Biocon Ltd

NSE:BIOCON

Earnings Call Transcript 2022-Q4

[Aishwarya Sitharam, executive]

Right. We have about 200 people in the call now. We will get the call started. Good morning, everyone. I am Aisharya Sitharam from the Biocon investor relations team and I would like to welcome you to Biocon's earnings call for Q4 and full-year FY '22. [Operator Instructions]. I would also like to bring to your attention that this conference is being recorded and the recording will be available on our website within a day. The transcript for this call will be available within the next 5 working days.

To discuss the company's business performance and outlook we have with us today the Biocon leadership team comprising of Dr. Kiran Mazumdar-Shaw, our executive chairperson, and other senior management colleagues. I'd also have 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 concurrent 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 this call, if you need any further information or clarifications, please do get in touch with Nikunj or me. I would now like to turn the call over to Dr. Kiran Mazumadar Shaw. Over to you, ma’am.

[Kiran Shaw, executive]

Thank you Aishwarya. Good morning, everyone. I welcome you to Biocon earnings call for the fourth quarter and the full year fiscal FY 22. I would like to start this earnings call on a note of optimism on the back of a strong performance in the year that has just concluded. Biocon’s reported revenues of INR 8,397 crores or $1.1 billion this fiscal. This year, Biocon has entered into a transformative acquisition with its long-term partner Viatris to acquire its biosimilars business portfolio for $3.335 billion USD. This is in order to create a vertically integrated structure that will ensure an efficient value chain with embedded agility and competitiveness. We believe that this deal will enhance Biocon's position as a true bio powerhouse.

At Biocon, our key priorities of patients’ centricity and access to all drive our decisions and the way we operate. Yes, we have now further assumed a greater prominence in our business objectives, recognizing our sustainability practices, eco-virus, global sustainability rating agency placed Biocon in the bronze category with an overall score of 52 as against 35 in the previous year.

Let me emphasize the fact that our pipeline or our research pipeline is our lifeline. We continue to invest significantly in the search and development to drive business growth. Towards this objective, we invested over INR 700 crores in R&D this fiscal to advance our development programs in the biosimilars and generics area. During this quarter, 2 of our wave 2 biosimilar molecules, Denosumab and Ustekinumab moved into the clinic. We also continue to build the strong pipeline of niche formulations, such as injectables as well as peptide and potent APIs in our genetics business. We believe these investments will help us further our pursuit in providing high quality and affordable healthcare accessible to all the, once we drive further value creation.

Next slide. Let me now turn to the board update. Before I discuss the performance of the business, I would like to share a board update. I'm pleased to welcome Naina Lal Kidwai, a retail banker and a business leader as an additional director on the board of Biocon Ltd. An MBA from Harvard Business School, she's a recipient of several awards and honors, including the Padma Shri for her contribution to trade and industry. She's the past president of FICCI. She retired in 2015 as chairman of HSBC India and executive director of HSBC Asia Pacific. We look forward to Naina's leadership, which we believe will provide a strong impact to our great growth journey.

I'll now present the key financial highlights starting with the quarter and followed by the full year. At a consolidated group level, revenues for Q4 FY 22 grew 21% year on year and 11% sequentially to INR 2,476 crores. Revenues from a biosimilar business delivered a strong year on year growth of 48% while that of a genetics business grew at a healthy rate of 26% and research services revenue grew by 15%. Our gross R&D spend was at 232 crores, an increase of 70% over the last fiscal, corresponding to 14% of revenue [XDG]. Of this, INR 191 crores expense in the PLL while the rest has been capitalized.

Core EBITDA Margin, which is EBITDA margin net of licensing, dilution gain on account of our startup [indiscernible] mark to market loss 4X and R&D was higher at 33% compared to 32 in the same quarter last year on account of an improved performance in both biosimilars and genetics. EBITDA for the quarter was INR 659 crores, reflecting a 3% year on your growth. The EBITDA margins stood at 27% as against 30% reported in Q4 last fiscal, primarily due to as explained earlier, the higher R&D spends in biosimilars and generics during the quarter.

Exceptional items for the quarter included professional fees towards the Viatris deal. Profit before tax and exceptional items for the quarter totaled INR 384 crores, up 9% over INR 353 crores during the same quarter last fiscal. Net profit for exceptional items for the quarters totaled INR 262 crores versus INR 257 crores last fiscal. Our net adjusting for exceptional items totaled INR 239 crores. Adjusting for the mark to market loss on investments and gain on dilution [indiscernible] on a like to like basis, growth margins are higher compared to the same period in the previous fiscal, which translates to 37% growth in core EBITDA versus reported growth of 11%, 32% growth in EBITDA versus reported growth of 3%, 75% growth in profit before tax and exception items versus reported growth of 9% with a 5% higher margin. INR 176 crores in net profit before exceptional items versus deported growth of -6 and a 5% higher margin.

Let me now turn to the full year financial highlights. At a consolidated group level revenues for FY '22 were INR 8,397 crores versus INR 7,398 crores, a year-on-year growth of 14%. Adjusted for the gains from dilution in our Bicara state, the overall revenues grew by 16%. Revenues from our biosimilars business, a strong year on year growth of 24% and our research services as I mentioned, grew at a healthy rate of 19% while revenues per a generic business remain flat. We recorded a of INR 58 crores this fiscal. A loss of INR 28 crores arising on account of mark to market loss on investments is also reported this year. For this fiscal, we also recorded a gross R&D spend of INR 711 crores, which is 13% higher over last fiscal and corresponds to 13% of revenue [ex TG]. Of this INR 595 crores is expensed in the P&L while the balance has been capitalized.

Full year EBITDA margin, as explained earlier, stood at 32% compared to 31% last year on account of an improved performance by biosimilars. EBITDA for the fiscal was INR 2,183 crores, reflecting of 14% year on year growth with a consistent EBITDA margin of 26%. Exceptional items for the year included provisions for export incentives, impact on modification of terms of certain debt instruments and professional fees towards the Viatris deal. Profit before tax and exceptional items for the year stood at INR 1,094 crores up 4%, over INR 1,055 crores last fiscal. Net profit before exceptional items stood at INR 722 crores versus INR 744 crores while net profit for the year after exceptional items stood at INR 648 crores versus the INR 740 crores reported in FY21. However, as explained earlier for a like-to-like adjustment EBITDA growth was 25% versus the reported growth of 14%. And the growth in core EBITDA was 18% versus 10%.

Let me now turn to segmental business performance during the quarter and for the full year, let me start with generics. The generic segment delivered revenues of INR 717 crores during the quarter a year-on-year growth of 26% and a sequential growth of 18%. Profit before tax for the quarter was at INR 116 crores versus INR 73 crores last year and INR 67 crores in the previous quarter. Profit before tax margins were higher at 16% as against 13% last fiscal and 11% previous quarter.

