Biocon Ltd

NSE:BIOCON

Earnings Call Transcript 2022-Q2

[Aishwarya Sitharam]

Good morning, everyone. I'm Aishwarya Sitharam. I have recently joined the investor relations function for Biocon Limited. And I would like to welcome each one of you to Biocon's Earnings Call for Q2 FY '22. [Operator Instructions] This conference is being recorded. To discuss the company's business performance and outlook, we have today with us the Biocon leadership team comprising of Dr. Kiran Mazumdar-Shaw, our Executive Chairperson, and other senior management colleagues. I'd like to take this opportunity to also remind everyone of our safe harbor. Today's discussion may be forward looking in nature based on 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 call, if you need any further information or if you need any clarifications, please get in touch with me or Nikunj. Now I'd like to turn the call over to Dr. Kiran Mazumdar-Shaw. Over to you, ma'am.

[Kiran Mazumdar-Shaw]

Thanks, Aishwarya, and good morning, everyone. Welcome to Biocon's earnings call for the second quarter and first half of FY '22. I would like to start this earnings call on a note of cautious optimism when it comes to the pandemic. The timely mass vaccination drive that we saw across the nation in the past few months has certainly helped to abate the spread of the virus considerably. Having crossed the mega milestone of 1 billion vaccine doses yesterday, which I think was a huge milestone for the nation, we hope that we will soon see the worst of the COVID-19 pandemic behind us. However, I'm sure all of you will agree that we just cannot afford to allow complacency to reverse this situation, and we must all continue to exercise caution and stay safe. Biocon, as you know, has been at the forefront in the fight against COVID-19 through our portfolio of remdesivir, itolizumab and Cytosorb. And we have added to this effort, through our collaboration with Adagio Therapeutics for their normal antibody therapy, ADG20, and thereafter, with Serum Institute Life Sciences for vaccines. And this certainly takes us several steps further in strengthening our portfolio of therapies for the treatment and prevention of COVID-19. These collaborations, we believe, will enable us to expand our focus into the communicable disease space, thereby, providing a comprehensive portfolio of affordable therapies for global health care. Let me begin with a Board update. As part of our Board updates pursuant to the vacancy created by the retirement of Mr. John Shaw, Dr. Eric Mazumdar has been appointed as Non-Executive Director to the Board of Biocon Limited with effect from November 1, 2021. Dr. Mazumdar is an Assistant Professor of Computing and Mathematical Sciences and Economics at the California Institute of Technology. He has worked extensively in research at the intersection of engineering, machine learning and economics at reputed institutes such as the University of California, Berkeley, the MIT Computer Science and Artificial Intelligence Laboratory, and the MIT Koch Institute for Cancer Research. Dr. Mazumdar holds a PhD in Electrical Engineering and Computer Sciences from the University of California, Berkeley and a Bachelor of Science in Electrical Engineering and Computer Science from the Massachusetts Institute of Technology. We believe that his induction will give a strong impetus to our digital initiatives, especially in the area of artificial intelligence and digital transformation. Coming to business highlights. Let me now take you through the key highlights of this quarter. Before I talk about Everolimus, we did see a launch of Labetalol Hydrochloride tablets and Esomeprazole Magnesium delayed-release capsules earlier this calendar quarter. But of course, the most significant launch was that of Everolimus tablets, a generic version of Afinitor in the U.S. on -- as a day 1 launch on the 1st of October. We expect that this will significantly drive the growth of our generics portfolio in the second half of this fiscal. Another bit of important news was the approval that we received for the world's first interchangeable biosimilar from the U.S. FDA for our biosimilar Glargine Semglee, which has now been included as a preferred Glargine brand on the National Preferred Formulary of Express Scripts. This was indeed a great impetus to the interchangeable label, which is expected to drive significant future growth for our Biosimilars business, especially in the Insulins segment. We had earlier reported that we had entered into a strategic alliance with Serum Institute Life Sciences to foray into vaccines by which we will get committed access to 100 million doses of vaccines annually for 15 years in exchange for approximately a 15% stake in Biocon Biologics at a post-money valuation of $4.9 billion. We also entered into a partnership with Adagio Therapeutics to manufacture and commercialize a broadly neutralizing novel antibody ADG20 for the prevention and treatment of COVID-19 for several markets across GCC and Asia, including, of course, India. Let me now move on to the financial highlights for this quarter. Revenues for Q2 FY '22 were at INR 1,945 crores versus INR 1,765 crores, which represents a year-on-year growth of 10%. Our revenues were mainly driven by research services, which were up 17% and biosimilars that were up 10%. Revenues in our Generics business saw a 12% decline. We recorded a gross R&D spend of INR 165 crores for this quarter, which is very similar to that of last fiscal which corresponds to 13% of revenue ex Syngene. Of this INR 146 crores is expensed in the P&L while the balance amount has been capitalized. We also recorded a ForEx gain of INR 20 crores as compared to a loss of INR 18 crores during Q2 FY '21. Core margin, that is EBITDA margin net of licensing, ForEx, Adagio revaluation gains and R&D stood at 33% compared to 32% in the same quarter last year, on account of an improved performance in both biosimilars and research services. EBITDA for the quarter was INR 551 crores, a growth of 25% year-on-year. The EBITDA margin stood at 28% as against 23% reported in Q2 FY '21. Profit before tax or PBT for the quarter, excluding an exceptional charge of INR 70 crores stood at INR 276 crores, up 27% versus INR 218 crores during the same quarter last fiscal. The exceptional charge relates to modification of the optionally convertible debentures of a PE investment in Biocon Biologics, and reversal of SEIS claims relating to the prior period, which as all of you know, has been restricted to INR 5 crores per exporter. This has actually hit both Syngene and Biocon Biologics and Biocon sales profitability. Our net profit for the quarter before such exceptional charge and associated tax stood at INR 188 crores, versus INR 169 crores in Q2 FY '21, which represents a growth of 11%. After adjusting for exceptional charge, net profit stands at INR 138 crores. Now let me turn to the performance of our business segments during the quarter. Let me start with our Generics business, which witnessed a subdued performance this quarter as a result of continuing pricing pressure in the U.S. for our formulations portfolio and a slower-than-expected ramp-up of demand for some of our key APIs. Advanced buying by customers in the corresponding period of the previous fiscal in terms of being apprehensive of COVID-related disruptions is reflected in the year-on-year decrease in our revenues. Operational and supply challenges in the earlier part of Q2 FY '22 also impacted the performance of the API business. The segment delivered quarterly revenues of INR 530 crores, a degrowth of 12% over Q2 FY '21. The quarter's PBT was at INR 50 crores versus INR 70 crores in the same period last fiscal and PBT margins were at 9% compared to 12% last fiscal. Our statin formulations portfolio in the U.S. comprising Rosuvastatin, Simvastatin and Atorvastatin held on to their market share despite continued pricing pressure, while tacrolimus capsules maintain similar volumes to Q1 FY '22. Labetalol Hydrochloride tablets and Esomeprazole Magnesium delayed-release capsules were launched earlier in the quarter. And following this, we launched Everolimus tablets, a generic version of Afinitor as a first day launch on October 1, 2021. This is the first day 1 launch for our generics formulation business. and Everolimus is a prescription medication that is used to treat certain types of cancers and tumors. In September, the U.S. FDA conducted a remote interactive evaluation for our overall solid dosage manufacturing facility in Bengaluru, as part of the pre-approval review for previously filed ANDAs. The final closeout report from the agency is awaited. Our greenfield immunosuppressants API facility, manufacturing facility, in Visakhapatnam remains on track to be commissioned in the latter part of FY '22 with qualification and validation in FY '23. With remote inspections finally underway, we are hopeful that future inspections will pave the way for our new product launches and expansion into key markets. We will continue to focus on capacity enhancement projects as well as operational efficiencies and expect strong growth from FY '23 onwards in terms of our Generics business. Coming to Novels. Equillium, our U.S.