, and I welcome you to the Biocon Earnings Call for Q1 FY '22. [Operator Instructions] This call is being recorded. To discuss the company's business performance and outlook, we have today with us the Biocon leadership team comprising Dr. Kiran Mazumdar-Shaw, our Executive Chairperson, and the other senior management colleagues. I want to take this opportunity to remind everyone about safe harbor. Today's discussion may be forward-looking in nature based on the management's current beliefs and expectations. It must be viewed in concurrence with 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 get in touch with me or Nikunj. Now I would like to turn the call over to Dr. Kiran Mazumdar-Shaw. Over to you, ma'am.

[Kiran Mazumdar-Shaw]

Thank you, Nikunj. And let me welcome everyone to this earnings call, which is being held on this very new format. And I would like to basically start by -- this earnings call by saying that the impact of the second wave of the pandemic has turned out to be far more devastating than we thought. And we have all, as in the pharmaceutical industry, faced mounting on-site infections coupled with lockdowns, which all have posed significant challenges to our operations across our facilities in Bangalore and Hyderabad, particularly at our API plants. As you know, we are a fermentation-based industry, and many of these supply chain challenges included things like oxygen shortage, et cetera. So we have been impacted this quarter. But we have taken several measures to mitigate the impact of the spread within our organization. A massive vaccination drive was also undertaken for our employees, their families and our neighboring communities, wherein more than 20,000 doses of vaccines were administered. We simultaneously ramped up the manufacturing of Itolizumab, which has been at the forefront of our fight against COVID-19. And I'm -- I would like to share with you that more than 27,000 patients have benefited from Itolizumab thus far. We have received several testimonials of appreciation from patients, family members and health care professionals for the number of lives that Itolizumab saved throughout this pandemic. With the vaccination drive picking up pace and newer vaccines on course to get to government approval in India, we are hopeful that the situation will turn for the better sooner than later. While there are signs of recovery, we cannot drop our guard. We must stay vigilant, ensure that we get vaccinated and stay safe. I would like to also share with you an important management update. John Shaw, the Vice Chairman and Non-Executive Director of Biocon, will retire from the Board of Directors due to health reasons on 23rd July, that is today, at the conclusion of the Annual General Meeting. As a key member of the company's Board and the management team since 1999, John Shaw has contributed majorly to the transformation of Biocon from a small enzymes company to a globally recognized biopharmaceutical company. Over the past 22 years, John Shaw has played an important role in building Biocon, ensuring the highest levels of corporate governance in the company as well as contributing to the financial and strategic development of the group. On behalf of Biocon's Board of Directors and management, we express our deep appreciation and gratitude to John Shaw for his stewardship and guidance. I would also like to share with you another organizational update. I'm pleased to welcome Dr. S. Vijaya Kumar as Head of Operations at Biocon to lead the manufacturing projects and EHS functions for the Generics business and will be part of the executive leadership team. Vijaya Kumar is an industry veteran with more than 30 years of extensive experience across manufacturing and engineering in global diversified setups. Let me now turn to some business highlights, starting with our Generics business. We launched Labetalol tablets and Esomeprazole capsules in the U.S., further expanding our generics portfolio. Within Biocon Biologics, we expanded our Biosimilars global footprint with product launches in 7 countries in Q1 this fiscal. We also received marketing authorization approval for biosimilar Bevacizumab from TGA, Australia and MHRA, U.K. The U.S. FDA has scheduled a pre-approval inspection of our Malaysia facility in Q3 of calendar year 2021 in support of the BLA for our biosimilar Aspart. Syngene has signed a 5-year agreement with IAVI, a U.S.-based nonprofit scientific research organization, for manufacturing 3 anti-HIV monoclonal antibodies for use in Phase I and II clinical trials. I will now turn to financial highlights for the quarter. Let me start by saying that we delivered a revenue of INR 1,808 crores in Q1 this fiscal versus INR 1,712 crores last fiscal, a modest year-on-year growth of 6%. Our revenues were mainly driven by Research Services, which were up 41%, and Biosimilars, which were up 10%. We reported a subdued performance in Generics, which saw a degrowth of 22%. However, we largely sustained all our operational financial aspects of our business. As we recorded a gross -- and we recorded a gross R&D spend of INR 136 crores for this quarter versus INR 142 crores last fiscal. And this corresponds to 12% of revenue ex Syngene. Of this, INR 120 crores is reported in the P&L, while the balance has been capitalized. We also recorded a ForEx gain of INR 17 crores versus a loss of INR 4 crores last fiscal. Core margins, that is EBITDA margins net of licensing, ForEx and R&D, stood at 30% in this quarter, and this is on account of subdued performance by Generics that offset the gains of an improved performance in Biosimilars and strong growth in Research Services. EBITDA for the quarter was INR 437 crores, largely flat year-on-year. And the EBITDA margin stood at 24% against 25% reported in the same quarter last year. PBT for the quarter was at INR 166 crores, are down 9%, which is down, and this is at 9% compared to 15% of INR 249 crores in Q1 FY '21, which is largely on account of higher depreciation and amortization and share of loss from our Boston-based associated start-up Bicara. However, if you exclude the share of loss from Bicara, PBT stood at INR 224 crores. Novel Biologics is a capital-intensive business, and while it impacts our P&L, it is an integral part of our business and future growth. We will explore external venture funding to support clinical development for long-term value creation. This is a high-risk, high-reward business, and we believe that these novel programs are important to pursue. Our net profit for the quarter stood at INR 84 crores versus INR 149 crores last fiscal. But if you exclude the share of loss of Bicara, our net profit was INR 142 crores for this quarter. And this largely basically points to a very sustained financial performance despite all the challenges we have faced because of the pandemic. I will now take you through the performance of our business segments during the quarter. Let me start with our Generics business. Our Generics revenues witnessed a degrowth this quarter, as I mentioned earlier, largely due to COVID-related headwinds that resulted in operational and supply chain challenges that impacted largely our API manufacturing. With the number of COVID-19 cases starting to decline, we expect these to normalize in the coming quarter. Additionally, the comparable period in the previous fiscal benefited from customers stockpiling APIs on account of COVID-related uncertainties. The segment delivered quarterly revenues of INR 486 crores. The quarter's PBT stood at INR 29 crores versus INR 96 crores in the same