The improved business performance in Q4 was driven by key factors, mainly a ramp-up in API sales, new drug product launches in the US, particularly [indiscernible] and the normalization of operational challenges that we have faced earlier in the year. On a full year basis, the generic segment delivered revenues of INR 2,340 crores compared to INR 2,363 crores in the previous fiscal. Profit before tax stood at INR 261 crores versus INR 291 crores the previous fiscal. The segment witnessed a muted performance given the COVID-led operation and supply challenges at the start of the fiscal, which started running to normalcy in the second half of the system.

However, profitability continued to be impacted by higher logistics and input costs, particularly raw material solvents and fuel. Pricing had been in several markets further added to this impact. During the quarter approvals were received from the US FDA for Posaconazole an antifungal drug, as well as Dorzolamide, an ophthalmic product, which were also recently launched in Q4. We continued to expand in emerging markets and commenced our first commercial supplies of tacrolimus capsules to Mexico. We also received our first approval in Singapore for tacrolimus and in the UAE for Rosuvastatin and tacrolimus.

In January this year, we also had a successful site inspection at our API manufacturing unit located in Biocon Park, Bangalore by Health Canada. We are on track to qualify and validate our Greenfield fermentation based immunosuppress API manufacturing facility at Visakhapatnam. We also plan to augment our existing API manufacturing infrastructure in Hyderabad and Bangalore as well as set up a new injectable facility in Bangalore.

As part of our sustainability focus, we have diversified our renewable power consumption to include both solar and wind energy. We are confident to grow our generics business in led by [indiscernible], supported by new product launches and our expanded manufacturing. Whilst we continue to be resilient, we are cognizant of potential headwinds, such as pricing pressure and rising input costs, and we will continue to focus on building costs and operational efficiencies to sustain growth.

Now, coming to biosimilars, Biocon Biologics recorded revenues INR 982 crores for Q4, a year-on-year growth of 48%. Core EBITDA excluding R&D, Rx licensing income and mark to market loss on investments stood at INR 382 crores, up 78% year on year. Core EBITDA margins increased from 33% Q4 last fiscal to 39% this quarter, demonstrating continued healthy profitability. EBITDA for the quarter was up 56% year-on-year at INR 257 crores and profit before tax and exceptional items stood at INR 144 crores, up 109% year on year. I'm also pleased to say that our Malaysia operations became profitable for the first time this quarter.

Moving on to full year performance, Biocon Biologics recorded revenues of INR 3,464 crores in FY22, a year-on-year growth of 20%. This rate of growth is much faster than the 21% witnessed in FY 21. And this I might add is in line with our guidance. We witnessed significant improvement in profitability at all levels this year. Core EBITDA for the year was at INR 1,320 crores, up 30%. Net R&D spends for the year was at 9% of revenue, in line with FY 21. EBITDA for the year stood at INR 1,320 crores, a year-on-year growth of 35%. Profits before tax and exceptional items has grown by 49% year on year. And the growth in profits is attributable to higher revenues and improved margins.

Let me now share some highlights of the biosimilars business. The most significant growth driver has been our 351(k) interchangeable biosimilar insulin largely in the US market, which has attained a double-digit market share at the end of this quarter. Viatris expects to end calendar year 2022 with mid-to-high teams in terms of market share. We give these market share in the US reported consistent improvement during the year obtaining double digits. Fulfiller the US market share was resilient despite a high competitive market.

In Europe, both these products continue to witness gradual improvement and performance. And similarly, our biosimilar bevacizumab was launched in select European markets during the year further boasting our oncology franchise. Continued improvement in the performance of our existing products coupled with potential US launches of biosimilar Aspart, Denosumab and Adalimumab will enable the current Viatris-led business to deliver robust growth over the next 2 years. Our economic interest in Viatris collaboration products will significantly increase once we consummate the deal with Viatris. We have seen impressive growth in our B2B and BFI business. We've recently been awarded a 3-year contract for Ingsugen in Malaysia, valued at approximately $90 million. We expect our B2B business to be bolstered by the integration of the Viatris transaction, allowing us to target a larger segment of emerging markets. The branded formulation India business recorded a year-on-year growth of 35%. We expect that the continued focus on Salesforce excellence, brand building and KOL engagement will generate sustainable growth for the business.

Moving on pipeline update, we have advanced to and have partnered with 2 biosimilar molecules into the clinic, mainly Denosumab and Ustekinumab. We have exercised the option to acquire Viatris's rights in biosimilar Aflibercept as a part of the transaction. Viatris filed the first biosimilar of Aflibercept in the US. Our portfolio of biosimilars will address the opportunity of approximately $20 billion to drive the growth in the medium term. The Viatris and [indiscernible] deals are towards regulatory approvals. We expect these closures in the second half of the calendar year 2022.

In summary, Biocon Biologics delivered strong revenue and profit growth this fiscal. Combining the Viatris Biosimilar business with BBL accelerates the build out of our commercial capabilities in developed markets in order to become a strong global brand. Vertical integration will drive operational efficiencies and business agility, thereby underpinning cost competitiveness. The vaccines Alliance with crores and continued investments in R&D, adding products to our portfolio opens up new growth avenues for Biocon Biologics in the coming years.

A brief note now on novels. Equillium, our partner initiated a pivotal phase 3 clinical trial of Itolizumab in patients with acute graft versus host disease or GVHD in March this year. The randomized double blinded study will assess the efficacy and safety of Itolizumab versus placebo as a first line therapy for acute GVHD in combination with [indiscernible]. Our Boston-based associate Bicara initiated those expansion cohorts evaluating its lead molecule BCA101 in a patient with head and neck squamous cell carcinoma. Squamous cell carcinoma of the nasal canal and acute cell carcinoma.

In February 2022, Bicara has secured the first round of seed funding from external investors to support the clinical development of BCA101 and other pipeline assets. Coming to the cell services, revenue from operations to their INR 758 crores for the quarter indicating a year and year growth of 15%. Profit before tax for the quarter was at INR 179 crores against INR 158 crores in Q4 previous fiscal, which is a growth of 14% year on year. For the full year revenue from operations stood at INR 2,604 crores indicating a year-on-year growth of 19%. Profit before tax for the year increased by 19% year on year to INR 515 crores.

The fourth quarter growth was also driven by performance across all divisions. Development services and particularly a strong portal as its brought up on the projects delayed due to supply chain issues and other COVID related disruptions. Phase 3 the expansion plan of the Hyderabad research facility was completed during the quarter and the facility now accommodates 500 scientists. Further expansion is being planned in the year ahead.