-based partner has announced plans to initiate a Phase III pivotal study for the use of itolizumab in first-line treatment of acute graft versus host disease following regulatory feedback from the U.S. FDA and is on track to commence the study in Q4 of calendar year 21. During the quarter, our Boston-based associate Bicara Therapeutics continue to make progress in the dose-finding part of the Phase I trial for its lead program BCA101 as a single agent and in combination with the PD1 inhibitor. On the basis of the current progress, Bicara anticipates declaring the recommended dose for expansion by the end of calendar year 2021. Now coming to biosimilars. Biocon Biologics recorded revenues of INR 743 crores for Q2, a year-on-year growth of 10%. The previous quarter had benefited from a higher contribution from our COVID portfolio, which has come off this quarter. Excluding the COVID portfolio, we have seen sequential growth of 11% of our Biosimilars business. EBITDA for the quarter was up 72% year-on-year at INR 303 crores. This includes the revaluation gains made from the equity investment in Adagio at the IPO. Core EBITDA margins, excluding R&D, ForEx licensing income and Adagio revaluation gains stood at INR 304 crores, which is up 15% year-on-year. Core EBITDA margin was at 42% for the quarter. The improvement in margins have resulted primarily from incremental profits in developed markets. Profit before tax, excluding the exceptional charge stood at INR 119 crores, up 47% year-on-year. This also excludes the revaluation gain arising from our investment in Adagio. We continue to strengthen our presence in emerging markets with the launch of new products as well as sustaining our existing business. The Branded Formulation India business continues to witness strong performance on the back of improved secondary sales. In the U.S., Fulphila and Ogivri continue to be resilient despite competition with market shares hovering around 9%. A steady improvement in the market share of our oncology products is expected to support the overall growth of our Biosimilars business. The U.S. FDA has approved Semglee as the first interchangeable biosimilar product under the 351(k) regulatory pathway, which allows substitution of Semglee for the reference product at the pharmacy counter. This has been a marquee milestone for Biocon Biologics and Viatris. Our partner Viatris plans to transition the current product to the 351(k) interchangeable product in the coming months. We have just received breaking news yesterday to say that our biosimilar Insulin Glargine, Semglee has been included as a preferred Glargine brand on the National Preferred Formulary of Express Scripts. As many of you know, is one of the largest pharmacy benefit management organizations in the U.S. The formulary covers more than 28 million lives. As a result of this, we expect Semglee to gain commensurate market share in the U.S. from calendar year 2022, making it an important growth driver for Biocon Biologics. The U.S. FDA conducted a preapproval inspection of our Malaysia facility last month for a biosimilar Aspart BLA. We have responded to the agency with the CAPA plant and are confident of addressing the observations made during the inspection. We do not expect the outcome of this inspection to impact our commercialization plans in the U.S. We continue to work closely with the U.S. to expedite the pre-approval site inspection in India for biosimilar bevacizumab. We have, as you can imagine, requested them for a remote inspection like they have done for one of the Biocon generics facility. However, we have not yet had a positive response from U.S. FDA for such inspection. Our market share in Europe continues to improve with products like Ogivri crossing the 5% mark in July and continuing to see steady improvement. In Q2, our biosimilar bevacizumab, Abevmy, was launched in several EU markets, including Germany, Croatia, Czech Republic and Slovakia. In Canada and Australia, we continue to see a robust performance of Ogivri. We have also just received regulatory approval for our biosimilar Insulin Aspart in Canada. We have also made a strategic move into communicable diseases through 2 key partnerships. One with Serum Institute Life Sciences for vaccines and infectious disease antibodies, and the second with Adagio Therapeutics for a novel COVID antibody therapy. The Serum Institute Life Sciences strategic alliance provides Biocon Biologics an asset-light and accelerated entry into the vaccine segment. Pursuant to the terms of the agreement, Biocon Biologics will generate a committed revenue stream and related margins commencing H2 fiscal year 2023. The near-term focus will be on COVID-19 vaccines since a large part of the global population remains unvaccinated. Only 3% of people in low-income countries have received at least 1 dose. There is also a strong potential from the booster dose of COVID-19 vaccines. Additionally, the partnership will have access to Serum Institute Life Sciences' current development pipeline to address unmet needs in other communicable diseases like mosquito-borne infections. The platform enables Biocon Biologics to add next-generation vaccines that will drive long-term growth. Biocon Biologics has also entered into a partnership with Adagio Therapeutics for ADG20, a novel antibody therapy for COVID-19. This entails manufacturing and commercialization in several emerging markets, including India. ADG20 is being developed for the prevention and treatment of COVID-19 as a single-dose intramuscular injection. It has the potential to effectively neutralize a broad range of SARS coronaviruses, including SARS-CoV-2 and its emerging variants. The company is currently conducting its Phase II/III pivotal trials to support an emergency use authorization application by the first quarter of calendar year 2022. To summarize, we clearly see the Biosimilars business gaining momentum with the launch of interchangeable Glargine in the U.S. and continued launches and market share gains for our portfolio globally. This will be augmented by our strategic foray to vaccines and biologics for infectious diseases. We continue to invest in creating a robust pipeline of products, enabling sustainable value accretion for our shareholders. Coming to Research Services, which is really the Syngene business. For Q2, revenue from operations was up 17% to INR 610 crores from INR 520 crores last fiscal. Profit before tax, excluding the exceptional charge increased to INR 113 crores versus INR 94 crores. The second quarter was characterized by strong performance in all divisions, including adding 25 new clients in Discovery Services, which lies at the heart of our research activities. Syngene also continued to expand relationships with existing clients and long-term partners in the dedicated research centers. Syngene continued to manufacture remdesivir during the quarter, although the volumes are dropping as the impact of vaccination reduces the need for treatments such as this. Strong performance delivered in the first half of the year is expected to also deliver a good performance in the second half. So in conclusion, I would like to say that the expansion of our generics portfolio, the grant of interchangeability of our biosimilar Insulin Glargine and its inclusion in Express Scripts National Formulary and the collaboration that we have entered into with SILS and Adagio have now created more opportunities than ever to build for a stronger future and fulfill our goal of making large-scale impact on global health care through affordable access. With this, I would like to open it up to question and answers.

