Biocon Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Biocon reported a progressive Q3 FY25 with 10% like-for-like operating revenue growth, driven by strong Biosimilars and Research Services performance. Key regulatory milestones were achieved, including VAI status for major facilities and multiple product approvals, setting the stage for future launches. However, Generics saw a marginal YoY decline and lower reported EBITDA margins due to new facility costs and R&D investments, while group core EBITDA growth was modest.

Highlights

  • Overall group operating revenue grew 10% YoY (like-for-like) to INR 3,821 crore.

  • Biosimilars revenue grew 14% YoY (like-for-like) to INR 2,289 crore.

  • Research Services revenue grew 11% YoY to INR 944 crore, with EBITDA margin improving to 31%.

  • Successful FDA audits across 3 sites (Bengaluru API, Biocon Park, Johor insulin facilities) received VAI status, paving way for US approvals of Bevacizumab and Aspart.

  • Completion of all BBL deferred milestones under the Viatris acquisition agreement.

  • Key product approvals for GLP Liraglutide in EU, Tacrolimus in China, and Yesintek (Ustekinumab biosimilar) in US/EU/Japan, with launches commencing in Q4 FY25.

Concerns

  • Generics revenue saw a marginal decline of 2% YoY, though it grew 10% QoQ.

  • Generics reported EBITDA margin was 5%, impacted by higher operating expenses linked to new facilities and increased R&D investments.

  • Group core EBITDA grew only 4% YoY to INR 1,007 crore, with a margin of 26%.

  • Biosimilars EBITDA margin was 22% (including non-cash Forex translation loss of INR 20 crores), which is lower than last year's reported EBITDA of INR 714 crore (which included BFI investment gains).

Key financials

  1. Operating Revenue (Like-for-like) ₹3,821 Cr +10%YoY
  2. Total Group Revenue ₹3,856 Cr +7%YoY
  3. Group Core EBITDA ₹1,007 Cr +4%YoY
  4. Group Core EBITDA Margin 26%
  5. Group Reported EBITDA ₹787 Cr +16%YoY
  6. Group Reported EBITDA Margin 20%
  7. Group R&D Investment ₹199 Cr
  8. Reported Net Profit ₹25 Cr

What they filed

Q1 FY27: revenue up 10.0%, net profit up 53.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,590 3,821 4,417 3,942 4,296 +20%4,173 +9%4,517 +2%4,336 +10%
EBITDA685 752 1,078 766 835 +22%834 +11%1,020 −5%847 +11%
Net profit27 81 459 89 133 +393%-52 −164%199 −57%137 +54%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

SegmentRevenue from OperationsReported EBITDAReported EBITDA MarginProfit Before Tax
Generics₹686 Cr₹39 Cr5%₹-14 Cr
Biosimilars————
Research Services (Syngene)₹944 Cr₹302 Cr31%₹181 Cr

Capital allocation

high confidence
  • Debt Net $1.23 Bn
    • Repayment Remaining part of USD 335 million deferred payment for Viatris acquisition settled. $160 Mn
    • New borrowing Additional commercial paper for Biocon Biologics. $65 Mn
    So about, I think it is USD 1.23 billion. Sid, again, can you clarify? Yes, that is the right number. So Syngene is USD 100 million net cash positive. In Generics we have roughly similar amount of net debt. And at Biocon Biologics, that's roughly USD 1.25 billion. This is now in December. So, you will add another USD 65 million of the commercial paper, so that will get you to USD 1.3 billion.
  • M&A Biocon Biologics (BBL) Acquisition · Closed

    To support meeting an obligation to an investor who exercised the liquidity option.

    Increased Biocon's holding in BBL by 1.5%, bringing it closer to 72%.

    This is the instrument we use as a short-term bridging loan. The purpose was to support meeting an obligation to an investor who exercised the liquidity option. And as you have pointed out, the conclusion of that would be that Biocon would pick up the shares that would be about 1.5% increase in the holding in BBL, which would move, and Sid will provide the numbers, but from roughly 70% to then add on 1.5%.
  • M&A Cranbury oral solid dosage facility Acquisition · Integrated

    To strengthen manufacturing infrastructure and footprint in the United States.

    Now qualified by U.S. FDA for 3 vertically integrated statin products, commercial supplies commenced.

    I am pleased to share that the oral solid dosage facility in Cranbury, New Jersey, which Biocon had acquired in September 2023 to strengthen its manufacturing infrastructure and footprint in the United States, is now qualified by the U.S. FDA for 3 of our vertically integrated statin products, and we have commenced commercial supplies.
  • Liquidity Liquidity disclosed Viatris settlement funded through existing liquidity sources.
    So now like what Shreehas said, there were 2 milestones this year and both we have settled and it's not that we have paid the full amount, based upon the existing receivables that we had between both the parties and based on other arrangements, I think that is how the full settlement has been down, and the funding has been done through the existing liquidity sources.