Let me now conclude by saying that as we come out the pandemic with a strong performance, I would like to announce that the board of directors have recommended for approval by the shareholders a final dividend of 10% of face value of each share for the financial year 2022. I would like to conclude by saying that the year ahead holds tremendous promise for all our business segments. The most significant growth is expected to come from the acquisition of Viatris biosimilars business, as well as through the Vaccine Alliance with Serum. And with this, I would like to open it up to Q&A.

[Nikunj Mall, executive]

[Operator Instructions] The first question is from Damayanti Kerai from HSBC.

[Damayanti Kerai, analyst]

I hope I'm audible. My first question is on biosimilars. We have seen good pickup in prescription volume in most of the launch product, but when we look at the reported sales for fourth quarter, frequently, it's looking flat despite having full quarter benefit assembly. Can have some clarity there, whether it's due to more squeeze on the pricing? How is the pricing environment for most of the launch products, especially insulin?

[Kiran Shaw, executive]

So let me start by saying that the insulin business is showing a strong pickup, like you mentioned. As it has already been reported from a 3% market share in the earlier part of the year, we are now registering double digit market share by the end of this fourth quarter. Yes, I think there has been almost a slack performance of biosimilars in Q3 and Q4, but you must understand that this is no reflection of the kind of market improvement of the business. Q1 tends to be a slightly lower quarter in terms of being able to pull outgrowth as such. But regardless of that, I would like to mention that our biosimilars business is tracking in the right direction. We have not seen greater growth because of certain tenders, which open up later in the year. For example, we just won that tender from Malaysia, which obviously will start only reflecting in our numbers in the year ahead. I would like perhaps my colleague Shreehas to add to what I said.

[Shreehas Tambe, executive]

Thanks, Kiran. I think to your 2 questions, one is to see why those numbers been more or less flattish and a concern if this was anything do with pricing pressure in the US. I think let me address the first part of it, the part related to pricing. We do not see the pricing pressure at all on this aspect. We bought a formulary listing. So we address and that's something that we see staying consistent in the positive. That's really quite a set piece there.

I think the aspect related to the flattish numbers that you talked about, if I draw your attention to the to the earlier part of the fiscal, where we had a run rate of about INR 750 crores to INR 800 crores, the early part of the year as our revenue for the quarter, which we broke through in QC that INR 950 crores to INR 980 crores range which is larger on the back of the launch supplies for our 351(i) insulin.

What you saw in Q4 effectively is the ramp up of that market share from what Kiran just said, which we ended at less than 6% last year to actually the secondary is moving up from there to you know, into that 10% of the teams, as we would say as we move it forward. What will happen going forward is you see that market share is strengthen further and the profit share starting to move into the coming quarters towards the latter half the year. Now that's really how that market is expected to shape. You’ll see us breaking through from that INR 750 crores to INR 800 crores quarter to the 950-980, and then the subsequent quarters you see us getting past INR 1,000 crores mark in the first 2 quarters and then ramping up for it. So I would say that the way to read this is over a wider horizon rather than just a sequential number over one quarter.

[Damayanti Kerai, analyst]

Excellent. Appreciate it. My second question is again on pricing environ for some of the product, which we are anticipating to launch save the [indiscernible] once we get the final FDA approval. What we saw numbers reported by some of the computers in the similar space, I guess the volumes were steady to growing, but even they mentioned declined in ASP. So can you comment on pricing for some of other biosimilars where we are looking to enter?

[Shreehas Tambe, executive]

I think definitely the one of the important things to note is that the pricing overall as remained same for a very long time. We do see pricing tending towards a decline, which is also a factor of the competition that we see increasing the number of players there, which is expected when you have this kind of a market condition. But as you rightly pointed out, the CGR, the volume growth in the US alone has been at around that 4-5% range. And in Europe, even higher around that 14-15% range. So the underlying opportunity is in sizeable, is still growing. Very few players who really had the opportunity to offer a complete product portfolio like we would have once we completed with [indiscernible] as we come in once we get the agency to inspect us.

I think one of the key changes from what we had discussed with you last time is that now we have the agency past that dialogue that we've had visiting us in Q2 of this year and we should hopefully get past into the approval stage shortly which then allows us to partake in this sizeable opportunity along there. So it be an upside, which we had expected to happen in ‘22, but now that the agency is finally able to make it to Bangalore, you would see that happening as we pull along with.

[Damayanti Kerai, analyst]

My last question then I'll get back in the queue. Some of the programs which I think we discussed during opening remarks pertain to clinic. So in line with that, we have seen gross R&D jump 30%. So over next 12-15 months, how should we look at R&D as more and more of these programs progress in the clinical trials?

[Shreehas Tambe, executive]

Yes. Yes, I can respond to that. If you want to talk about the R&D overall let, give you a favor of how we progress? If you looked at how the R&D spends built for the course of FY ‘22, our programs we had said will be moving into the clinic towards the end of the year. And that's exactly what we've announced today. And you've seen 2 of the major assets getting to the clinic. We've announced Denosumab as well as Ustekinmab getting to the clinic. And you will see the R&D spends moving up in line with the progress of these molecules. I’ll let Siddharth actually talk to the specifics on what those numbers will contribute toward the P&L.

[Siddharth Mittal, executive]

As this year, we ended at 9% as Shreehas just said, but as we see the 2 new products enter the clinic, we expect R&D spend to increase in the coming quarters. Of course, the additional revenues from the vaccine that the CRMD and [inaudible] will help us increase our investments in R&D as we progress our next wave of biosimilars. Overall, we expect R&D investments to be around 10-15% of revenues going forward. Of course, quarterly distribution will be lumpy.

[Nikunj Mall, executive]

[Operator Instructions] The next question is from Surya Patra from PhillipCapital.

[Surya Patra, analyst]

Yes, thanks for this opportunity and congratulations for the good set of numbers. My first question is again, on the biosimilar sales. In fact the sequential of flatness, what we are witnessing in the biologic sales, despite the ramp, what you have mention concerned about the ramp-up and the prescription for interchangeable insulin in which obviously would not have witnessed any pricing as such. And even in the previous quarter, we had witnessed a Delta of almost $30 million in the biologic sales. So, which the profit share of which would have come this quarter. Despite that, and the branded pricing for this interchangeable insulin. Despite all these 3 factors, we have not seen any sequential improvement. It is just a flat test. So although you have responded to that question, but I'm still not the same. So can you just clarify bit more on it?

[Kiran Shaw, executive]

So I think I just want to add to what Shreehas said, and then Shreehas can add to what I'm saying. I think he mentioned very clearly that you have to look at this in context of what the sales values were before the [indiscernible]. So they were roughly the 700-750 kind of range in the first 2 quarters, and now they bumped up to almost INR 1,000 crores. So that is the addition of the large gene sales for these last 2 quarters. And obviously we expect a further ramp up to take place because as you know, 2 of our programs, which will Aspart and Bevacizumab have been delayed in terms of approvals for various reasons, largely attributable to US FDA not being able to come and inspect our facilities. So I think you can expect the ramp up to really happen in the coming fiscal. So I think to really contextualize it on a sequential growth may not be the right way of looking at what has done for the business. Shreehas, do you want to add to?

