In slightly over a year since its inception, Biocon Biologics, a subsidiary of Biocon, has seen its valuation grow to $4.17 billion. In an interview with BusinessLine , Kiran Mazumdar Shaw, the Executive Chairperson of Biocon and Biocon Biologics talks about the challenges ahead for its subsidiary and the reasons for the sudden exit of its MD, Christiane Hamacher. Excerpts:

What led to subdued performance of the generics business in Q3? What plans do you have to revive growth in this business?

The generics business experienced a subdued performance in Q3 as demand moderated following a period of advance buying by customers in the first half of this fiscal, apprehending supply disruptions in the wake of the pandemic. Growth was also impacted by delays in regulatory approvals of certain products that required physical inspection of our facilities, due to Covid related travel restrictions. We, however, achieved a milestone during the quarter with the launch of the immunosuppressant drug, Tacrolimus, in the US, which reflects our commitment to bring vertically integrated, complex finished dosages to the market. Looking ahead, we will expand our portfolio and enter new geographies. New product approvals will be a crucial determinant of our growth. In formulations, we filed one MAA (Marketing Authorisation Application) for UK and two generic dossiers for MoW markets. We have made progress on entering new geographies with our APIs. We received two Drug Master File (DMF) approvals during the quarter. We also filed 10 DMFs for APIs in the US, Europe and MoW markets. We will continue to focus on the advancement of our development pipeline and capacity enhancement projects.

The biosimilars business has reported low double-digit growth this quarter. How will it pan out for you?

We reported a topline of ₹769 crore for Q3, a growth of 11 per cent versus Q3 of FY20 and 14 per cent versus Q2 of FY21. Revenue growth this quarter was driven by steady market share of our products in the US and growth in key Most of the World (MoW) markets including Africa, West Asia and Turkey and India. Our insulins and monoclonal antibodies portfolios continued to do well in key MoW markets. Through our partners, we expanded sales for recombinant human insulin in key markets like Mexico & Malaysia and insulin glargine in Algeria & Malaysia. We continue to be the leading player for biosimilar Trastuzumab in Brazil’s private market and are reporting strong performance in other markets like Turkey & Algeria.

What factors led Biocon Biologics to dilute its $1-billion revenue target for FY22?

We believe that the impact of Covid-19 on our business across the value chain has been larger than expected. Although we have seen year-on-year growth this fiscal, we realise that the anticipated acceleration in revenue is below par and makes it very difficult for us to meet the $1-billion target by FY22. We are experiencing delays in the award of tenders, and higher entry barriers are preventing the opening of new markets. With fewer patients visiting hospitals due to uncertainty around Covid-19, we are witnessing an impact in product off-take in critical-care segments such as oncology. Besides, our facilities are not running on full strength due to Covid-19-related safety measures and procurement of some raw materials has taken longer than usual. It has been challenging to get shipments of finished products out on time and resolving operational issues is taking more time given travel restrictions, etc. Moreover, the US FDA has been unable to perform site inspections due to travel restrictions, thereby delaying new approvals. The nature of these challenges is not linked to the fundamentals of the business but driven by exceptional circumstances which have appeared over the last 10 months.

Given Covid-19, shouldn’t there be a better demand for affordable biosimilars, enabling $1-billion guidance?

We are continuing to see good demand for our products as every country is looking for an alternative to high-cost therapeutics. However, we are experiencing delays in the award of tenders, and higher entry barriers are preventing the opening of new markets. With fewer patients visiting hospitals due to uncertainty around Covid-19, we are witnessing an impact in product off-take in critical care segments such as oncology. Also, there are execution challenges in these exceptional times with travel restrictions, local lockdowns, reduction in patient footfalls etc., resulting in high uncertainty. We believe the demand for biosimilars would become stronger as the world comes out of Covid-19.

When do you expect Biocon Biologics to achieve the $1-billion revenue target?

Biocon Biologics is based on strong business fundamentals and the biosimilars market remains solid, based on which we continue to believe in achieving $1 billion in revenue and beyond. It is just a matter of time as we need to carefully see through the ongoing pandemic. We have regulatory approvals for several of our biosimilar molecules which augur well for the future growth of the business. We continue to make significant investments into R&D, manufacturing and commercial infrastructure. We will ensure that we unlock all the business potential from emerging markets opportunities. We will also continue to work with our partners to ensure we get maximum benefits from the developed markets opportunities. We are determined to deliver on our commitments to our partners, patients and all other stakeholders.

Why did Christiane Hamacher step down as Managing Director of Biocon Biologics given the fact that the subsidiary has been able to get a valuation of over $4 billion in such a short period of its existence?

Pursuant to a mutual agreement, Christiane Hamacher has stepped down as the Managing Director of Biocon Biologics due to professional differences with me as the Biocon Biologics Chairperson on strategic priorities and vision for the company. However, she will continue as CEO until the end of her two-year tenure on February 28. Christiane has steered Biocon Biologics well over the past two years and set it on the path towards becoming a global leader in biologics. Arun Chandavarkar, a member of the Biocon Biologics board, has taken over the mantle of Managing Director of Biocon Biologics. As you know, Arun is the former CEO and Joint Managing Director of Biocon and has been a part of my core team that worked on building the biosimilars capabilities at Biocon. So from a business perspective, I see the continuity of operations with him stepping it at this juncture. I will also be playing a more active role in Biocon Biologics as Executive Chairperson of the company, while earlier I was a non-executive chair. Moreover, there is a strong executive leadership team that will continue to lead the strategic initiatives, which are extremely important to drive Biocon Biologics’ future growth.