period last year. PBT margins also were at 6% compared to 15% in Q1 last fiscal. Tacrolimus capsules were launched in the U.S. in Q3 FY '20, and is witnessing a gradual ramp-up in demand. Our statin formulations portfolio in the U.S. comprising Rosuvastatin, Simvastatin and Atorvastatin held on to its market share despite continued pricing pressure. During the quarter, we launched Labetalol tablets and Esomeprazole capsules in the U.S., in line with our aim to expand our formulations portfolio and establish a strong global presence. Labetalol is used to treat high blood pressure and helps to prevent cardiovascular complications such as heart attack and stroke, while Esomeprazole, a protein pump inhibitor, is indicated for treatment of gastroesophageal reflux disease. IQVIA pegs the market value for Labetalol Hydrochloride and Esomeprazole Magnesium in the U.S. at $63 million and $230 million, respectively. Travel restrictions in the wake of the pandemic continued to delay inspection of our facilities and consequently, launches as well as expansion into some key markets were affected. However, we are in discussion with the U.S. FDA to see if we can apply the Mutual Recognition Agreement announced in May 2021 between the U.S. FDA, EMA and MHRA. We have responded to the complete response letter issued by the U.S. FDA on Copaxone. We remain on track to commission our greenfield API facility in Visakhapatnam in FY '22. This will significantly expand our immunosuppressant manufacturing capacities, which will come on stream in FY '23, post qualification and validation. We are confident that our strong foundation in fermentation technology coupled with several initiatives undertaken during the past year including digitalization, cost improvement and measures to boost operational efficiencies will help us to significantly improve our business performance in the coming quarters. A note on Novels. Equillium, our U.S. partner, had an End-of-Phase I meeting with the U.S. FDA, which confirmed the path to advance Itolizumab into a single Phase III pivotal study for acute GVHD to support their biologics license application, or BLA. The study is expected to commence later this year. Biocon who owns the European rights for Itolizumab would like to report an important milestone this quarter, wherein the committee for orphan medicinal products approved an orphan designation to Itolizumab for the treatment of both acute and chronic GVHD. Meanwhile, Itolizumab continues to be at the forefront of our fight against COVID-19 in India. We have ramped up our production capacity to meet the growing demand of the product. A second brand of Itolizumab has been licensed to Sun Pharma for distribution. We have also completed patient dosing in the Phase IV study of Itolizumab to treat Cytokine Release Syndrome in moderate to severe ARDS patients due to COVID-19. The study report is expected to be converted into a publication in the near future. Let me move on to Biosimilars. Biocon Biologics has recorded revenues of INR 758 crores in Q1 FY '22, a year-on-year growth of 10%, and also a sequential growth of 14%. Core EBITDA stood at INR 271 crores in Q1 FY '22 versus INR 249 crores last fiscal, a year-on-year growth of 9% and 26% growth sequentially from INR 216 crores in Q4 FY '21. Core EBITDA margins were at 36%, in line with last fiscal, and profit before tax stood at INR 101 crores. We have seen a significant contribution from our COVID portfolio in India, predominantly Itolizumab and Remdesivir in the strong growth delivered by our branded formulations in the India business. Thus far, more than 50,000 patients have benefited from these products. Our non-COVID products also have performed very well. Our Biosimilars continues to maintain and garner market share in the U.S. whilst Fulphila, a biosimilar Pegfilgrastim, maintained a steady market share of around 8.5%. Ogivri, our biosimilar Trastuzumab, increased to over 9% volume share in June 2021. And our biosimilar insulin Glargine is estimated to be around 2.6%, about 20 basis points higher month-on-month. We anticipate continued pricing pressure in the U.S. and are taking steps to mitigate this through increased volumes and market share. In addition to this, we expect our growth to be fueled by regulatory approvals for our biosimilar Bevacizumab and biosimilar Aspart in the near term once on-site inspections happen. In Europe, our sales continued to improve on the back of new market entries and better market share in key countries. The EU launch of biosimilar Bevacizumab by Viatris is target -- is expected in Germany, Austria and Poland in Q2 FY '22. Moving on to regulatory topics. The U.S. FDA has scheduled a pre-approval inspection of our insulin's manufacturing facility in Malaysia in Q3 calendar year '21 in support of our biosimilar Aspart BLA. We believe the BLA is adequate in all scientific aspects, and it is only the pre-approval inspection of the Malaysia facility that is pending. However, with respect to our biosimilar Bevacizumab BLA, we are yet to have visibility on the timing of the site inspection in India by the U.S. FDA. We have received approval for our biosimilar Bevacizumab from TGA, Australia and MHRA, U.K. We expect the U.S. FDA's decision on interchangeability of our biosimilar Glargine by the end of this month. If approved, it will be the first interchangeable insulin approved in the U.S. We continue to make good progress on our robust R&D pipeline. To summarize on our Biologics business, we remain confident on the long-term opportunity for Biosimilars through improved market penetration, geographical expansion and further growth from upcoming approvals. Coming to Research Services. During the quarter, Syngene reported revenues of INR 595 crores, up 41% over INR 422 crores in the similar -- in the comparable period last fiscal. PBT for the quarter was INR 95 crores with PBT margins at 16%, in line with Q1 FY '21. Syngene's performance was driven by growth across all divisions, discovery, development and manufacturing services and dedicated centers. Remdesivir was also a significant contributor to revenues this quarter. The company's Mangalore API facility was also -- has also successfully completed ISO 9001:2015 certification audit. As mentioned earlier, Syngene has signed a 5-year agreement with IAVI for manufacturing 3 anti-HIV monoclonal antibodies for use in Phase I and II clinical trials. Syngene will provide an integrated solution encompassing clone selection, analytical methods development, manufacturing process development scale-up and cGMP manufacturing of drug substance viral clearance studies, cGMP manufacturing of drug product and stability studies. So you can see that Syngene now has end-to-end capabilities from cloned to market in every possible way. To conclude, I would like to say that this has been a challenging quarter for all of us. However, we are confident we can overcome these challenges with all the encouraging developments and opportunities that lie ahead. Business sentiment is favorable for Biosimilars, Generics and Research Services. Globally, we see a strong demand for biosimilar and generic drugs given the growing emphasis on affordable drug pricing. These are challenging times. And I would like to end by saying, let's be responsible. We all need to stay away from crowds. Let's double-mask ourselves, maintain the proper COVID-appropriate behavior, and most of all, I hope every one of you has vaccinated yourself, like we have at Biocon Group. Thank you. I would now like to open the floor to question and answers.