[Nikunj Mall, Head of Investor Relations]

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

[Prakash Agarwal, Executive Director of Pharmaceuticals]

My first question is on outlook where you mentioned obviously the -- sorry -- yes. So from an outlook perspective, you mentioned second half is looking better, obviously, and that Insulin Glargine interchangeability and with the [indiscernible] with Express Script from calendar 2022. My question actually on the other base business, trastuzumab and peg, how do we see the journey from here for these 2 products? And for the other 2 products, which is beva, which is awaiting the approval, what are the time lines there and [ aspire there ]? So basically, ex Insulin Glargine because Insulin Glargine is, I think, pretty much set for its growth part.

[Kiran Mazumdar-Shaw]

So Prakash, I'll just answer some of those questions, and then I'll sort of leave into Shreehas to answer the rest. Basically, I think you're right. I mean bevacizumab is an approval we are very eagerly awaiting. And at the moment, we have really no visibility in terms of when we will have this inspection done. As you know, in recent times, there have been multiple reports of many, many product approval delays in the U.S. And we happen to be one of them. So we do hope that this inspection will happen sooner than later. We have tried to get them to even consider a remote inspection, but we will keep you informed as soon as we get any information. I think the rest of the questions, I will leave it to Shreehas to basically respond to.

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

Thanks, Kiran. To respond, Prakash, to the 2 products that you talked about, particularly at Fulphila and Ogivri in the U.S. I think we've discussed this in the past that we've seen in the pandemic phase that Onpro, particularly in the Fulphila basket, held on to a market share in a sense, artificially given the convenience factor as people would first [ reduce ] to hospitals. We're seeing that particular market share come off from a little above 60% to the mid-50s. And that part is starting to move towards the synergy space, which is where we are operating. We've not got all of it moving towards Fulphila, but we'll be starting to see that as a positive development. We've obviously held on to a strong market share, which is just below that double digit. And we see that progressing well as we get into the next calendar year. For trastuzumab, we've seen to hold up on position or the second position, I would say, after the other biosimilar on the 150. On the 440, you've seen some competition pushed past on a more aggressive pricing strategies. But it hasn't really overall impacted the Ogivri brand strategy that Viatris has come up with. And we held on to that just under 10% market share even in the recent couple of months. And we see this as a steady positioning, which will only improve as we move along to the next fiscal.The bevacizumab, I think Kiran has already covered. We remain bullish on that as it completes our portfolio offering in the oncology space and allows us a more complete portfolio to discuss with peers.

[Nikunj Mall, Head of Investor Relations]

The next question is from Surya Patra from PhillipCapital.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. Just before getting into the questions, can I just get the clarity about the other income number. Why is that so elevated? And the...

[Kiran Mazumdar-Shaw]

The other?

[Surya Narayan Patra, VP & Pharma Analyst]

Other income and quantify that what is the kind of the revaluation gain on that as you're in the nature of that.

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

Kiran, can I clarify?

[Kiran Mazumdar-Shaw]

Yes, yes, please.

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

Surya, in August, we had invested $5 million in Adagio Therapeutics as part of that in the IPO at $17 a share. The share was trading at $42 on 30th September, and the gains on account of that has been recorded as other income.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. Okay. Can you quantify, sir, what is that number that is there in the other income?

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

INR 55 crores, sir.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. Just extending that Adagio, all these things, so the progress of the product, the ADG20 and all that, so what is the commercial scope there? And what is the competitive advantage of that molecule in neutralizing COVID cases compared to other antibodies that is there in various stages of development or in various stages of progress? And what is our aspiration there? Anything on that front?

[Kiran Mazumdar-Shaw]

Yes. I think Shreehas, you can take the question.

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

Yes, sure. So Surya, I think the ADG20 product that we partnered with Adagio is a broad neutralizing antibody. And it really has shown a very high efficacy in all known variants. In fact, recently, we've published -- Adagio has published an in vitro study where ADG20 has really shown a very high efficacy against all known variants, including the Delta variant, the Lambda variant, the new variant. And even as other antiviral therapies are available, where efficacies are in the region of 50% or thereabouts, I think it is quite obvious that the antibody therapies have an efficacy of over 80% will remain the gold standard. And ADG20 specifically has a very unique positioning where it's a single therapy, a monotherapy, with a one-shot intramuscular dose, which can be given in an outpatient setting, really improving the convenience of it, and the way it has been designed is with an extended shelf life, which offers or which is expected to offer protection for close to a year or thereabouts, which really then offers a lot of security to a wide section of population, which is at high risk or immunocompromised or were unable to develop immunity despite vaccinations. So there are 2 studies that Adagio has been conducting apart from the 6-month study that they've already published in the Phase I, where they are doing a Phase II/III study. One is the STAMP study for treatment that I just talked about. And the other study is about EVADE, which is a pivotal study to look at profile access, which should then target a very large section of the population, thereby, allowing peace of mind as we go along without necessarily getting infected, but kind of a shot, which you can protect yourselves directly without waiting for an incubation period of 2 weeks, which a typical vaccine would do. So we believe the product positioning is very strong and offers several [ USPs ] over existing therapies other than the small molecule space or even in the antibody space, which are either approved under the EUA today or are under development?

[Surya Narayan Patra, VP & Pharma Analyst]

Shreehas, can you clarify the markets?

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

Is it you Surya or...

[Surya Narayan Patra, VP & Pharma Analyst]

Yes. Shreehas, if you could clarify the markets we have presented.

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

Well, yes. So we have -- of course, we'll be present in India and several India-like markets that we've looked at. We are present in countries in the Middle East and in Asia Pacific, where we close and select markets to focus on, where we believe this therapy can make a very big difference. I think we lost Surya probably.

[Nikunj Mall, Head of Investor Relations]

Yes. We'll wait for him to join back. The next question is from Damayanti Kerai from HSBC.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

My first question is coming back to Ogivri and Fulphila. So here, we are hovering in high single-digit market share at -- you obviously mentioned some of the reasons behind that. But looking ahead with the kind of manufacturing capacity we have and the marketing outreach, which our partner might have achieved so far, potentially, what kind of market share we can gain in these 2 key products?

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

I'll respond to that, Damayanti, I think we wouldn't want to comment on specific market share, I think that wouldn't be fair. But we've really looked at the past. We've been able to hold on to a steady market share overall. And it's really been moving upwards despite the competition that we've seen. So we've really seen our partner, Viatris, to may be able to navigate the increasing competition as well as the other products, which have entered that space over time. And we believe that these are products as bevacizumab joins our portfolio, it will only strengthen our position that we had in the U.S. overall. So we would remain optimistic as to how Viatris has held on to this, and they remain -- may remain positive about how they will pursue it in the coming year.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

My second question is again on biosimilars. So can you specify the broad sales split between the emerging market and developed market as of 2Q? And on the emerging market side, what kind of growth we should be anticipating in the next few quarters? Related to that, sequentially, biosimilar sales where, I'll say, are largely flat, but we have seen good pickup on the margin part. So can you also please explain that?

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

Chinni, do you want to go on the split and then we can maybe see that we can add on the...