[Shreehas Tambe, executive]

Yes, thanks, Kiran. I think Surya, just to comment further on what I said earlier and what Kiran is just saying, I think the way to look at this would be to say that Q3 would essentially have marked the launch supplies as we same product from Malaysia into the channels. So making sure that that drove they gave once launch supplies into January 2022, as we got the product into the market and to view Q4, essentially as that shift in market share, as it moved from that 3% into that 10% as we left March 2022.

So effectively you are seeing one as the quarter where we actually did the channel stock supplies, and then the other one where you're seeing increasing market shares as the second pieces have gone up and what you’ll see happening to the course of the year as a market share ramps up further is you see a cumulative effect of launch supplies transiting into the key supplies, and then increased profit share as the market share goes up. So I would say that to repeat, not to just look at it as a sequential one quarter but take a broader view of 3Q or 4Q horizon, which then gives you a fuller picture on an annualized basis than just a sequential part, even the sizable shift that we will see in the US market cause of the 351(k) interchangeable insulin.

[Surya Patra, analyst]

That is very useful. My next question is on the small molecule side. You have mentioned about your entry into this injectable API team manufacturing [indiscernible], further emphasizing on the expansion on the commendation-based APIs. And there is obviously on the integrated formulation business also that we are replacing, there is steady progress. So I think this space looks really interesting in the global market from here, given whatever the global situation that we are witnessing. But that is also matching with your migration towards building capability. So if you can just give some sense on this business, let's say 2-3 year time given the ongoing project and the anticipated project on the injectables and the complex products side, what is the thought process there and what growth contribution we should be seeing over next 3 years’ time from this space?

[Shreehas Tambe, executive]

Let me take that. But and let me probably give a broad context before I specifically answer your question. As I've alluded to in the past, you all are aware that we have a very strong capability and manufacturing capacities in the fermentation space since last [indiscernible]. We are building onto those capabilities by adding pipes on [indiscernible] APIs, as well as large scale synthetic APIs. Now that's purely from API perspective. As we further integrate, we have formulations spreading across rules, solid injectables, and various other forms of formulation. We are of course creating pipeline, a very strong pipeline in terms of differentiation and the complexity of these molecules. We are not of chasing a large number of filings like many other general companies do.

We are looking at over-integrating as well as we do so [indiscernible] from outside. If we find an attractive opportunity for differentiated formulation. Now, as we add to the pipeline, we of course need manufacturing capacities. And today, we do have a couple of injectable products, which are manufactured in our biologics manufacturing site and a couple of CMOs. But as we get closer to the launch, we, of course will have our dedicated facility for small molecule injectables and a construction on this facility is what's going to start this quarter. We also have, as you know, expanded our immunosuppressants AP manufacturing capacity in where the commissioning is almost complete, and the validation would start this fiscal. But that is only for immunosuppress. We also see a huge potential for non-immunosuppressant KPIs. And that's where the mention is that we are expanding our existing fermentation facilities in Biocon park where we will significantly enhance our capacities.

The third is we are building a very large-scale synthetic API manufacturing facility in [indiscernible]. Now with all these investments and expansion of pipeline advancement of our pipeline. Of course, we will see a good growth coming in in the next couple of years. I would not specifically give a number for next 3 years, but in fiscal ‘23 compared to fiscal ‘22, which we saw was flattish in the whole year compared to FY '21, but in FY '23, we definitely expect a growth to be there. As some of the capacity enhancement projects are complete, we expect to start supplying from these facilities. We also expect launch of new products in the U.S. in FY '23. And I'm quite hopeful that we'll be able to deliver double digit growth in the next fiscal.

[Surya Patra, analyst]

So on the cap for this cans, give some sense are you becoming bit more at aggressive in terms because of your capacity, excellence and plans? Are you becoming more at aggressive on cap expense here?

[Shreehas Tambe, executive]

No, we have always indicated we are going to be spending rough $100 million of CapEx in a year for 3 years. So has been $300 million of CapEx over the period of 2020 to 2024. We stick to that guidance.

[Nikunj Mall, executive]

Next one from Harith Ahamed from Spark Capital.

[Harith Mohammed, analyst]

My first question is on the Vaccine Allianc. I believe you had talked about revenues of almost $350 million from this Alliance for FY ‘24. So with the commercialization expected from second half FY ‘23, do we have visibility on which of the products and the markets? I’m asking because this is almost 20% of the $1.8 billion performer revenues that you guided for FY ‘24. So it's a significant share of that. Any color that you can provide will be helpful.

[Kiran Shaw, executive]

So let me respond that by saying that obviously it is not a particular segment of vaccines. We have access to the complete portfolio of vaccines. As you also know, the Serum Institute decently received regulatory from the European agencies, the Australian agencies, Health Canada and also hopeful of getting a US FDA regulatory nod for the Novavax vaccine. It is not just the COVID vaccines that we are looking at. We're looking at any other vaccines and we remain committed to making sure that these numbers are a part of our future revenues. And I think we are very confident that Cedar Institute will provide these revenue number numbers going forward. So as you yourself have mentioned, the numbers will only get reflected from the latter half of FY ‘23, and then the full year numbers will get reflected from FY ’24. But the Serum Institute is very confident of providing us these revenues.

[Harith Mohammed, analyst]

That's helpful. My next one is on Bicara. So will you be able to share [indiscernible] in Bicara for the current post dilution which happened during the quarter? What I'm trying is if there'll be a lower fat loss pickup next year and then this was around [indiscernible] in FY ’22. Just trying to understand if this number would be lower in FY ‘22. Can you also give a sense of the evaluation at which this roundup fundraise happened?

[Shreehas Tambe, executive]

The fundraise is not yet complete, so I don't want to discuss about the valuation right now, because the discussions are going on. While we raise a certain amount in March, there's also additional amount being raised in this month. And there's also discussions going on as I said to raise for in this quarter. But after all the rounds are complete, Biocon would just be around 50% of equity being put in Bicara. By June end, you can expect that Biocon will be at 50%.

[Harith Mohammed, analyst]

Yes. And then last one with your permission. I was look at the RD spends roughly 300 crores R&D spends outside Biocon biologics, which I believe is primarily the generic business. So if you could confirm that, that the INR 300 crores R&D spends ex-Biocon biologics is primarily [indiscernible] business and some indication of the split between generics and novel biologics? Secondly the R&D spend for the generics segment, how should we think about that for FY ‘23 and beyond because currently the profitability of generics business is on the lower side and that's primarily cause of the higher R&D that we are doing for that, that A&D filing ramp up. But is there a case for some kind of operating leverage kicking in Ingen business as the R&D spends flatten out or will it continue to increase? Is what I'm trying to understand.