[Chirag Dalal, Investor Relations Officer]

[Operator Instructions] Our first question is from Prakash Agarwal from Axis Capital.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

Yes. Am I audible?

[Chirag Dalal, Investor Relations Officer]

Yes.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

Yes. My first question on trying to understand this July end, that date better. So as per our understanding, what are the things pending, if at all? And what is our expectation of getting interchangeability? And how does it impact our assumptions for the market share ramp-up, which we in the past have talked about that from calendar '22 only, we will see some -- since the buying has already happened, or it's the last commentary. So if you could give more color there, that would be very helpful.

[Kiran Mazumdar-Shaw]

I will turn this to Shreehas to respond.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Thanks, Prakash. We are -- as Kiran said, we are looking for the interchangeability status. Our goal date is towards the end of this month, and we've reason to remain optimistic that our insulin Glargine would be the first interchangeable biosimilar insulin analog that the FDA would approve. Now having said that, we've talked about this in the past as well that after the interchangeability status, we would still -- but we just would have to go through the full contracting cycle and secure the contracts. So that piece we will have to be completed in terms of securing the contract increase. But it certainly does provide us the opportunity to then validate the decisions that payers have made in supporting the cost of biosimilars. We're building it into the formularies. And more importantly, also provide assurance to the patients' prescribers, and more importantly, when it can be made available at pharmacy counters in a substitutable manner. So clearly, there is support to that overall strategy that we have just outlined where it was stated in the Investor Day that it is an opportunity now to relaunch Semglee as an interchangeable insulin Glargine, the first of its kind. So we will certainly be looking at that uptake in the coming calendar year.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

So on the contracting cycle that you spoke about, what is the contracting cycle currently? Is it ongoing? And would it help if we get the interchangeability, say, on the goal date, or it would actually help in the next contracting cycle?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

So the Viatris commercial team is right now in discussions with various payer channels at this point as we talk, and the interchangeability status towards the end of this month is very timely because it will aid in these decisions as we have made them over the course of the next month or 2.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

Okay. Got it. And secondly, on the inspections that you have talked about, both in Malaysia plant for Aspart. So everything done is what I understand. But it would require a physical inspection or it would be an online inspection? And I don't know what's the status in Malaysia, but have they started -- has the FDA started visiting other countries and Malaysia? I'm not sure. So if you could throw some light there. And in Bevacizumab, is there a chance of online inspection? That's all from my side.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Yes. Thanks, Prakash. I think you have 2, 3 questions in that. So let me respond. I think on the Aspart inspection for our facility in Malaysia, as Kiran said, the agency -- FDA has confirmed that they will visit us end of this quarter, for a physical inspection on location. So that's something here, we were working with the agency closely for. And that's something the agency has consented to. So we will be looking to post the agency towards the end of this quarter. And the Aspart inspection should be then the only step to move us forward into the approval process. On the Bevacizumab part, approval date, as you know, was end of last calendar year. And we've been working with the agency to enable that inspection. The FDA did publish a resiliency road map where they are looking at international inspections in an expedited manner. We have been in engagement with them. We haven't received so far a firm date on when they can visit us in Bangalore. But at this stage, the understanding we have is there is more technical outstanding questions for the Bevacizumab application. We submitted a complete package, and we move forward to the pre-approval inspection, which is a mandatory requirement for a biosimilar approval in the U.S. So that's the update, Prakash, on Bevacizumab and Aspart inspections.

[Chirag Dalal, Investor Relations Officer]

Thank you, Prakash. The next question is from Damayanti Kerai from HSBC.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

I hope I'm audible.

[Chirag Dalal, Investor Relations Officer]

Yes.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Okay. My first question is, can you explain what kind of P&L impact we should continue to see from Bicara? Maybe some more clarity, like what is spent from our side? And then what kind of impact we'll be seeing on the P&L, say, in next few quarters?

[Kiran Mazumdar-Shaw]

Maybe, Siddharth, you would like to answer this question.

[Siddharth Mittal, MD, CEO & Director]

Sure. So Damayanti, I think last quarter, we had said that Bicara, which was earlier a subsidiary, would move to an associate because Bicara is looking at raising funds directly in the U.S. to fund its clinical programs and the pipeline that is under preclinical stage. The investment value that we have for Bicara end of June is roughly $15 million. And we expect till this $15 million of expenses are there in Bicara, it will continue to go through the P&L, but through the share of loss of associate, which we expect within the next 1 to 2 quarters.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Okay. And my second question is, can you provide current split of biosimilar sales between regulated market and rest of the world market? And if you can talk a little bit more on what will be the key expectations for the rest of the market biosimilar sales? And what will be key drivers or key market which you are looking at that part of the business?

[Kiran Mazumdar-Shaw]

So let me request my colleague Susheel Umesh to talk about the biosimilars business in the rest of the world markets. Susheel, you're on mute.

[Susheel Umesh]

Sorry. Thank you, Damayanti, for your question. In the rest of the world, we are looking at the biosimilar space very positively. We have a plan to quickly launch our new products and also increase our products in many more countries than where we are today. We do this with our partners and distributors, and we plan to have a very robust growth in excess of 25% over the years.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Okay. That's helpful. What is the current split between this regulated and rest of the world market sales for biosimilars?

[Kiran Mazumdar-Shaw]

Shreehas, do you want to take it?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

[indiscernible] please respond. I think we were already on.

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

Damayanti, it's -- for the quarter, emerging market is actually above 60%. But if you look on a full year basis, you'd see developed markets, 40% to 45%, and emerging markets around the 55% mark.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Okay. So just to clarify, 55% around rest of the world market and 45% for the regulated market. But as you...

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

On a full year basis. But for the current quarter, emerging markets is about 50%.

[Chirag Dalal, Investor Relations Officer]

The next question is from Neha Manpuria from JPMorgan.

[Neha Manpuria, Former Analyst]

First, on the biosimilar business. In ma'am's opening comments, she mentioned there's a COVID portfolio contribution in the quarter. If there is a way to quantify that, just to understand how the base business will look at -- look going forward to just understand what's the COVID contribution in this quarter, please?

[Kiran Mazumdar-Shaw]

Well, this was specifically linked to the second wave. So actually, it is just sort of a blip in our BFI sales. So we don't expect it to continue at these levels. So it has contributed significantly to our Branded Formulations business in India, but we don't expect it to contribute -- to continue and contribute at these levels going forward. So that's as far as what [ I think it is ]. So Branded Formulations has certainly jumped over 50% because of this contribution. But I don't think we can rely on this particular business beyond a few quarters.

[Neha Manpuria, Former Analyst]

Understood. And ma'am, in terms of -- again, for the Biosimilars business, if I were to look at quarter-on-quarter, we have an FX gain. R&D does not seem to have moved too much from what I can see for the Biosimilars business. But the costs seem to have increased. So is it a reflection of our gross margins being different or lower because of this COVID portfolio contribution? Just -- and because ROW sales are higher. So what's driving the -- the margin improvement should have been higher given the FX gain and flattish R&D spend.

[Kiran Mazumdar-Shaw]

So 2 things. One is, you must understand that always quarter 1, obviously reflects the increments that we give our employees, and that's a big impact on costs in the first quarter, which gets normalized for the rest of the year. Secondly, I think you must also understand that even though we have a contribution from the COVID products, the margins are at a lower level and compared to our other biosimilars business. And thirdly, I think -- I don't think you should read into the fact that ROW margins are low. So I think ROW is a very good business in many markets, very rich margins. Of course, average is over the entire business. So I think overall, I think the margin impact has really happened because of the quarterly impact of salary increments as well as some of the low-margin sales that we have basically in third quarter because of COVID -- our COVID portfolio.

[Neha Manpuria, Former Analyst]

Understood. And...