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

Damayanti, I'll just share the numbers around the split. For Q2, we have developed markets going towards a 50% mark with just about 45%, 46%. The second question was the margin improvement. Yes, the margin improvement reflects the higher profits, as Kiran mentioned, that we played out from the developed markets.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

And what will be the key driving factors which we should be looking for the [ emerging part ]?

[Kiran Mazumdar-Shaw]

So Damayanti, I just want to answer that question of yours by saying that I've already mentioned that the second half will get bolstered by, obviously, Insulin Glargine, and we also expect there is the improvement in some of the other -- all the biosimilar portfolio. So I think the main spurt of growth will come definitely from Insulin Glargine.

[Damayanti Kerai, Analyst, Healthcare and Hospitals]

Ma'am, even in other emerging markets because I was specifically asking for growth drivers in the non-developed markets.

[Kiran Mazumdar-Shaw]

Yes, that continues to grow. I think, Susheel, you might want to comment on that.

[Susheel Umesh]

The first half in the emerging countries, we have seen good growth and we have got a demand book that is full in the different countries that we operate. So I'm also very optimistic that the growth trajectory will continue the same way it was in the first half for the other emerging countries. In India, too, in the first half, we have seen very good growth, and we hope to continue the growth trajectory as well. So I would keep the trend of the growth more or less similar as it was in the first half.

[Nikunj Mall, Head of Investor Relations]

Next question is from Yash Tanna from ithought advisory.

[Yash Tanna]

My first question is, so I know that we have a very small business in India, but I would like to know the impact that we have due to the Insulin Glargine coming under NLEM. Like how much price cut we have in percentage terms of the product? And with the decreased price, can we expect the volumes to go up for a product like higher adoption for the product?

[Kiran Mazumdar-Shaw]

Susheel, why don't you fill this question?

[Susheel Umesh]

In India, the Insulin business, the bigger part of the business in India is still the human insulins. If you look at the analog business, it's about 20% of the patients that is there in the market. Thus, the huge scope for the analog business is one. The second, our own business in this particular area. We are not promoting this product only in terms of price differential and that's very clear. Though we have a price differential from the leader product in this, we are promoting our products strongly on quality. So whatever the price decrease will come in, we have got 2 SKUs that are unique in this market, and that is the vial SKU of 5 and 10 ml in which the price differential will continue to be there. So we have got a significant advantage here. And I don't think the NLEM in terms of what the leader price will come down will impact us that much because, a, there's a huge scope to gain market share from the human insulin; and b, we continue to focus on the high-quality and the interchangeability that we have got in the U.S., will give us that further impetus. Though the same rules don't apply in India, but it definitely gives more confidence to doctors that what we have with us is a very, very high-quality Glargine. And we have seen in the 2 months, the traction definitely has improved. So I'm very optimistic about this entire business of Glargine, of our brand Basalog in India.

[Nikunj Mall, Head of Investor Relations]

Yash, do you have any follow-up questions?

[Yash Tanna]

Yes. I've got muted, sorry. Yes, so my second question is also on Visakhapatnam greenfield facility. So we have invested INR 600 crores in the facility. And so I would like to know like what would be the approximate asset turnovers for the facility? And we said that we can get approvals by FY '23. So when can we expect significant revenue to start growing in from this facility?

[Siddharth Mittal, MD, CEO & Director]

Yash, we cannot give guidance in terms of what revenues would be generated from this facility. All that I can say is immunosuppressant is a very important growth driver and a differentiation factor for the Generics business. And today, we are capacity constrained in our Bangalore facility and the additional capacity that we will get from Vizag would drive the segment growth in the coming years. Now what we said is that the commissioning would get complete by end of this fiscal, followed by a validation and filing in the next fiscal. And then it could be followed by FDA inspection and approval. So we expect the commercialization to start somewhere in calendar '23, if everything goes as planned.

[Yash Tanna]

Okay. So H2 FY '23, if everything goes as planned.

[Siddharth Mittal, MD, CEO & Director]

Yes.

[Nikunj Mall, Head of Investor Relations]

Next one is from Shyam Srinivasan, Goldman Sachs.

[Shyam Srinivasan, Equity Analyst]

I hope I'm audible. Just from a logistics perspective, if I unmute, I think the participant cannot mute back. So maybe, Nikunj, if you can keep that in mind. So let me ask two questions and then pause after that. So first one is on CMS pricing data for biosimilars came out very recently for 2Q. And if you see the products that have seen the maximum Q-o-Q erosion have been the products that are there or potentially going to be there like Herceptin, Avastin, Neulasta. So largely on the onco space, somebody like a Celltrion has been very, very aggressive in terms of taking prices down in Herceptin. So just while there is the angle of volume share gains for us through this next 6 months, and then calendar year next year, I just want to understand how are we placed in terms of pricing and in terms of cost competitiveness, especially against Asian manufacturers. That's question one. The second question is on the small molecule generics. I think you've seen another weak quarter. So just want to understand what's happening in terms of price pressure. When do you think we will likely see some kind of a bottoming out and things improving? So let me pause there.

[Kiran Mazumdar-Shaw]

So maybe Shreehas and Abhijit could take these 2 questions, starting with Shreehas.

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

Sure. So Shyam, I think the CMS [ pricing ] is absolutely valid, and we've seen that in discussions. Viatris has been in active discussions there. And while we do not see a direct impact on our margins overall, we do see the -- [indiscernible] situation there given that our products will come up for that tip off of some of those benefits, particularly on the reimbursement side. But to address the question of cost competitiveness, I think we see fairly we're quite confident on the cost competitiveness given the Asian partners or for that matter, other peers in that group. Because we've conventionally been a strong emerging market player for several years, whether we were in the small molecule space in the past and even today, we've always been very cost competitive. We've always said that we'll [indiscernible] with emerging markets first, and we've succeeded in our small molecules business, in our Insulins business. And as we now get to the U.S. and other parts of the developed markets, we believe this will be more remunerative opportunities for us than what we've seen in the past. So these are things that we're not really -- is something that we are very concerned about. We, of course, are vigilant on the cost competitiveness part, but nothing that we are overly concerned about at this point. I'll let Abhijit respond to the small molecules question.

[Abhijit Zutshi, Commercial Head of Biocon Global Generics]

Thanks, Shreehas. So Shyam on your questions about the price erosion that we are seeing in the performance on the generics formulation business. The only market we commercial right now is the U.S. and the portfolio that we have is also quite limited. Right now, we have 7 products commercial. Some of the products that have been commercial, we've consistently maintained a market share between 15% to 20%. But there has been some pricing headwinds on that. Despite that, we've maintained our market share. However, with the launch of molecules like Everolimus, as we expand the portfolio with more complex products, I think we can start seeing some growth coming in from these markets. And as other markets also open up in the near future for us, you would start seeing some growth.

[Shyam Srinivasan, Equity Analyst]

And the split of API to formulations remains at 80-20?

[Abhijit Zutshi, Commercial Head of Biocon Global Generics]

Indranil, you would like to...

[Indranil Sen, Chief Financial Officer]

That's correct, Shyam. Currently, that's at 80-20.

[Nikunj Mall, Head of Investor Relations]

The next one is from Sheersh Jain from Apex Capital.