[Shreehas Tambe, executive]

The R&D spend in the FY 22 was [indiscernible] revenue. So to be precise, it’s roughly INR 250 crores on generics. Novel was a very small number because of Mycan is of course is not considered in, the expenses on Biocon molecules are part of R&D and we spend on partially on. That's a very small number. So for next year I would continue to hold guidance between 12% to 14% of generics revenue as R&D guidance.

[Nikunj Mall, executive]

The next question is from Prakash Agarwal from Axis.

[Prakash Agarwal, analyst]

Congratulations on good numbers. The first one is on clarification on the R&D. When you say 10-15% of sales, and normally you've said biopharma sales. So from second half onwards, we will have Serum sales coming in and we would've probably Viatris also kicking in. So when we say 10-15%, is it at what base? Is it biopharma X of these or?

[M. Chinappa, executive]

As indicated earlier, it is not a total revenues, including the services. Yes. Sorry. On the total biopharma biologic [indiscernible]. That includes current BBU revenues, the new revenues from Viatris and [indiscernible].

[Prakash Agarwal, analyst]

Okay. The new molecule that you have mentioned, the 2 new additions on the biosimilar pipeline, what is approx. cost for doing these now? In the past, it had ranged from $50 million to $100 million. Currently, I mean, when we are looking at this, what is R&D budget approx. we have for these kinds of molecules and correct me if I'm wrong, these are for over 4-5 years?

[M. Chinappa, executive]

Yes, 2, 3 years. But roughly along those lines, $50 million to $100 million for product.

[Prakash Agarwal, analyst]

Okay. Because why I ask this is because when I see the competitive landscape there are few players already in phase 3. We have entered clinical now. So I'm trying to understand that we could build late in the game. What is management thought process here?

[Kiran Shaw, executive]

So we are trying to basically see how close we can be to the LOE date on both these programs. We may not quite meet LOE dates, but we are trying to see as close as we can to the LOE date. But suffice to say that, yes, there are a few companies who have entered into Phase III trials, but we also have a strategy to see how quickly we can catch up.

[Prakash Agarwal, analyst]

Okay. Fair enough. And with the background of this 10% to 15% R&D guidance, which is fairly broad, what kind of margins we are looking at? Would it be similar to what we are already having or is there a chance of inching up, given the pipeline and other products kicking in a significant manner? Whatever you can mention. In the core side also do you think that margins could interrupt XR as well?

[M. Chinappa, executive]

I would keep it in the same length, of course, as we consolidate the Serum and Viatris business, we're giving you a guidance for FY ’24. That will give you the real picture of the combined business, the guidance that we laid out for FY '24.

[Nikunj Mall, executive]

Next question is from Sameer Baisiwala from Morgan Stanley.

[Sameer Baisiwala, analyst]

Just for the end-market products, biosim in the US. So what's the revenue outcome for [indiscernible] and task 2 for fiscal ’23? Basically trying to get to the volume price dynamics.

[Shreehas Tambe, executive]

My knowledge, not probably given out product by product specific sales numbers. [Indiscernible] Do you have any additional color?

[M. Chinappa, executive]

Samir, again, at point guidance given, post the Viatris acquisition, we indicated that 523 growth will be biased towards 70 and FY ‘24 would be the full benefit of 70 plus the launch of [indiscernible]. So these are the key of new growth before [indiscernible] kicks in. We're currently modeled growth around the other products. Of course, we continue to pursue opportunities there.

[Sameer Baisiwala, analyst]

For sure. I get that. I'm just trying to see what's the framework. I mean, do these products trend down gradually, or you think there is still some room to grow, then? I'm not looking at any specific number. Just philosophically, how do you guys think about this?

[Kiran Shaw, executive]

So maybe we could ask Matt Erick to basically comment on that.

[Matthew Erick, executive]

Yes. I think if you look at our oncology for portfolio, there's opportunity in both of those areas, as we add that Trastuzumab to continue to grow that oncology portfolio. There's a great foundation there that really understands the buy and bill. Of course, there's some downward pressures, but it's also in regards, how are you looking at this space and how can you continue to grow based on the market share piece. So we have a great foundation to do that, and I think that will give us that opportunity to continue to grow in that market and be successful.

[Sameer Baisiwala, analyst]

Okay, great. The second question is about the contracting outlook for insulin largely for calendar 2023. I'm just not trying to get to any market share number. I'm just trying to understand how does the system work. Do you retain your current contracts that you are enjoying in 2022 and then build over it? Or do you start all over again? Any flavor on that would be great.

[Shreehas Tambe, executive]

Matt, do you want to talk to that?

[Matthew Erick, executive]

Yes, sure. Thanks, Shreehas. Thanks for the question. Look, all those relationships are important and again, leveraging the franchise from a standpoint in diabetes to continue to grow on that and grow that portfolio is very important as you deal with payers in that diabetes space, and we'll continue to work with them as we add additional products within diabetes.

[Sameer Baisiwala, analyst]

No, no, Matthew, I'm not asking about adding new products. I'm asking about the current in market product. How does the system work? How does the contracting for 2023 will work do you start all over again or do you build on, on the current contracts and grow that?

[Matthew Erick, executive]

Sure. Thank you for that. Sorry about that. Look, the contracts do come up each year, but once you're in that contract position, you do have an advantage from that standpoint to renew because you're in that position in regards to current payers and the formularies there. So we'll continue to maintain those relationships in that market share and then continue to build upon that within additional payers as we go into the following years.

[Sameer Baisiwala, analyst]

Yes, that's great. Matthew, that's very clear. And one final question from my side. How are we thinking about as part in terms of resolution of the pending CRL and the regulators visit to our facility and do you think you can still be in time to contract what calendar 2023 for as part.

[Shreehas Tambe, executive]

Yes, thanks. For that question, as you know when we received these CRL, we had pointed out to the, to the 2 aspects that the agency had raised that question. One was regarding the [indiscernible] that is used particularly for a small segment of pediatric patients last year. We needed it on the file and the other one was related to further updates on the kapa actions that we had provided for the observations that the agency had made during the inspection. Now we have been in constant dialogue with the agency and we've responded to the CRL based on the conversations that we've had with the agency earlier this month. Our response to the CRL has been the same, and we expect the agency now move on to see that it gets towards approval. Now whether it'll be exactly in time for the, for the formulary contracting cycle. That's our hope. I know we discussed that before as well. But that's the that's the discussion that will be ongoing with the agency. We are on our part to probably commit on behalf of the agency on when they'll be able to [indiscernible].

[Nikunj Mall, executive]

Next question is from [ Ankush Mahajan ] from Axis Securities.