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

Just to clarify, Neha, the FX gain, there's no FX gain in Biosimilars. And when -- with a core EBITDA margin at 36%, which is a 26% sequential growth, I mean growth terms is 26% sequential growth. And in margin terms, it's a 36% margin, consistent with last year.

[Neha Manpuria, Former Analyst]

Yes, but I was looking at the absolute sales increase year-on-year is pretty significant, right? So to that extent, the margin is flat despite R&D pretty much being in the INR 60 crore number. That's why I was asking. But yes, ma'am's answer sort of gives color on that.

[Kiran Mazumdar-Shaw]

Yes. But it's at...

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

Revenue growth, 10%; EBITDA growth, 10%; core EBITDA growth, just about 10%, 9%. So they are all consistent, Neha.

[Neha Manpuria, Former Analyst]

Understood. So that, just on the Generics business, given the supply chain and operational challenges, if that were not there, how much would you have expected -- what was the impact because of that? I'm just trying to understand the normalized performance of the Generics business?

[Siddharth Mittal, MD, CEO & Director]

So the impact on supplies because of the second wave was roughly INR 75 crores, we have been very close to our fourth quarter report. But -- and then alluded to, we have also seen continued pricing pressure in the U.S. for our Generics drug and also for our API customers. And unfortunately, we do not have any new approval because the [ approved ] drugs which are under review with the FDA until the inspections are complete. We are not expecting any new launches. The 2 products which we launched were more in-licensing products. So we -- these products were approved by our partners, which we in-licensed and launched recently. So we do expect some growth to come in. But the main point is when we get additional approvals, the continued pricing pressure will continue to impact our Generics formulations sales. But the business, which was impacted in quarter 1, we said that we have seen normalcy now, number of cases in Bangalore have gone down. All our employees are vaccinated and the operations are now running on normal course.

[Chirag Dalal, Investor Relations Officer]

The next question is from Surya Patra from PhillipCapital.

[Surya Narayan Patra, VP & Pharma Analyst]

Yes. So my first question would be on Pegfilgrastim. A couple of days back, we have seen a notification from U.S. FDA to Amgen about the claims they used to make about the product Onpro. And FDA has indicated that all the claims of a superior clinical benefit over the prefilled syringe, that is baseless. So I think with those claim, Onpro was having initially about 60% market share of the total Pegfilgrastim opportunity and now they're still having over 50%. So with this notification, how should we look at as a kind of potential opportunity for Biocon?

[Kiran Mazumdar-Shaw]

Shreehas, would you like to take it?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Yes. Thanks, again. So thanks, Surya, for the question. I think if you look at our previous commentary on the topic, we've always said that the Onpro device does offer an element of convenience, but we focused on making meaningful clinical difference with the prefilled syringes. That's been our focus. And -- and then this kind of, in a way, validates some of the positions we've taken in the past. And over the last one year, where we saw the effects of the pandemic resulting in the Onpro device holding on to market share of around 58%, over the last year, now we're starting to see that come off and we're seeing that -- about 52% this year -- or this quarter we just closed in June. So in a way does -- it creates an opportunity for Fulphila and we do see that in terms of our market shares in the last quarter have started to slowly ramp up with a 15 basis point increase in the monthly market share that we've seen in our product. And we do this as an opportunity to really make a difference in the market space.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. So just I want to extend this question a bit more. The 340B program, what you had tied up with -- also for Pegfilgrastim in the kind of a significant ramp-up in the capacity for Pegfilgrastim what we have already achieved prior to the COVID and possibly the benefit of which all this would not have flown into you. So given that with the recovery in the business that -- and with a favorable notification from the FDA, all that considering, should one consider this as a kind of meaningful opportunity in the near term? Or what time frame that you can see there okay? There will be some meaningful progress in terms of penetration as well as contribution into the earnings.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Just to elaborate on that, Surya, I think the -- these are certainly developments, which bode well for an increase in market share going forward. But if you really look at it, the factors that will influence these things would be competitor contracting strategies, the regulatory -- or the reimbursement strategies that exist in the marketplace. We certainly see this as a positive development and an opportunity for us. We have the capacity, the product, the approvals. And with increased customer focus or commercial attention to this, which we just had actually said in previous calls as well. With a stronger value proposition that we can bring to stakeholders, we really see this as an opportunity in the coming fiscal to realize a lot of this market share.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. And about the interchangeability approval. So aren't we expecting the interchangeability approval for both the insulin, sir, both Aspart as well as Glargine?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Yes. So the Aspart, as you know, we talked about insulin Glargine a while ago, where we are expecting it towards the end of July, we'll expect a decision on our application for interchangeability. The insulin Aspart has been filed as an interchangeable insulin analog under the 351(K) pathway. So when approved, we will be looking at that approved as well as an interchangeable insulin analog.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. Just last one question from my side, sir. On the Bicara, if you can just help me understand, I mean, what could be the earlier earning figure for Bicara, because we know that the first or the lead molecule is at the very early stage in Phase I, Phase II like that. And there is an upfronting of the spend also that we know that. So hence, if you can just give some sense on that side?

[Kiran Mazumdar-Shaw]

So Bicara has both the first program in the clinic at early stage of Phase I development. And it also has a portfolio of molecules, which are preclinical. So I think from that point of view, it is a growing startup. And as Siddharth mentioned, we have basically funded it, and they are on the -- at the stage of looking for extra venture funding. So I think that is where we need to support them because the program is very exciting. And some of the early signals are also very encouraging. So I think we would like to support them until they raise external finance.

[Siddharth Mittal, MD, CEO & Director]

And I think -- let me just add, we expect some critical readouts on the first program, which is in clinic by end of this calendar year.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. The losses from the share of losses, whether that is getting -- that is restricted to, let's say, in current year and early part of next year, it is a kind of a continued -- the same thing, the timing, that we see some progression in terms of earnings?

[Siddharth Mittal, MD, CEO & Director]

So Surya, I think what I mentioned to an earlier question that we have roughly $15 million left in our balance sheet out of the $40 million which we had funded. And that $15 million, until it gets utilized, will flow through the P&L unless we fund anything incremental over the next few quarters, until Bicara gets this readout and does the external funding. So it is expected to be temporary, definitely. We do not expect it to go beyond this fiscal.

[Chirag Dalal, Investor Relations Officer]

The next question is from Shyam Srinivasan from Goldman Sachs.

[Shyam Srinivasan, Equity Analyst]

Just the first one on the COVID impact, going back to the earlier participant as well. I remember Branded Formulations (India) was some INR 100 crores like the way we used to report earlier, maybe I'm wrong. And if that has grown 50%, so INR 758 crores minus INR 150 crores is INR 600 crores. I'm making these numbers up, but it looks like then the base biologics or the biosimilar business has declined Q-o-Q. Would that be a fair way to think of things?