[Sheersh Jain]

Am I audible?

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

Yes.

[Sheersh Jain]

So my question arises from the concern that we are not able to gain substantial market share in the U.S. in the biosimilar market. And given the stellar margin that we have had and continued price competition in biosimilar business, is it not possible for the company to be aggressive on the pricing front and give us some margins temporarily to gain market share and make this a sustainable growth story for the company?

[Kiran Mazumdar-Shaw]

So let me answer that by saying that, look, Viatris is absolutely focused on making this into an important business growth driver for their business. And I think what we have seen thus far is basically making sure that we are in the market with a sustainable market share, which, as you can see, has been in the high single digits. As you know that there are not too many competitors. At the same time, I think, we are confident as partners of making progress and gaining greater market share in the coming quarters and years. So I think you -- this is a patient-business-building kind of phase where, I think, once we are entrenched in that market, with biosimilars -- as you know, biosimilar uptake also has now been very positively received in the U.S. And so now onwards, I think you are likely to see an uptick in market share. So we are very confident, as is our partner, Viatris, that things will improve in the future.

[Sheersh Jain]

But your confidence has been visible for the past few quarters, but there hasn't been or I [ should say ] in the past few quarters, but there hasn't been visible market share gain. So I'm just concerned like what is Viatris doing exactly to turn your optimism and your strategies into substantial market share gain because that has been constantly in the high single digits and there hasn't been [indiscernible].

[Kiran Mazumdar-Shaw]

I think the fact that -- the reason why we remain confident is because you can see the interchangeability label that Glargine secured. Certainly, should give you confidence that our Insulin business is likely to see benefit from this particular approval. As you know, Aspart will be the next product to follow. So our Insulin segment is getting strengthened with these approvals. And as you know, the Express Scripts announcement of including Semglee into their national formulary is also a very, very important step in this direction. Similarly, I think you know that we are awaiting our approval for bevacizumab. This is something beyond our control. There is -- the only step remaining is a pre-approval inspection. We had asked for a waiver but U.S. FDA has not agreed to that. And we need -- as soon as the facility is approved, we hope to receive approvals soon thereafter. You need to have a portfolio of products, which we do have. It's unfortunate that COVID disrupted some of our strategies, but we remain very confident that, in the coming future, you will see a very good uptick in market share as Viatris also focuses on making sure that they start gaining market share. So that's all I can say. We remain confident because we have the capabilities, we have the capacity, and we are vertically integrated. That's what gives us the confidence that we will be a very strong player in biosimilars. When you compare us to many other companies who are playing in this field, they are not vertically integrated, except for a few, there are most who are not vertically integrated. And therefore, we believe that we do have a very strong reason to be confident that we will succeed in the near term.

[Sheersh Jain]

I have just one last question. So just as we have interchangeability status for Semglee, do all biosimilars, all biologics, can have an interchangeable biosimilar? And if yes, what happens to our market share when other players get interchangeable status for the products that we are not interchangeable in? So do we still sustain our market share in that scenario?

[Kiran Mazumdar-Shaw]

Interchangeable labels have also been given. As you've just heard, adalimumab has also received an interchangeable label recently. I think there is an exclusivity period for the interchangeable label. We have a 1-year exclusivity. We will have a first mover advantage, and you need to basically garner market share and make the most of a first mover advantage. That is what we are trying to do with the interchangeable label.

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

Just to add what Kiran said, Sheersh. Interchangeability also is a high part. So it's not something that's an easy access. So there's a requirement for a high degree of analytical characterization showing that your product meets a -- to the expectations that have been set by the agency. Of course, together with the interest of Biocon Biologics, has set that bar and we've paved the way for an interchangeable interest in improving access. And there will be others who will follow. But like Kiran said, it is something where we carry an exclusivity period. And this is something that's not easily accessible unless you have the scientific credibility to get past that product.

[Nikunj Mall, Head of Investor Relations]

The next question from Tushar Manudhane from Motilal Oswal.

[Tushar Manudhane, Research Analyst]

[indiscernible] would like to understand [indiscernible].

[Operator]

Sorry, Tushar, your line is not clear.

[Tushar Manudhane, Research Analyst]

Am I audible?

[Kiran Mazumdar-Shaw]

You're audible but there is some distortion.

[Tushar Manudhane, Research Analyst]

Am I audible now?

[Kiran Mazumdar-Shaw]

Yes.

[Tushar Manudhane, Research Analyst]

Just on this Semglee [ where we are ] having [indiscernible] product as well as interchangeability associated. I would like to understand, are we also going for the authorized [indiscernible] as well? Could [indiscernible] a key benefit [indiscernible].

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

So Nikunj, can you repeat it? I couldn't hear the question.

[Kiran Mazumdar-Shaw]

No, the question was that you got both Semglee and an authorized generic, what is the strategy of that?

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

Yes. So Tushar, I think these are [ productive ] product that we've launched in the U.S. market. Viatris has brought this to the market. Basically, this is a commercial strategy to allow access -- as broad access as we can to patients in the U.S. or people with diabetes in the U.S. as much as whether they're [ carrying ] insurance plans, their co-plan -- copay coverages, their payer preferences and coverages. I think the intent is to see how we can maximize each of the product regardless of how the patient is placed. But we are just [indiscernible] would be best place to respond to it, but the intent is to see how we can make access -- make the product accessible to a wide section of people, whether they are covered through the formulary or limit that to phase -- to a ceiling. That's the real intent behind that products.

[Tushar Manudhane, Research Analyst]

In manufacturing the authorized version?

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

Yes.

[Tushar Manudhane, Research Analyst]

Biocon will be manufacturing the authorized version?

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

Yes.

[Kiran Mazumdar-Shaw]

Yes.

[Tushar Manudhane, Research Analyst]

And secondly, we would like to also understand why we have a good pipeline of Insulin Glargine, Aspart and bevacizumab. Would like to share the other potential molecules for FY '23, '24, maybe '25?

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

So if we've talked about a bunch of products, Tushar, which are the insulin and then insulin analog. We've also shared that we will be looking to bring our recombinant human insulin, which is right now approved to -- in over 40 countries of the world, to those in the U.S. as well, and then we look forward to adding that to our portfolio shortly. So in addition to the basal insulin, which is Glargine, we will add a rapid-acting analog in Aspart. And then we will also bring in, which is [ Viatris on that], we will bring in our own recombinant human insulin following that.

[Tushar Manudhane, Research Analyst]

Got it. And just one last one with generic side, while you get an intense pricing erosion as has been commented, but at the same time, if I look quarter-on-quarter, PBT margin has improved at least by 300 bps. So if you could just explain that part. Is that to you [indiscernible] I don't know?

[Indranil Sen, Chief Financial Officer]

Yes. I think the quarter-on-quarter margin is largely reflected due to the product mix. I think operationally, our base has remained similar to quarter 1. I think it's purely a play of product mix.

[Nikunj Mall, Head of Investor Relations]

The next one is from [ Ankush Agrawal ] from [ Search Capital ].

[Unknown Analyst]

Am I audible?

[Nikunj Mall, Head of Investor Relations]

Yes.