Guidance & targets

Generics

  • Revenue Growth Generics · at some point · Medium confidence mid-teens
    if I remember, at one point, we had alluded to this business probably growing 15%, mid-teens sort of growth at some point.

    — Siddharth Mittal

  • Revenue Growth Generics · Fiscal 2026 · High confidence growth
    Yes. Fiscal 2026 itself you will start seeing this growth.

    — Siddharth Mittal

  • Liraglutide Launch Generics · Q4 FY25 · High confidence commercialization
    This approval positions Biocon for strategic growth in the region, and we are preparing to commercialize the product in fiscal 2026.

    — Peter Bains

  • EBITDA Margin Generics · 1-2 years · Medium confidence 13-14%
    And directionally, what I have guided for is an EBITDA margin of 10% to 12%. I mean, of course, it's gone down this quarter because of, again, increased R&D and expenses, but we will get closer to 13%, 14% in 1 or 2 years.

    — Siddharth Mittal

Biosimilars

  • EBITDA Margin Biosimilars · sustainable · High confidence 22-23%
    And we continue to have an EBITDA margin of 22% to 23%. So that is, in my view, a very sustainable guidance that we have given in the past, and Biocon Biologics stays to that.

    — Kedar Upadhye

  • R&D Spend (% of Revenue) Biosimilars · ongoing · High confidence 7-9%
    And we continue to invest in R&D in that 6%, 7% to 9% range that we have guided.

    — Kedar Upadhye

  • New Product Launches Biosimilars · year ahead · High confidence 5 in US, 3 globally
    The year ahead, we have 5 new launches coming up in the U.S. and 3 globally.

    — Shreehas Tambe

  • Ustekinumab (Yesintek) Launch Biosimilars · next month · High confidence February 2025
    Further strengthening our new product launch outlook, we also received U.S. FDA approval for Yesintek, biosimilar Ustekinumab, a biosimilar to the reference product, Stelara, and are preparing for February 2025 launch next month.

    — Peter Bains

  • Denosumab Launch Biosimilars · FY26 · High confidence early FY26

    Previously next financial year → early FY26

    So, it's moved from the next financial year, which is FY 2026, into maybe early FY 2026. And I think that's been a good positive traction.

    — Shreehas Tambe

Semaglutide

  • Approvals Semaglutide · 2026 · Medium confidence some markets
    I think you know China is a very difficult market where Indian companies have not been able to successfully penetrate in a large number of drugs. But Tacrolimus is an important drug for us and is an important drug in China. It is still a large value market in China with a very limited number of local players. Our partner CMS is getting ready to launch the drug in the retail market. Of course, retail penetration is not that easy, and we are looking at the tender, which opens up for this drug. China major volumes are driven by tender the government tender or VBP tender, which is a 3-year tender, and that is where the maximum volume is driven from. And I think we are expecting that tender to open sometime end of this calendar year with supplies commencing in 2026.

    — Siddharth Mittal

What to watch in Q4 FY25

Generics Revenue Growth Trajectory

Q4 FY25 and into next fiscal
Current Marginal decline of 2% YoY, but 10% QoQ growth in Q3 FY25
Target Continued sequential growth, building towards mid-teens growth

Why it matters

Generics recovery is key for overall group performance and achieving mid-teens growth targets.

Looking ahead, we expect performance in the fourth quarter and into the next fiscal to build upon the sequential revenue growth in Q3, driven by new product launches across markets, including the launch of our generic GLP, Liraglutide, in the UK and the EU, as well as additional new product launches, particularly in the United States.

Risks & concerns

  • Generics Pricing Pressures

    medium

    Pricing pressures have persisted in the Generics business, though some volume recovery was observed.

    Management acknowledged

  • Market Dynamics in US Biotech

    medium

    Market dynamics, particularly in US biotech for Research Services, are stabilizing later than expected.

    Management acknowledged

  • Biosimilar Price Erosion

    medium

    Competition in the biosimilar market leads to steady price erosion, which is in line with budgeted expectations.

    Management acknowledged

  • Competition in Insulin Portfolio

    medium

    Innovators' increased focus on GLP-1s could potentially shift attention away from insulins, impacting market dynamics.

    Analyst acknowledged

  • Complexity of Semaglutide Regulatory Approvals

    medium

    Regulatory review for Semaglutide varies by country, making approval timelines difficult to predict.