[Kiran Mazumdar-Shaw]

Chinni, do you want to take this question?

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

Yes. The base biosimilar business is kind of flat versus last year if you strip out the COVID portfolio. But keep in mind that last year, there was a spillover from Q4 into Q1, which boosted the Q1 FY '21 numbers. So if you strip that out, then you will still see a growth in the biosimilars business, excluding the COVID portfolio.

[Shyam Srinivasan, Equity Analyst]

Yes, Chinni, just so from a market share perspective, Q-o-Q, things have improved. So I'm just trying to understand where the struggle is for the business then. And you talked about, I think, EM being higher and higher contribution and DM being lower versus how you envisage it to be for the full year. So what are some of the translations? I remember in fiscal '21 call, you had actually said that the profit shares from Viatris has not flowed through. So how should we -- what can ease now which will kind of help us accelerate this biosimilar business?

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

Let's see, I mean, we're double-counting there when we -- it's a COVID portfolio that's got the emerging market share above 60%, just to clarify. And then the second point, of course, yes, the Glargine as we start to increase our market shares in Glargine, you'll see the profit share from Glargine play out. And you're aware that we have two more approvals lined up for this year plus a potential increase in market shares on our existing portfolio that's big and trastuzumab should also play out in improved profit share in the upcoming quarters.

[Shyam Srinivasan, Equity Analyst]

Got it. Very helpful. Second question is on the Generics business. Siddharth, I think we have seen kind of subdued performance. You talked about the INR 75 crores. And this now spans across multiple lines, right? So the INR 100 crores, I remember 4Q FY '20, we couldn't ship things in the biosimilar line, INR 75 crores now on the generic client. So from an operational and an ability to supply perspective, is the group looking at what are some of these issues? Could this have been avoided? Can we do something in the path forward where these issues don't recur? Because just looking at peers, we have not seen this kind of like a Q-o-Q large volatility in clean numbers, most of them have had it trended upwards. So I'm just curious from our own group perspective, where are the potential misses and how can we correct it in the path forward?

[Siddharth Mittal, MD, CEO & Director]

Very good question, Shyam. I think we do have a BCP and disaster recovery plans. But if you look at the second wave, in Bangalore, we all know there were significantly higher number of cases compared to first wave. Out of 3,500 employees in Generics, in the second wave, we had almost 500 employees who were positive within a span of 2 months. And that impacted a lot of the work schedule. The quality releases got impacted. Now that has been addressed by vaccinating all our employees. 100% of our employees in Hyderabad, Vizag, Bangalore are vaccinated. That's number one. Number two, again Kiran had alluded in her opening comments that if you look at Biocon API business is primarily a fermentation-based business. And for fermentation, these are large-scale fermenters. And one of the most important ingredient for fermentation to run is oxygen. And when there was overall high number of cases in the country, the allocation of oxygen was being done by central government, where a lot of the oxygen, even for the industrial use, was diverted for medical use. And we were out of oxygen and hence not able to charge any new batches. Unfortunately, we treat this more as a force majeure, where there is no mitigation plan. We were working with various state and central governments to see how soon we can get the required quantities that we needed, which did happen, as I mentioned, after 15 years. There was also certain other disruptions. But I think we do have overall a good plan in place. But an extreme situation like this wave 2, we -- I'm not sure if, at a very short notice, we are able to address all the issues that come up. In fact, Q1, we didn't have any of these issues in the Generics business. We had a very, very strong quarter 1 last year and including H1. Because number of cases in the company were still low. We were continuing to manufacture. We had supply chain issues, which we addressed very efficiently. So hope that these issues, at least on the employee front, do not happen if there is a wave 3 in the future.

[Shyam Srinivasan, Equity Analyst]

Got it. Last question to the team is on R&D spend. So how should we look at it for fiscal '22 and '23? Is the current run rate now or you see a step-up happen in terms of R&D?

[Siddharth Mittal, MD, CEO & Director]

I think maybe I'll just give a view on the group level. We continue to maintain our earlier guidance of between 12% to 14% of gross R&D ex-Syngene revenues.

[Chirag Dalal, Investor Relations Officer]

The next question is from Harith Ahamed from Spark Capital.

[Harith Mohammed Ahamed, Vice President]

I hope I'm audible.

[Chirag Dalal, Investor Relations Officer]

Yes.

[Harith Mohammed Ahamed, Vice President]

So on the Generics business, my apologies if this question was addressed previously. On the Generics business, after the disruptions we saw in the first quarter, how is the business shaping up now? And how should we think of the second quarter and the upcoming quarters?

[Siddharth Mittal, MD, CEO & Director]

So Harith, I'll split this answer into three parts. The operational impact that we had in quarter 1 is normalizing. So we do expect again our API production to ramp up to what it was in the previous quarters. We do not have any new plant or new capacities which get qualified this quarter. So there is no growth in our API business. The generic formulations business in the U.S. is undergoing pressure. While we are launching new products, we are ramping up our tacrolimus drug, which we had launched last year. We won some new contracts and we have started supplies against those contracts. At the same time, we have lost certain business on our statins. And on an overall basis in Q2, I do not expect significant growth. Because the biggest growth is going to come from the 2 or 3 products, which we have filed and are under review with the FDA. We have a target action date, which was in quarter -- calendar quarter 1 of '21, which FDA moved to calendar quarter 3 and 4 of '21. Now that -- assuming FDA accepts our request of conducting a virtual audit or the U.K. MHRA audit, which was successfully conducted in quarter 1, even if we receive the approval, we expect the launch to happen in the third quarter this year. So I expect overall business to remain flattish and flattish compared to, let's say, quarter 4 of last year. But definitely, we should be much better compared to this quarter's performance in the next quarter.

[Harith Mohammed Ahamed, Vice President]

Okay. Got it. And on Bicara, how far are we in terms of our fundraising plans at that entity? And who owns the 13% minority stake there?

[Siddharth Mittal, MD, CEO & Director]

So the funding should be complete. Our funding is actually dependent on the readouts. I mentioned that the readouts from the Phase I clinical trial readouts are expected by end of this calendar year basis, which the funding timing would be decided. And the remaining 13% of the company is with the employees in the ESOP pool.

[Chirag Dalal, Investor Relations Officer]

The next question is from Nithya Balasubramanian from Bernstein.

[Nithya Balasubramanian, Research Analyst]

Yes. I had just the one question on biosimilars in the U.S. So we know that CMS offers a pass-through status for the reimbursement rate that's given to 340B hospitals. And that's valid only for 3 years. So if you look at your fulfiller, you're possibly reaching that deadline in June. And that's likely to happen for some of the other biosimilars at a later point of time. So given that the delta between reimbursement is ASP plus 6% to ASP minus 22%, do you expect this to impact your margin profile meaningfully?