[Unknown Analyst]

Just one broad question on the overall biosimilar business. So like Biocon has been an early mover in the business, right, from identifying the portion at early on, getting into the partnership, getting to product development, getting approvals. But how do you think we have done of there in the commercialization part of it? Like either be the challenges that we have faced together to a partner [indiscernible] or from a market development perspective, how do you think you're going to change a strategy going ahead?

[Kiran Mazumdar-Shaw]

Maybe, Arun, you would like to take this question.

[Arun Suresh Chandavarkar, Managing Director of Biocon Biologics Limited]

Can you repeat the question, Ankush? I missed the -- I couldn't hear you. Some -- I think you should be on mute because I'm getting an echo.

[Unknown Analyst]

Yes. So the question was like how do you think Biocon internally have fared when it comes to commercialization strategy until now, right? Broadly...

[Arun Suresh Chandavarkar, Managing Director of Biocon Biologics Limited]

I'm sorry, I think somebody else is...

[Kiran Mazumdar-Shaw]

No, he says, how do you think Biocon has fared on the commercialization strategy for biosimilars given that we were the first to enter this field and do everything to get approved. That's your question, right?

[Unknown Analyst]

Correct. Correct.

[Arun Suresh Chandavarkar, Managing Director of Biocon Biologics Limited]

I think there is a problem with my iPad. [indiscernible] I'm not able to hear you. Sorry, I'll get back. I'll let...

[Kiran Mazumdar-Shaw]

Okay. Then maybe Shreehas you might want to answer.

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

Let me try and respond to your question, while Arun fixes his line. But I think the important piece is to see the way we've developed these products and brought them. These are long gestation opportunities, as Kiran talked about. And the way we've brought these products first to emerging markets and then into [indiscernible] to broadly bucket this opportunity. And let me talk about how we brought them to the U.S. first with our partner Viatris. And I think it's been a very successful launch. We think that when we brought in Fulphila, it was the first biosimilar to have been launched in the U.S. market. And even the -- it was probably the most successful launch of a biosimilar ever in the U.S. Now since then, we've also been able to value maximize that opportunity in the U.S. and continue to hold high single-digit market share by preserving margin for us. In terms of how we progressed with trastuzumab, we were slated for a risk-free launch until Amgen did jump in with the [ at-risk ] launch. So we were -- Viatris was caught by surprise by that. But it hasn't taken away from how we've gradually inched our market share towards double digits now and in the period since we've launched. Again, here, we preserve value. We preserve margins. The markets remain same. There was this Insulin Glargine launch and approval that we got and the timing of that approval in the U.S. meant that we missed the formulary cycle for calendar '22 because that was between that July and October period. Since our approval happened subsequent to that formulary discussions and negotiations, our calendar '21 has essentially been in the retail space. But now that it's opened up for calendar '22, you can see that Viatris has really made good progress and gotten us listed with the preferred status in one of the biggest PBMs. So I would say we've had a fairly successful approach in probably the largest market in the world and with the products that we brought to the market. There is no switch that will suddenly bring market share which takes time to build. Now we've seen -- I think there was a previous question, I think it was Sheersh asking, why can't we [indiscernible] -- suddenly, sustainably and is pricing the only lever that you have? Pricing is one of the levers, and we have been very competitive on that as I responded to Shyam. But I think beyond that, there are several other factors to be commercially successful which is the order of entry or the payer strategy to payer access. And importantly, what is the cost of acquisition of that portfolio and -- particular for our customer. So Viatris has balanced all of this very well. And if you look at how that business has increasingly grown. And like Chinni said is now that entire full is about 50-50 of what we were since the time we brought these products into the market, the split between developed and emerging markets. So I think overall, if you look at it, we've progressed well in a, I would say, in a gradual but steady pace. And in the emerging markets, where our teams have commercialized the product to partners, I think we've seen phenomenal progress there as well, whether it is the markets of Latin America where our trastuzumab brand through our partner, Libbs, which is [indiscernible] is the largest brand in the country for trastuzumab, or in Mexico with our partner in PiSA for our recombinant human insulin, or with the Malaysia where we have over 60% market share in that market to a distributor model. So we've changed models to different markets, including how we get access to patients over time. So that is a longish answer to your question, but I think the commercialization has been in 2 different avenues, which is successful in the market, which works best in the market that we are operating in. That's really the summary, [ Ankush ], of how we've gone about getting our products to patients.

[Unknown Analyst]

That was a very broad answer to it. But do you think the market condition has shaped what our expectations to say, 5, 6 years down the line, back earlier? And do you think that, based on this current status, you will modify your expectation for the future products that you are going to launch?

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

I didn't get the full content of your question, but I think what you're saying...

[Kiran Mazumdar-Shaw]

I think the main -- I think what I'd like to respond by saying is, please don't cut and paste the generics model with the biosimilars model. I think we have to build the Biosimilars business just as the way Shreehas have described it. It is a very important business which requires a different set of factors to address. I think we are very confident that we have understood what it takes to build a Biosimilars business. And we remain very confident that this will be a very large and significant business for the group. For Biocon biosimilars, we certainly believe that this is going to be a biologics is -- it's certainly going to be a very successful business going forward. But I think you must understand that you need to build a very strong foundation before you really start getting a good uptick in terms of what you're trying to do. So I don't think we are disappointed. I think we know what to expect, and we're addressing these expectations very meticulously.

[Nikunj Mall, Head of Investor Relations]

The next question from Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, Executive Director]

So first question is on your virtual PAI that has been done for oral solid in Bangalore. Can you give some color on that in the sense that typically it would be for first generic, complex, high-value product? Is that the case with you as well?

[Siddharth Mittal, MD, CEO & Director]

Sameer, it is for a product where there are very limited number of players in the market. So that would have prompted FDA to oblige with this remote inspection evaluation.

[Sameer Baisiwala, Executive Director]

Is it a large market in dollar terms or?

[Siddharth Mittal, MD, CEO & Director]

Not very large, I would say. Abhi, maybe you want to add some context there.

[Abhijit Zutshi, Commercial Head of Biocon Global Generics]

Sorry, I was on mute, Siddharth. Yes, it's not a very large market. It's upwards of $500 million with limited competition.

[Sameer Baisiwala, Executive Director]

Okay. Great. And the second question is on Semglee. Have you had any advantage on the vial side because I think you are the only player on that? And the second -- or does the commercialization contracts, both for pen and vial go hand in hand? And the second is, would it be a fair expectation that you get to a double-digit market share over next 12, 18 months? Your thoughts on that.

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

Let me respond to that, Sameer. I think the opportunity within the Express Scripts Formulary Listing that Viatris is secured is for pens and vials both. So we would, in that sense, be the only 1 outside of Lantus, which had that. So it clearly creates a unique positioning and we see an uptick in that particular SKU clearly. So that's different from what other products have to offer particularly Basaglar. On the second question, do we see our market shares moving up? I think I couldn't specifically comment on what that would be, but it's fair to assume that they will move not [indiscernible].

[Kiran Mazumdar-Shaw]

I think it is safe to say that, certainly, the aim is to be in the double-digit growth category, our market share category.