[Unknown Analyst]

Congrats for good set numbers. My question is there is a falling [indiscernible] margin that's special margins. So what is the impact on gross margins if there is any fall in realizations? I want to say if you see in the US market, we have gained the market share and similarly, we have gained the market share. Gaining market share due to the fall, any impact on margins?

[Shreehas Tambe, executive]

Just speak specifically for we have seen improved margins this year. Margins has gone up from [indiscernible] always with that fully adapt.

[Unknown Analyst]

So the growth is 70%. That's a good growth. How do you see the competition segments are going on, especially the price and no doubt, there is new launching new launches are there. But what are the price erosion? How could we see the growth in this generics phase?

[Siddharth Mittal, executive]

Of course, I already addressed this in a previous question that we do expect new launches coming up next year, both in our API business, as well as formulation business. It should drive double digit growth fortune teams, but from a pricing perspective there are headwinds in the market, especially in the U.S. There are many reports already there that continued pressure. It has impacted all [indiscernible]. We have also been impacted. Now you have to choose. Will we continue to be part of that pricing pressure, continue to lower prices, or you opt out some of these tenders. Of course, we have to do depending on the circumstances, but I can also request Abhijit who heads our generic formulations business add his perspective.

[Abhijit Zutshi, executive]

Thank you, Siddharth, for that. Yes, you're right. I think you sum it correctly that the pricing pressure is there. And the key is to add new products and we are planning for new launches, both through new strategy of licensing products, as well as internal pipe kicking in. So you would see more launches as we grow in this business.

[Nikunj Mall, executive]

The next question is from Nithya Balasubramanian from Bernstein.

[Nithya Balasubramanian, analyst]

First one is actually on Humira. There are obviously multiple factors at play your interchangeability, the [indiscernible] formulation, the low dose versus high dose. So 2 questions. One is what is Viatris' product presentation? Are you likely to go after interchangeability at some point. And 2, based on your recent conversations with payers, what are you picking up as important factors? Is interchangeability important? How important?

[Shreehas Tambe, executive]

I think is a topic of interest for everyone. I think we follow this closely as well. Let’s get the 2 key things out of the base first. I think one aspect is to have the right product formulation, which is as you rightly said [indiscernible] formulation, and that's something that we can confirm has been able to secure. And the other thing is to see that we get the approval for all indications and that's something that we can confirm as well. So I think that out of the way, basically now looking at the other variables that are under the discussion, which are whether it's the strength of the formulation, whether it's sustainability to the device versus the syringe. And I think these are, these are conversations which are currently ongoing with also the [citizen petition] that's been filed at this point in time.

And different players will probably launch with a different approach, some with a high stent, some with low. Some with an interchangeable stent and some without. I think the key ones here is that while the agency will provide guidance on some of this in the coming days, the changeability aspect here, although important is probably really commercially relevant to the first player who would have exclusivity for a period of one year post launch. That is really going to happen with the first year getting into the market.

There will be others who will conduct similar studies and we've seen other places have that as well. But the aspect of making a difference commercially will play out only year end, considering that interchangeability is a consideration for a product of this type. But given that there are going to be close to a dozen players, 10 or 11 players in this opportunity with the prize pool by being as sizable as it is, I think there is going to be room for almost everyone to play.

If you were to look at the question that you asked on what sharing from players, I think there is, there's still that weight and watch in terms of how the market is going to shape up and what is the offering that each player is going to bring to the market. But clearly, as I said before, there is going to be ample opportunity for everyone to play because of the size of the opportunity that we're talking about.

[Nithya Balasubramanian, analyst]

Shreehas, can I summarize that as maybe 2023 might not see as much biosimilar penetration as you would anticipate given that we are lucky to want to wait to see what is the product presentation who has interchangeability, who doesn't?

[Shreehas Tambe, executive]

No, I think that would be probably jumping the gun to say whether they will be sizeable or not. I think there will be a cleared entry with [indiscernible] entering first that we now know publicly and then a whole bunch of companies and entering towards the second half of the year. While each one will have a different proposition, I would restrain from the commenting on commercial strategies and how we expect to win in the market. And I probably reserve it for a later to get launch.

[Nithya Balasubramanian, analyst]

My other question is also, are you likely to chase interchangeability?

[Shreehas Tambe, executive]

So this is asset that I said, we've been watching closely and given that the timing of data studies really matters to only be the first player and then everything else is really a year later from them. We are committed to doing whatever it takes to be successful in that changeability study is one of those things that we could [indiscernible]

[Nithya Balasubramanian, analyst]

One last one on vaccines. I think there were reports last week that Serum Institute is sitting on a large pile of vaccines with not enough takers. So now that you're closer to kicking off the deal with SII what is your visibility on your to push the hundred million doses in a year for the COVID vaccines?

[Kiran Shaw, executive]

So, as I mentioned, it was not just about COVID vaccines. So yes, whilst they're sitting on stock of basically the [indiscernible] vaccines. I don't think they're sitting on such a large stock of other vaccines.

[Nithya Balasubramanian, analyst]

Sorry. Correct me if I'm wrong. I thought if FY ‘23 and '24 is, and what's in the pipeline is?

[Kiran Shaw, executive]

I'm saying that the stop that he's talking about is the COVID shield vaccines. They also make as polo vaccines and all the other vaccines which are non-COVID as well. And what we have access to is every vaccine that they manufacture. So I would not draw any conclusions from the statement he has made just on COVID vaccine, overstocking.

[Nithya Balasubramanian, analyst]

Ms. Shaw, sorry, I'm just going to push you a bit for clarity here. When you say all other vaccines as well, are you talking about the MMR and the MR, and the typhoid vaccines as well that SI is producing? Do you have access to those in the near term?

[Kiran Shaw, executive]

Yes. Everything is what we have access to, but I just want to caution you that don't draw conclusions from his statement that he's made, which really pertains to COVISHIELD vaccines.

[Nikunj Mall, executive]

Next question is from Surya Patra from PhillipCapital.

[Surya Patra, analyst]

So, in fact for the Malaysia plan, you mentioned about that achieving positive profitability this year. Could you clarify, what are the number revenue in terms of EBITDA from that setup, because potentially that should see a kind of meaningful improvement in FY ‘23. That is the first question.

[M. Chinappa, executive]

Sorry, just give a perspective of how [indiscernible] ramping up and I'll share the numbers, but Surya, did you have a second question?

[Surya Patra, analyst]

Yes, yes. So I have a second question. So I just wanted to have a sense so say on the biosimilar this new biosimilar user fee act for today's been approved. So do you think a greater competition that would be likely to come in the overall biosimilar space and more and more interchangeability opportunities will be competing with each other and hence the way that we have witnessed in the normal business, chemical-based business, similar trend can possibly emerge in the biosimilars space. Is that a concern, or there is some opportunity that you find from the biosimilar user?