[Siddharth Mittal, MD, CEO & Director]

Shreehas?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Yes. Let me take that question. So Nithya, yes, we are seeing that CMS, they can come up shortly. We have developed -- or Viatris has developed strategies to counter that pricing change, which will come up shortly. We believe the recent discussion that we just had on the call also in terms of Onpro does provide us the opportunity to expand the market. There is going to be an increased competition in that space also with more players than we started off with when these debates were fixed. And we will certainly have to have the right mix of whether it's just the pricing part or whether it's the reimbursement strategy that we talked about or the overall mix that we will be coming up with. But certainly, Viatris is aware of this. And we are looking at providing a stronger value proposition overall to the various stakeholders.

[Nithya Balasubramanian, Research Analyst]

If I may just follow up, can you throw some color on whether -- if you look at your revenue split between hospitals, clinics and 340B, is it possible to provide some color on what's your exposure to 340B?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

I think we'll love to do that. But unless, Chinni, you have that available with you, do you have that split with you right now?

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

I don't have the exact split. But we have a lower share of the 340B segment. So we have -- our exposure is slightly lower there, compare to some of the competitors, but we can't give you specifics on the numbers.

[Chirag Dalal, Investor Relations Officer]

The next question is from Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, Executive Director]

The first question is on the pricing pressure that you're seeing in the U.S. for biosims, trastu and pegfil. Can you just help us what's driving this? You've been talking about this for the last 6 months at least.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

So I mean, pricing pressure in terms of the U.S., you see the important piece is -- the biggest question around the U.S. was whether the U.S. market will be accepting our biosimilars. I think that was the biggest question that we were faced with as we began the fiscal and maybe towards the end of last fiscal. I think that's the reasonable answer that is we've seen good adoption of biosimilars. And as the competition increases, there is -- the natural fallout is that there is going to be some pressure on pricing. We've not seen pricing go down the generic route. So this is in line with the expectation when you see different major players enter this space. So we basically expect this to kind of stabilize. We've also seen more gradual decrease in prices overall and the ASPs have been more in line with what you would expect in a market, where you have 4 to 5 major players across the portfolio. So we're not really seeing anything out of line that we had set out in the beginning.

[Sameer Baisiwala, Executive Director]

Sure. That's fine. But I'm just trying to understand what's the dynamics behind it in the sense that if there is no new entrant over the last, whatever, 6-month period, then what forces the price correction? Is one of the incumbent getting more aggressive? Or is the payer demanding it? What's the catalyst behind the price cuts?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

So pricing is -- so pricing is certainly one factor which plays a role in deciding this, right. Because I was saying before, beyond pricing, there are other factors that play a role as well in terms of how entrenched players are focused on therapy areas in terms of what the competitor contracting strategies have been in terms of what the overall payer dynamics are. So in addition to just the pricing, even the reimbursement strategies that have been put together play a role in terms of how market shares get allocated. And we are not fully weighted between the various determinants on how these decisions are being taken. So pricing is certainly one factor but not the sole determinant of market share allocations between the various players. And you will see that change over time across the various players. Certainly, those who have been the space in that particular therapy area create barriers, given their long-standing relations with payers. And I think that's an area that we just also said in the past, that it has -- there is an area for improvement that we will then decide. And that's what we will be investing in the greater focus of their commercial team. And they've stated that [indiscernible].

[Sameer Baisiwala, Executive Director]

Okay. My next question is on the market share for these two products, pegfil and trastu in the U.S. See, we have been active, whatever, 6% to 8% for some time. We do get some 50 basis points up here and there. What's really going to drive this 15%, 20% your rightful market share? What's holding back? And just to add to that, over time, you will see more players coming in and this opportunity would then go away as the biosimilar utilization moves up to 65%, 70%, 75%. So we need to act urgently, it's been a long time. So your thoughts on this.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

So let me address these questions one-by-one. Let's talk about pegfilgrastim to begin with. I think the pegfilgrastim space, we've got a steady market share of around 8.5% to 9%. That's where it has been trending. And as we discussed earlier on the call, we did see Onpro, which kind of moved up in its market share over the last 1 year, given the pandemic situation and the convenience factor that we saw patients are looking at, so certainly held on to market more than what was expected. So it has taken a longer time for all incumbents to move into that share. We've seen that come off as we get into this year. And we've seen over the last 1 year that Onpro market share drop from 58% to 52% certainly creates an opportunity for a fulfiller to move into that space. In terms of trastuzumab, I think there again, the COVID pandemic has played a role where there's been a reduction in terms of the overall diagnosis, where the screening success came down over the course of the last year. And we've held on to that market share steadily over the course of the last 18 months. We've ramped up towards the double-digit figure we just underpinned at this point. And we're looking to increase that market share. There was, of course, a disruption that was caused with the market moving from the 150 milligrams to 420 milligrams. And certainly, there is some attribution that, given the higher dose formulation, there is lower losses, hence lower requirements. So the franchise itself, there is some, I would say, rationalization in terms of volumes. But we believe that, that remains strong. And as we get into the coming year with the pandemic probably behind us, particularly in the U.S., we are starting to see those more footfalls in the hospitals and more screenings. And we will see that we continue to hold that 150-milligram pole position that we've held. In terms of talking to you about what is it that has driven this overall franchise, in addition to pegfilgrastim and trastuzumab, we're looking forward to getting bevacizumab join this overall oncology franchise, which we believe will be also another sizable opportunity. Because bevacizumab itself has grown year-on-year 5% in terms of market share solely in the U.S., so apart from 26% globally. So we believe that there is a longer-term play for us in the oncology space with the more complete offering in terms of pegfilgrastim, trastuzumab and then bevacizumab can join in shortly.

[Sameer Baisiwala, Executive Director]

With your permission, I just have one or two more. And that is when did the FDA confirmed that it would come for Malaysian inspection in 3Q? And I ask this question because I think Malaysia is right now going through a very bad third wave. I think just 3 days back, it's hitting almost its highest-ever COVID-positive cases. So is there any reason to think that the FDA can actually delay this? And second question is any thoughts on the new biosimilars entering Phase III trials?

[Siddharth Mittal, MD, CEO & Director]

So let me answer the first one, straight up. We've been in constant dialogue with the inspectors who are visiting us on site. And we put -- you're absolutely right, the third wave of Malaysia, despite the lockdown, has been more aggressive -- or not the third wave, but essentially the current wave. And then they are seeing all-time high in terms of cases reported. But there are clear relaxations that the government has provided in terms of visitors from different parts of the world and those who are coming for visits for 15 days and less. And I think the way we'll go with the agency is they are confident of making the trip to inspect us and be with us on site. At this point, what we have to share with you is those plans are still on track. And we expect to visit us towards the end of this quarter. So that's on the Malaysia pre-approval inspection at our location. In terms of products getting into the clinic, we've said in the past that our products are progressing very well in terms of the CMC aspects of it. We are currently in the stage where we are progressing them towards the clinic. And we will be updating shortly once they get past that stage and are ready to discuss that with you.