[Sameer Baisiwala, Executive Director]

Okay. That's great. And just 1 or 2 more. Can you update us on the pipeline of new biosims entering Phase III? I think there was expectation that there would be a couple of them in this current fiscal. And second is for Aspart, what's the realistic time lines that you think you will be able to get the approval and launch the product?

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

Yes. So as far as Kiran said in her opening remarks, I think the year, we've clearly hosted the inspection FDA has visited us, we did receive a [ Form 483 ], and we have those 6 observations we feel very confident about. And we responded to those observations with solid CAPA actions, which we believe the FDA will find acceptable. So we are looking at, I don't know, approval at some point in time sooner than later. So that's about Aspart. And in terms of your other question, which was more related to products coming to the clinic this fiscal, I think we will -- we are on course to deliver on that, and we should be discussing them and the progress of our pipeline with you as we get on to more discussions like this.

[Sameer Baisiwala, Executive Director]

Shreehas, would you say Aspart is for 1Q 2022? Is that a realistic expectation, [indiscernible]?

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

From an approval standpoint, yes, I think launch strategies would certainly be depending on how Viatris sees this and how we position that. I think Viatris would also have to be with the formulary cycles like we did in case of Glargine. So we'll have to be mindful of that as we bring trast -- sorry, Aspart also into the market.

[Nikunj Mall, Head of Investor Relations]

The next one is Prakash Agarwal from Axis.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

I got muted somehow. So my second question was on the cost aspect. So we've been hearing a lot of increase in raw material prices, solvent prices as well as power cost. As a company, how -- what we are witnessing now? And how well we are positioned for the next 6, 12 months from a raw material besides the operating costs like power, et cetera?

[Kiran Mazumdar-Shaw]

Shreehas and Siddharth, can you take it?

[Siddharth Mittal, MD, CEO & Director]

Sure. So from a power cost perspective, we do not see any impact. In fact, we are looking at rationalizing our power cost as we move to green energy. More the dependency on wind and solar other than conventional energies where we definitely see a benefit coming in. But as far as the raw materials are concerned, I think it's more than the raw material, it's a solvent, which -- where we have seen the prices go up over the last 6, 9 months. And that's definitely impacted our margins. But the KSMs and raw materials, we have not really seen any drastic upward or downward movement coming in from China or even the other vendors in India. Shreehas?

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

Yes, I think you've covered it -- said, on that part. I think the only ones to the biologics business would be specifics where you would need single-use materials or specific media components where we've seen supply slowdowns, I would say. And that's really been something that our supply chain team has really been working hard at preserving. We do not see any major concerns to our ongoing operations, and we've not seen anything that we are really overly concerned about, Prakash, at this point.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

And how do we read the increase in inventory? I mean is that to protect the future increase in prices? Or is it to protect the supply chain? Or would we consider both?

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

It would be a mix of both. I'll let Chinni comment on it, but it is a mix of both. Clearly, a lot of -- there was a lot of anxiety in the months, which were leading up into the pandemic, and there was a requirement to see that [indiscernible] of stock up on a lot of these things. We see that easing up overall as supply chains were over -- start relaxing a bit. We also are looking at product launches. So we would see some of that building up. So you're fair when you say, it will be a little bit of both. But Chinni, if you would like to add something or Indranil?

[Indranil Sen, Chief Financial Officer]

Yes. You covered it. It's mostly the supply chain aspects, Prakash, and with the buildup for H2.

[Prakash Agarwal, Executive Director of Pharmaceuticals]

Okay. You mean the launch or the market share in [ check ] that you're expecting across markets, it could be because of that as well?

[Indranil Sen, Chief Financial Officer]

Yes. Generally, we are expecting to see sequential growth quarter-on-quarter and set up nicely for FY '23. So far attainment we build up is to us.

[Nikunj Mall, Head of Investor Relations]

Next one is Surya Patra, PhillipCapital.

[Surya Narayan Patra, VP & Pharma Analyst]

I was trying to understand whether you have seen any kind of advantage in terms of gaining better -- or expansion for your other products, getting more like inclusion in the various incremental formularies for the -- for say, the older product, given the benefit or advantage of interchangeability, what we have seen in case of [ obliging ]. Let me restate the question, please. Sorry for that. See, we have seen interchangeability at approval for Glargine, so now this should be a demanded product for commerce. So whether this is giving any advantage to the other old product in terms of penetrating faster with new contracts or new customers like that.

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

No, I don't quite follow that. Would you want to respond to that? Did you -- if you could hear what that -- Surya, your line has been a little static on that.

[Siddharth Mittal, MD, CEO & Director]

I think, Surya, looking -- you're asking if there are synergies between the commercialization of interchangeable Glargine and the other oncology products which we have. And then, does that -- does an improvement in Glargine also supports the improvement in the Fulphila and Ogivri? Is that your question?

[Surya Narayan Patra, VP & Pharma Analyst]

Exactly.

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

I mean if you look at our current relationships that Viatris has with some of these major formularies. Fulphila is investing with some of these PBMs in some way, and we have those onward relationships. But of course, the -- this kind of a preferred listing with the formulary as large as Express Scripts will have positive knock-on effects, not just on other products in our portfolio, but even potentially with other customers. These are things which we can't necessarily comment on how those will play out. But it's basically intuitive that some of these things will have synergistic or positive rub-on effects overall. But to really say that this is what will happen, I think, would be very difficult as well.

[Surya Narayan Patra, VP & Pharma Analyst]

Okay. And then similar question on. Let's say, Fulphila, what we had seen last quarter that U.S. FDA highlighting the artificial volume gain, what the innovator has witnessed over the years because of the Onpros kind of marketing. So after that, did you see any kind of advantage in terms of a more and better penetration for Fulphila?

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

We certainly have always maintained that the device itself doesn't probably offer any meaningful benefit to patients. That's something that we've always been of the view. Clinically, it doesn't offer any benefit. There's certainly some benefit on the convenience, and it certainly did head on to longer market share during the pandemic. But you are seeing that come off now and you're seeing that erode. So we certainly feel that the syringe market will overall benefit which is where we are currently operating in. So we certainly see some positive effect from that, Surya.

[Nikunj Mall, Head of Investor Relations]

The next question is from Charulata Gaidhani from [indiscernible].

[Charulata Gaidhani]

Yes. My question pertains to the difference with adalimumab getting interchangeable status. How does it change the market dynamics? And what kind of volume growth you can anticipate in the market?

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

We wouldn't necessarily want to comment on competition here, but the adalimumab biosimilar interchangeable approval that Boehringer has been able to secure. We've, of course, been ahead of the pack in terms of how -- what is publicly available in terms of dates. So we certainly feel that this is a positive development overall in terms of how it will improve and widen access of the product. But it's -- if you really look at it, Humira is a large opportunity overall. And we believe that it will only get better in terms of how this will be explored by all the biosimilar players, including Viatris who has a large deal there. So we see this overall, Charulata, as a positive development in terms of acceptance of biosimilars in general.

[Charulata Gaidhani]

Okay. And my second question pertains to the Serum deal. By when do we expect completion and the funds moving into Biocon?