[Kiran Shaw, executive]

Let me first take a shorter answer question. First and foremost, we are watching the interchangeability space. I might also mention here that Biocon is a front runner when it comes to having a combined portfolio of insulin and masks, which I think is a unique portfolio offering that we have. We do believe that have this early mover advantage in the insulin interchangeability space, we will look at obviously the interchangeability and have a strategy for that, but I think these are early days and we will have to see how we can basically take advantage of interchangeability or not.

[Surya Patra, analyst]

Sure, sure. And about the Malaysia plant, sorry if you can respond?

[M. Chinappa, executive]

I just had the numbers, you're talking EBITDA and the $20 million range and we are the PAT in the $10 million range. That's on a quarter basis.

[Surya Patra, analyst]

No, for FY '22, as a whole, sir, I think that was a loss-making setup.

[M. Chinappa, executive]

Yes. On a full year basis, as we indicated, we have been incurring losses of Malaysia, but Q4 that reflects the turnaround and that would be the thing to basis to look ahead. There's no point of going back.

[Surya Patra, analyst]

Okay. Just one more clarification. I wanted about the loss from the associates and JVs. I believe what we have reported this quarter is something more than 50 crores losses. And this was expected to be the last quarter of such charges. So some clarity on that and also whether it is only related to the Bicara related charges, or it is something relating to even the UA subsidy or UAE which now have activated. Can you just clarify on this and whether we should build more charges, similar charges, even in FY ’23?

[Shreehas Tambe, executive]

Yes. It does have a component of our joint venture in UAE small though. We have not, we activated that joint venture. Let me clarify that we are going direct in the market for our own drugs. But we still have certain products in that joint venture. And unfortunately, because of legal issues going on with our joint venture pack, we cannot bind down the entity. So we are going to sunset that business in the next year, but of course that business is profitable. So there is a profit aspect of that joint venture in the number. But the number primarily as I said, is from Bicara. Bicara, the expectation was that whatever we had at the end of Q3 would exhaust by Q4. But we also had given a debt to Bicara in the previous quarters and in line with fundraise that Bicara is doing, we have taken a decision to convert that debt equity.

Of course, we have not fund in additional cash into the business. And hence the loss pickup was higher this quarter. We have additional actually the carrying value of $10 million as of end of March which will come as lost pick-up in the next fiscal. There is a step up game that happens as Bicara continues to do fundraise, there's a step up game on the existing investment that happens as to the accounting standards. It gets offset against and regional expenses that come in the next quarter, but they could be a mismatch between when the step up gain happens and when the expenses against that gets offset.

[Surya Patra, analyst]

I think this 10 million will be even distributed across the quarter next year?

[Shreehas Tambe, executive]

No, it would be first come first basis. I mean, in, in the sense of $10 million plus the run rate or the rate for Bicara is going to be lower. It's going to be approximately $5 million to $6 million and looking at our equity of 50-60%, we will have a loss pickup of, for roughly $3 million to $4 million. And that will exhaust as soon as the $10 million get exhausted.

[Nikunj Mall, executive]

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

[Tarang Agrawal, analyst]

Two questions from my side. One, just to get a better sense on the biosims business while building in a product and deploying the R&D dollars there, what's the ballpark of EBITDA margin that you're making post atomization of all the R&D spend? I ask this because when I look at core EBITDA margin today, INR 1,000 crores of revenue and 39%, it really doesn't accommodate for the R&D trends that might have been incurred on the project on the products historically. So just to get some sense that if on INR 1,000 crores that the business is running the earning today, what would really be the margin on the business? I'm not sure if I was very clear on what I'm trying to understand.

[Kiran Shaw, executive]

I think we have indicated that this is net of R&D of course. When you talk about margins exclude R&D I think we also indicate that the R&D spends you should factor are roughly about 10-12% of revenue. So if you were to look at it that way, and of course it gets lumpy, so at some quarters, it might even get to 50%, but I think you need to factor that R&D spend and then calculate the EBITDA margins based on that. So if you were to look at that, then you can be that 26-27% range. But as you know, without investing in R&D, there's no future growth.

[Tarang Agrawal, analyst]

Yes. So basically what I wanted to understand was that today with [indiscernible] insulin and host of other biosims that are currently in the portfolio and generating thousands of revenue on a quarterly basis, would it be fair to presume that these products would be generating maybe 25% to 26% EBITDA margin, assuming that the R&D spends that will incur to bring these products online would be amortized over the revenue generating life of these products? I'm not talking from an accounting standpoint, I'm the purely talking from a cash flow stand.

[Kiran Shaw, executive]

Sure, sure. I understand what you mean. Maybe Chinni…

[M. Chinappa, executive]

I could just give a color on overall R&D, but just specifically on the numbers that the core EBITDA margins before R&D really reflects what we are earning on the past investments that were made and products that we brought to the market. So today our sales, the task to, and now insulin is reflected in our revenues and the core margins indicate what we are earning from this business.

[Kiran Shaw, executive]

I hope that helps. I think what he's saying is that once you make those investments, obviously your margins are much higher.

[Tarang Agrawal, analyst]

Not really, but I'll probably take it offline. If you may, I'll just probably take 2 more. So hypothetically, you said INR 1,000 crore or INR 2,000 crore was spent on R&D for these 3 products over the life, historically over the last 6, 8 years. Okay. And assuming that that entire amount was capitalized – assuming I'm not saying it has – assuming that it was capitalized, once these products start generating revenues, and I start writing of those 1,000-1,500, whatever, I spend on R&D over the lifetime of the products with probably fetch me what I'm really earning out of those products today. So that is the figure that I'm looking at. I'm not saying I don't want you to give out the figure for the current INR 1,000 crore pipeline, a INR 1,000 crore revenue. I'm saying, what is it that your customer you're building?

[Kiran Shaw, executive]

Let me answer other question by saying that look [Indiscernible] just mentioned that the let's look at today's numbers in biosimilars. It's actually pertaining to the products that you have that are in the market, right? And it does not reflect the current R&D spends on those numbers. It actually basically takes into account all the R&D that has gone into shaping these molecules. Basically, if you look at the way we capitalize all the R&D spends and if you look at your core EBITDA numbers, it includes the amortization on these spends at the current levels. So what you are now saying is that the only thing now having to factor is the additional R&D spend for the future.

[M. Chinappa, executive]

And the if I may, Tarang, just clarify one more time. Basically, when you see core EBITDA excludes R&D spend on a new program or old program, most of the old program [indiscernible] stretched out. And some portions cap plays. And those cap plays are being ammortized below the line below the EBITDA. So you look at core EBITDA, that's really giving you the 2 picture of revenues and profit. I mean, no profits on past investments.

[Tarang Agrawal, analyst]

Just a second question from me. The INR 3,400 crores of CWIP on the balance sheet what would be a major portion of that and what would trigger the capitalization of it and further impact of that on the P&L, annual impact of that on a P&L, cost impact?