[Chirag Dalal, Investor Relations Officer]

The next question is from Charulata Gaidhani from Dalal & Broacha.

[Charulata Gaidhani, Analyst]

Yes. My question pertains to the interchangeability for Glargine. After receiving interchangeability, what type of market share would you expect over the first year, full year of operations?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

So Charulata, we won't be able to comment on specific market shares. But as we discussed through the call, we certainly believe this to be a development in the right direction for us to have more constructive discussions with the payers. But we wouldn't be able to give you specific guidance on what those market shares would...

[Charulata Gaidhani, Analyst]

But while you are talking to the payers, with limited number of competition in Glargine, would it be reasonable to expect a 10% market share in FY '23 or it could be higher?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

As I said, you would not want to comment on specific market share percentages. But suffice to say that we are looking at building on what we've done so far in the past.

[Chirag Dalal, Investor Relations Officer]

The next question is from Sheersh Jain from Apex Capital.

[Sheersh Jain;Apex Capital;Founder]

I wanted to understand the cost competitiveness and cost advantages of Biocon in the biosimilars arena. Like do we have certain cost advantages in manufacturing biosimilars, which other players won't have because we are manufacturing in India and Malaysia? And do these cost advantages will help us stand in this pricing war that is happening currently in U.S.?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Sheersh, I think if you just look at how our focus has naturally been in the biosimilar space, price is certainly an important or, I would say, cost is an important element or an important lever to be successful in the market. But the first piece is the scientific aspect and to be able to develop a molecule as complex as a biosimilar, but then the ability to get the facilities approved in terms of which markets you want to bring these products to. And then the third aspect then would be the ability to price it competitively and to win market share. So I think what Biocon has been able to successfully demonstrate is that we have the scientific credibility to bring these highly complex biologicals to the market and not just to emerging markets with certain players maybe operating in, but to all parts of the world. And our products, they are approved by all ICH countries. So that's the scientific hurdle. The next piece is the manufacturing scale and the compliance and regulatory standards. And that's the other hurdle that we've been able to move on and surpass. But we've always been, even in our small molecule, stayed very focused on emerging markets. We've always been extremely competitive in that space. That's been our DNA. And we continue to be focused on cost at all times. So we come from that focus and legacy. So we don't see cost being a barrier to us to win market share. But I want to leave you with the thought that, that's not the only factor determining success as I have just kind of outlined.

[Sheersh Jain;Apex Capital;Founder]

Okay. That helps. My other question is what is the core growth strategy that senior management is looking? Like where is the bottom line growth going to come from in the next 2 or 3 years? What arenas are you most hopeful about?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

I mean on the biosimilar space, let me respond. I think one of the things that we've got is we've laid the platform very effectively for an insulin franchise, which is all set to grow in terms of us towards the end of the month, looking forward to an interchangeable -- first interchangeable insulin ever to have been approved by the FDA. So we're clearly looking forward to that decision. We are hopeful and we are looking forward to that. So we're looking at the insulin franchise making a difference. Certainly, we are also looking at a more complete oncology portfolio with bevacizumab joining the pegfilgrastim and trastuzumab franchise. We're also looking at making a difference with patients and patient lives for our COVID portfolio, where we repurpose products from our pipeline, like itolizumab, which is really [indiscernible] in saving patient's lives in this time of crisis. We are looking at growing our footprint in emerging markets, where we really had great success in different parts of the world, as Susheel talked about, with the portfolio that we bought. And most importantly, we are looking to bring the next wave of biosimilars to the fore as we continue to maintain our lead in terms of bringing several first biosimilars to the U.S. and to several other geographies. So I would say that there are several things that we have to look forward to. And we're really looking forward to that with a lot of optimism.

[Kiran Mazumdar-Shaw]

So I would just like to add to that by saying that across the group, we see some very strong growth drivers. I think you just heard from Siddharth that we are we have a large number of ANDAs in our pipeline. We are having a lot of capacity expansions that will go on stream. API business, as you know, is also a very profitable business for Biocon. And if you saw the recent rankings of API producers in India, Biocon is right up there in the top 10. In fact, it's in the top 5. So I think from that point of view, we are very committed to this business as well. And of course, Research Services has a lot of growth opportunities, which you also heard. So I think overall, I think the Biocon Group is in a very strong position to deliver on its -- on all fronts, whether it's biosimilars, which is now going to focus on market expansion across developed and emerging markets with its existing portfolio. It's looking at portfolio expansion. It's looking at a strong focus on insulins. And I think in terms of our Generics business, both in terms of APIs and formulations, we see a huge opportunity for growth in the coming years, and so also in the Research Services. So I think, overall, we are in a good place. And we are going to be really focusing on operational excellence as well as market share in terms of all our products.

[Sheersh Jain;Apex Capital;Founder]

Yes. One last question from my side. Siddharth, what kind of CapEx do we foresee for fiscal '22?

[Siddharth Mittal, MD, CEO & Director]

I think we had said that, overall, CapEx spends were $100 million a year for next 3 years. We have had some delays in the beginning in the first quarter. But overall, from a cash spend perspective, I expect around INR 500 crores to be the outlay in FY '22. That will pick up in FY '23.

[Sheersh Jain;Apex Capital;Founder]

So this is ex Syngene, right?

[Siddharth Mittal, MD, CEO & Director]

I'm only talking about Generics business. Maybe Chinni can give numbers for the biosimilars business.

[M. B. Chinappa, CFO of Biocon Biologics India Ltd.]

Another $100 million account biologics, $100 million per year.

[Chirag Dalal, Investor Relations Officer]

The next question is from Masira Vasanwala from FSSA.

[Masira Vasanwala;FSSA Investment Managers;Investment Professional]

I think, first, I just wanted to understand with Mr. Shaw leaving the Board, are you thinking of adding somebody else to the Board? And what kind of profile are you looking for?

[Kiran Mazumdar-Shaw]

Yes. We will look at adding someone to the Board. And we will look at someone who comes from a [indiscernible] technology background is what our view is.

[Masira Vasanwala;FSSA Investment Managers;Investment Professional]

And then just the second question was I think 6 months to a year ago, the target for the biosimilars business was about $1 billion in revenue. And understandably, some of that has been delayed with the FDA delay. Does that target still stand for you guys?

[Kiran Mazumdar-Shaw]

Well, the target is there, obviously. But it won't happen by FY '22. So I think we are looking at recalibrating that target date. But obviously, the $1 billion target is very much on the annual for biosimilars. And we hope that we will deliver it sooner than later.

[Chirag Dalal, Investor Relations Officer]

The next question is from Mitesh Shah from ICICI Securities.

[Mitesh P. Shah, Research Analyst]

I just have one hypothetical question. Post interchangeability, if a product is substitutable, can we see the similar kind of generic acceptance like for the Aspart in the insulin portfolio?