[Kiran Mazumdar-Shaw]

Let me say, there are no funds moving into Biocon, but we expect to see this partnership realizing revenues for Biocon Biologics in the second half of next fiscal.

[Nikunj Mall, Head of Investor Relations]

The next question is from [ Pranam Misha ].

[Unknown Analyst]

I have just one question. What would be our gross block for the Malaysia biologics facility? And what would be its [indiscernible] of that capacity?

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

We have not revealed the capacity. But in terms of investments, it's around $350 million.

[Nikunj Mall, Head of Investor Relations]

The next one is from Harith Ahamed from Spark Capital.

[Harith Mohammed Ahamed, Vice President]

On Insulin Aspart, your comment that the Form 483 in the pre-approval inspection, that doesn't impact your commercialization time lines. Just trying to understand if there are any entry barriers other than the compliance status of the facility. So I would have imagined if the inspection had gone well, we would have had an approval by now, and launched sooner. So are there any patents or something else that's blocking [indiscernible]?

[Kiran Mazumdar-Shaw]

I think you should be corrected in your perception of what you just said, okay? First and foremost, as you know, the inspection was not possible because of COVID for all this time. And we were able to persuade them to come and do an inspection at the Malaysia facility, which they did in September. It doesn't mean -- yes, India has been able to come earlier for the inspection, we could have got an earlier approval, but there is more linkage to the inspection and approval time line. Approval takes place of a PI inspection. It takes a specific period of time. And that is why, I think, even Shreehas confirmed, I think, to Sameer, that we expect approval in the first quarter of next calendar year, which is -- which does not necessarily mean that we will immediately see an uptick in terms of commercial opportunities because it is all linked to contracting cycles. If we are able to enter into a contracting cycle in that period of time, obviously, it means that we can immediately start with our commercial entry into the U.S. market. If for some reason, we have to wait for a few quarters, so be it. But I think you should not assume -- I mean, your perception that, that the inspection is delaying approval is not correct. The inspection had to take place. Yes, it could have taken place earlier, but COVID did not allow travel. And that was the only reason why the inspection was not -- are done in September this year, and that we persuaded them as a special request saying, please come inspect us and they agreed.

[Harith Mohammed Ahamed, Vice President]

My second question is on Bicara Therapeutics. So we had talked about plans to raise funds at that entity. So any updates there? And do we still maintain our guidance of no more funding from Biocon beyond the $40 million that we've already done?

[Kiran Mazumdar-Shaw]

They are in the process of raising funds, and we will provide some basic funding to keep their operations going. But beyond that, we are not funding them at such a large level.

[Harith Mohammed Ahamed, Vice President]

And the last one from my side. There's an exceptional item related to modification of the optionally convertible debentures of a preinvestment in Biocon Biologics. So can you give more color on this, what exactly this is about?

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

Harith, I'll take that question. But yes, there's been a modification in the terms. No change in the equity stake. But because there's a modification in the terms, unamortized cost with respect to the investment has to be expensed off in line with the accounting standards. No change in equity stake that it will convert.

[Nikunj Mall, Head of Investor Relations]

Next one is from the Vipulkumar Shah from Sumangal Investments.

[Vipulkumar Shah]

Am I audible?

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

Yes.

[Vipulkumar Shah]

Yes. My question is to Kiran, ma'am. This is regarding our deal with Serum or this vaccine. So is it an asset admission on our part that we are seeing a growth situation in Biologics business, and we don't see any meaningful growth prospects for Biosimilar business? How should we read it, ma'am?

[Kiran Mazumdar-Shaw]

No, I think -- let me explain the whole rationale behind the Serum deal. As you know, our objective of the Biocon business is to make global impact on global health care. And I think all this time, we were only focused on noncommunicable diseases, which certainly has a huge need and a huge unmet need. I think nobody has really looked at communicable diseases as an area where there was a huge need globally to handle global health care. I think the pandemic brought the attention to the huge impact of viruses and other microbes in terms of disrupting global health care, which we ourselves felt was very important if we wanted to be a comprehensive play in terms of making impact on global health care. We felt that this was also a good adjacency for us because of the fact that vaccines can be a very good bolt-on business to us. And that is the reason why we believe that this is a very good alliance, which gives us an entry into this business. There is also a huge need for developing antibodies for infectious diseases as well. And that's why we believe that this was a very good partnership and alliance. But it doesn't take away from the fact that you need biologics for many, many unmet needs in noncommunicable diseases. So I hope you understand that it is not to take away from noncommunicable diseases, but to make sure that we also have communicable diseases in our portfolio as something to address because both these areas do have unmet medical needs, which are being served by biologics and also now with the vaccines. So for a long time, I think the vaccine space was stagnating because there was no need for addressing any of these kind of viral diseases. But today, the spotlight on viral diseases and the disruptive impact is being felt and we find that we also need to be there.

[Vipulkumar Shah]

So ma'am, are we open to venture into manufacturing of vaccines at a future date also?

[Kiran Mazumdar-Shaw]

Well, I think we've already mentioned that in our alliance that Serum Institute and Biocon Biologics will enter into research programs for next-generation vaccines.

[Nikunj Mall, Head of Investor Relations]

So Tarang from Old Bridge Capital.

[Tarang Agrawal, Investment Analyst]

Congratulations on getting the interchangeability status and approval to Express Scripts. Actually, I have 3 questions, but I'll just probably start with 1. What proportion of the overall Glargine volumes in North America would be currently driven through the Express Script segment network?

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

Roughly, in the region of about [ 6 total out of 4 ] in that region, somewhere in that place.

[Nikunj Mall, Head of Investor Relations]

The next one is from [ Satya Kilti ].

[Kiran Mazumdar-Shaw]

Move on to the next if people are not able to...

[Nikunj Mall, Head of Investor Relations]

Okay. And the last one is from [ Sonal Gupta ].

[Unknown Analyst]

I just want to understand like, Humira you've seen the -- Boehringer had done interchangeable -- I mean switching studies. So I just want to understand that for -- what would be the cost of like if you were to pursue something similar for your maps where you have interchangeability, what would be the cost of doing a switching study?

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

So [ Sonal ], each one of these studies will be different depending on the product you are trying to do it for. It would vary depending on which reference product you are generating the study for the period for which that you are conducting the study, the number of switches that you would need to conduct before you can claim absolute suitability. So it would change from product to product for all these chronic therapies. But more importantly, you have to see, given the current guideline status, that it's only -- but the first one to make it past the line who can really benefit from it given the 1-year exclusivity period that they will enjoy. And this particular study was known for a while as it was obvious that if we were to make the cut, then really anybody else conducting a similar study would probably not benefit from that anyway because there could be now exclusive status that the first one past the line would enjoy. So it is really in that context that you're looking to do in these kind of studies.

[Nikunj Mall, Head of Investor Relations]

Thank you, everyone. I think there were a few more questions, but we'd request you to reach out to Aishwarya or I, and we can help you with the responses. Given we are over time, I think with that, we would like to conclude the call, and we look forward to seeing you again next quarter. Have a good day.

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

Thank you.