[M. Chinappa, executive]

Shreehas, you want to talk to the expansion?

[Shreehas Tambe, executive]

Go ahead.

[M. Chinappa, executive]

Tarang, yes, we -- the CWIP largely represents expansion of our substance capacities for mad. We expect one of the facilities to come online in this fiscal that FY '23 and the other second facility to come online in FY ‘24, ‘25 timeframe. As they come online, they will, of course give us our additional opportunities, particularly as by bevacizumab gets approval. We will have additional capacities just stack, but on the flip side, you'll have increased appreciation at cost associated with the risk penalty.

[Nikunj Mall, executive]

The next question is from Vipul Kumar Shah who is an individual investor.

[Unknown Attendee]

Congratulations on a good set of numbers. I had 2 questions. What is your [indiscernible]. Second, what is your guidance for full year losses for novel biologics program?

[Unknown Executive]

The first one, if I, you correctly the question was what is the capacity utilization as we see Malaysia? That was the question I see. I think the important thing is to see that the capacity utilization over the second half of the Malaysia has significantly improved over the first half of the year selected in the supplies and revenues that we've got during the second half of year. We also guided that we are making investments in expanding capacity further, as we see not just in these interest, in the in the products that we brought to the market, but also for products to formula, we will seek capacity expansion further in Malaysia or further drug product, if that substance in the years to come, but clearly capacity utilization of our current investments has grown significantly leading to that Malaysia facility turning a profit towards the end of the year as we close and exited fiscal ‘22. But I think second question was more related to novels couldn't hear that very? If you could repeat that, maybe Siddharth you could take that.

[Unknown Attendee]

What is your guidance for losses annually for [indiscernible]. And regarding Malaysia, my question was what was the capacity utilization for the fourth quarter?

[Siddharth Mittal, executive]

Vipul, let me take the guidance on novels and I would talk more qualitatively rather than numbers. I think I've already indicated that we have very small spin on trastituzumab. The trial is also complete. We do not expect any additional cost coming in for the BCA101 or the [indiscernible] trial, which is ongoing. Again, the cost is not coming in the R&D expense. That's coming through the cost of GV.

But more directionally as had mentioned in the opening remarks that [indiscernible] has started a phase 3 trial for a [indiscernible] and it's a global trial. We expect significant progress to be made over the next 2 years from a clinical perspective where [indiscernible] we are also going to start, maybe another trial for indication in India in this fiscal year. We have the BCA101, or by clinical trial going on in the U.S. Again, we expect data to come out in the FY ‘23 and ‘24. So those are the 2 lead molecules that we have where we do expect a progress over the next 2 years.

[Nikunj Mall, executive]

The next question is from Prakash Agarwal from Axis.

[Prakash Agarwal, analyst]

Quick one here. On the cross-margin side, we have seen some draw partly I think you do in gene resources and partly, maybe higher input costs. How do we see fiscal ‘23 given that most of the other products launch is now calendar ‘23. How do we see fiscal ‘23 for the cross margin?

[Unknown Executive]

I think maybe the breakup is generics is down 2% on a full-year basis. Biosimilars is down 2% and research is down 5%. Generics is down merely because of increase in input cost in the sovereign prices. I don't see at [indiscernible]. Next year, we do expect to continue at the similar levels as the full fiscal of ‘22. [Indiscernible] Chinni can answer, but again, there as many moving parts because of Serum and Viatris. But Chinni hazard a guess.

[Prakash Agarwal, analyst]

Just broad color should help.

[M. Chinappa, executive]

The base business as we see an increased revenues and proper share coming from the US markets. Our overall small gross margin should be maintained, but I take that when said gross margin, you're saying revenues less material costs.

[Prakash Agarwal, analyst]

Yes, sir. Yes.

[M. Chinappa, executive]

Not the core EBITDA margin, right? Yes, gross margin, we should be able to manage within a 1%, 2% range.

[Prakash Agarwal, analyst]

Okay. And second one is on the biologics. The past 12-18 months is it still looking that, or given that much development we address and et cetera has happen?

[Kiran Shaw, executive]

Yes, obviously it's going to be paying to the date of closure and the way we can basically integrate the business. So obviously we will look at that and then decide the time.

[Nikunj Mall, executive]

Thanks. Given we are running out of time, we will take one more question for the day. The next question is from Nithya from Bernstein.

[Nithya Balasubramanian, analyst]

So 2 quick ones. On [indiscernible], there are 2 product presentations, the IV one, and the injection one. Are you chasing both? And the second one is, what color can you give us on the [indiscernible] programs?

[Unknown Executive]

On the ustekinumab, the response to that first question is yes, which is in works. The question that you had [indiscernible] pipeline I think we are looking at products which would basically have towards the end of the decade. And that's something that we've been working on. As these products progress towards that, we will bring more information out into the public.

[Nithya Balasubramanian, analyst]

As of now everything is preclinical. Is that how we should read it?

[Unknown Executive]

Yes. Right now it is preclinical stage. Yes.

[Nikunj Mall, executive]

We have one more question from [indiscernible].

[Unknown Attendee]

Congratulations for good set numbers. I’ve being a practicing doctor like India being the diabetes capital of the world. And right now, the management seems to be more focused about the US market. Any special strategies we have to grow the Indian market share when it comes to [indiscernible] or your diabetes portfolio you have for the Indian market? Like I see [indiscernible] dominating in India. Does Biocon has any special strategy in place or are they focusing on growing market share in India?

[Unknown Executive]

Thank you for that question. India business to us is very, very important. It's a home country for us, and it's important that we drive market share in India. And we are very, very conscious about that. In terms of development, the interchangeability study for science that we are selling had a very strong impact the doctors in India. So focus is very high. In terms of salesforce. We have ramped up of salesforce as well. We know the needs of education, the needs of training with our salesforce will only go up. And that's where we are focusing. A lot of focus being done in India on Salesforce excellence, and also high scientific activities with doctors in the country as well. So we are driving very strongly to that. And in FY ‘22, we are seeing results coming as well, indicating towards increased market share. So the focus will be there very strongly on India, not only for diabetes, but also for oncology and the other portfolio that we have.

[Unknown Attendee]

And one more if I may. Biocon Biologics will be listed as a separate entity. Anything that your previous back shareholder should look at any share listing for them, or any other opportunity for them?

[Kiran Shaw, executive]

At this point in time, I really won't be able to say much but we are quite a while away from the IPOs.

[Nikunj Mall, executive]

Thank you everyone. That was the last question of the day. Thank you all again for joining us today. If you have any additional question, please feel free to reach out to Aishwarya or me. We'll probably be seeing you again next quarter. Have a good day.

[Kiran Shaw, executive]

Thank you.