[Kiran Mazumdar-Shaw]

I think Shreehas had mentioned that we have submitted our BLA for insulin Aspart as an interchangeable insulin. So I think going forward, all our insulin submissions will be made as interchangeable insulins. And Glargine was filed under a very different regulatory route. And that's why we had to now request for an interchangeable label under a very different set of circumstances. But going forward, I think we will look at all insulins being submitted under the interchangeability.

[Mitesh P. Shah, Research Analyst]

Yes, madam, got it. My question is mainly because post the interchangeability of the Glargine, can we expect the similar response like generic [indiscernible] having the interchangeability currently in the market or the generically accepted as a branded portfolio?

[Kiran Mazumdar-Shaw]

Well, you mean for biosimilars in general?

[Mitesh P. Shah, Research Analyst]

Right, post interchangeability.

[Kiran Mazumdar-Shaw]

I thought you were talking about insulins. But right now, the guidance given is for insulins because it's a simpler molecule from an identical comparability point of view. But when it comes to monoclonal antibodies, I think it will take some time before the agency will take such decisions is our belief.

[Mitesh P. Shah, Research Analyst]

Okay. And the loss of our sales this quarter because of the COVID-related disruption, can we see these -- some of the recovery on the coming quarters?

[Kiran Mazumdar-Shaw]

Well, we certainly expect that to happen. Because we expect normalcy to return this quarter, unless we see a very unexpected third wave. But other than that, I think since we have vaccinated all our employees, we believe that we are in a safe place to continue with our operations. And we hope that things will resume over the coming quarters. So certainly, we expect things to be -- to improve, let me put it that way.

[Chirag Dalal, Investor Relations Officer]

The next question is from Tarang Agrawal from Old Bridge Capital.

[Tarang Agrawal, Investment Analyst]

A couple of questions from my side, just general questions. One, in the manufacturing, marketing partnerships that you have entered with your partners, such as [ yours ] and Viatris for your oncology platform or the diabetes platform in North America. If you could give us some sense on what proportion of value of the product is captured by the manufacturer and what is captured by the marketer. Without getting into specifics, just wanted to get a broad brush of incentives between the two collaborators. That's number one. And the second question is given the size of the biosimilars opportunity wave 1, wave 2, wave 3 and maybe the wave 4 and the portfolio that you have, whether it's approved, under development, [indiscernible] therefore not make sense for you to maybe in the medium to long term actually be marketing these products on your own so as to be able to capture the entire value chain. Would that be the right way to look at it? Or would partnerships be the right way to look at this in the long term obviously, not in the short term?

[Kiran Mazumdar-Shaw]

Well, if you look at the way we have developed the biosimilars business, it is exactly along these lines. I think you will know that our partnership with Viatris was extremely valuable as we initiated our biosimilars development. Because I think it was important to share the risk, the cost and the opportunity, which I think both partners have benefited from and realize the value of entering into such a partnership, where Biocon brought in a lot of R&D and manufacturing capabilities and Viatris is obviously focusing on the commercial aspects of our partnership. Going forward, as you know, from -- in terms of wave 2 and wave 3 programs, we have a partnership with Sandoz. We have also plans to have our own programs. So we will have a combination of partnerships and programs going forward, depending on what the commercial models are going to look like. So I don't think we want to completely focus on one or the other. I think it's important to have a very balanced view of what works in a partnership and what could work better on your own. So I think that's the way Biocon has gone about it. And going forward, we certainly want to have our own programs being marketed by us.

[Tarang Agrawal, Investment Analyst]

Sure. And on my first question on broad brush in terms of value capture at the manufacturing level and at the marketing level?

[Kiran Mazumdar-Shaw]

So let me put it this way. On the collaboration as a whole, we have a very equitable collaboration. So I think that's as much as I can say. I cannot really break it down into the share. But I would just say that it's a very equitable partnership.

[Chirag Dalal, Investor Relations Officer]

We have another question from Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, Executive Director]

Just a couple of questions. One is on the mutual recognition route with MHRA U.K. for beva. What's the likelihood that FDA accepts this? And I guess, are there any case precedents where FDA has done so?

[Kiran Mazumdar-Shaw]

So Sameer, I just want to correct you, the MHRA mutual recognition route has been actually pursued by the Generics division. As far as the biosimilars or Biocon Biologics is concerned, they have looked at all avenues of trying to get our facility in Bangalore inspected, whether it's virtual, whether it's through mutual recognition. But we are yet to get a positive feedback from the agency. We were -- we at least appreciated that they gave us a positive feedback from Malaysia. But India is still not something that we have visibility on.

[Sameer Baisiwala, Executive Director]

Okay. Got it, very clear.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Sameer, yes, if I may also add, there has been not a precedence on this. So I think this guideline came out in May. After that, I know that companies have reached out to FDA to get the advantage of this new headline. The FDA has reached out to us and requested for information, which we have submitted and we await that decision. So at least I have not heard again in the Indian generic context if any other Indian company has received an approval using this mutual recognition with MHRA.

[Sameer Baisiwala, Executive Director]

Okay. Great. And just on the interchangeability, I'm not so sure, maybe not a very right question. But would this be against the innovative brand, which is Lantus, or also against the other brand, which is Basaglar?

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

So this is, Sameer, against the innovative brand of [indiscernible]. So we're changing the piece to Lantus.

[Chirag Dalal, Investor Relations Officer]

The next question is from the [ Vipul Shah ].

[Unknown Analyst]

Any update on oral insulin program? And what is the progress on our biosimilar joint venture with Sandoz? Any update, ma'am?

[Kiran Mazumdar-Shaw]

So in terms of oral insulin, we are still in the process of completing the type 1 diabetes trial. And once that is known, we will take a view on the next path ahead for this program. As far as Sandoz is concerned, yes, the programs are under development, but they are still at early stage.

[Unknown Analyst]

And lastly, ma'am, what type of annual [ loss ] guidance we can expect per annum for Bicara?

[Kiran Mazumdar-Shaw]

Bicara is a startup. So I would say that you will only get some readouts by the end of this year in terms of their first program that is in the clinic. And based on that, then we will go and the company plans to then raise funds, venture funding. And it also has some very exciting follow-on programs, which are preclinical. So I think as you must -- I'm sure you're aware, these kind of very innovative startups do need to basically focus on one or few programs that will then establish their capability and their platform technologies.

[Chirag Dalal, Investor Relations Officer]

Thank you. That was the last question. We thank you all again for joining us today. If you have any additional questions, please feel free to reach out to our Investor Relations team. We look forward to see you again next quarter. Have a good day and stay safe.

[Kiran Mazumdar-Shaw]

Thank you.

[Shreehas P. Tambe, Chief Operating Officer of Biocon Biologics]

Thank you.

[Siddharth Mittal, MD, CEO & Director]

Thank you.