    Management acknowledged

Q&A highlights

7 direct
Stelara Biosimilar Uptake & Part D Dynamics Direct
As you can imagine, we are very excited about the upcoming launch for biosimilar, Ustekinumab. We will be amongst that wave of products that will be coming to the United States. But I also want to draw your attention that this is a global launch. So, we will be looking to bring this product to Europe as well. There is a huge opportunity that we are looking forward to. I do acknowledge what you said about the Part D and the past that has been the case with the biosimilar Adalimumab. obviously, we are very conscious of that. Our teams are working very hard with customers, both commercial as well as the government customers as well. We believe we will be very competitive in this space, both for Ustekinumab and even as we progress the Adalimumab asset as we go forward.

Analyst questioned potential uptake of the new Stelara biosimilar, considering it's a Part D product and past Adalimumab dynamics. Management confirmed excitement for global launch and confidence in competitiveness despite Part D challenges.

Asked by Damayanti Kerai (HSBC Securities and Capital Markets (India) Private Limited)

Biosimilars Profitability vs. Market Share Gain Direct
I wouldn't say that it's a low-margin business or we have probably seen growth only in terms of the low profitability channels. If you look at the 2 large markets, and we also have seen huge gains even in emerging markets. But if you look at how growth has panned out, let's start with that perspective. I think growth has come because of the large increase in market share that you just referred to in the United States. That growth has not necessarily come in from low-margin business.

Analyst raised concern about biosimilar profitability not aligning with market share gains, suggesting low-realization channels. Management clarified that growth was profitable, citing strong performance in oncology and Glargine in the US.

Asked by Damayanti Kerai (HSBC Securities and Capital Markets (India) Private Limited)

Biocon's Stake in BBL & Net Debt Direct
This is the instrument we use as a short-term bridging loan. The purpose was to support meeting an obligation to an investor who exercised the liquidity option. And as you have pointed out, the conclusion of that would be that Biocon would pick up the shares that would be about 1.5% increase in the holding in BBL, which would move, and Sid will provide the numbers, but from roughly 70% to then add on 1.5%. Sid, is that roughly, correct? Do you want to clarify? Yes, Peter. I think we will get closer to 72% after the acquisition. ... So about, I think it is USD 1.23 billion. ... And at Biocon Biologics, that's roughly USD 1.25 billion. This is now in December. So, you will add another USD 65 million of the commercial paper, so that will get you to USD 1.3 billion.

Analyst sought clarity on Biocon's increased stake in BBL, its impact on diluted holding, and the consolidated net debt. Management confirmed holding closer to 72% and provided group net debt figures, explaining the BBL stake increase as a short-term measure.

Asked by Neha Manpuria (BofA Securities India Limited)

Generics Recovery & Liraglutide Launch Timeline Direct
As you have seen in this quarter, we have had a 10% sequential growth, and a large part of that growth has come from increase in API business, so very little contribution from peptides yet during the third quarter. And as Peter mentioned in his opening remarks, Liraglutide would be launched in the U.K. in the fourth quarter. We have already shipped the material to our testing site in Europe. The product is getting tested and will get released and launched by a partner and us in the fourth quarter. Post the national approval of Liraglutide in Europe, we are doing national registries in each country, and we expect that launch to happen in the first quarter of next fiscal. We also mentioned that there are a couple of other launches in the United States in the fourth quarter. So, sum total of these would drive growth in the fourth quarter. But I think coming back to your point on teen's growth, that next year is going to be a big growth driver, Liraglutide contributing to that growth in U.K. And of course, U.K. is not that big a market as a standalone country, but when you look at Europe. And then subsequently, during the second half of year, we also expect an approval in the U.S. That product was filed from the injectable facility in Biologics, which has now received the VAI status and the review of the DMF for the API was complete and FDA is now reviewing the other data packs, and we expect that review to complete by middle of this calendar year, followed by a launch.

Analyst inquired about the Generics business's path to mid-teens growth and the Liraglutide launch timeline. Management detailed sequential growth drivers and provided specific timelines for Liraglutide launches in various geographies.

Asked by Neha Manpuria (BofA Securities India Limited)

Biosimilars Regulatory Approvals (Bevacizumab & Aspart) Direct
We have said in the past as well that the only thing that it really which was open, there was no open question on the science or the dossier, both for Bevacizumab or for Aspart that and the agency had indicated that. The only piece that was remaining was the site GMP status. With that achieved, we have responded to them saying that we have now completed this. And we want them to reconsider our application at the earliest. So that is the process that is ongoing. And our regulatory team is in conversation with them to see how we can move this in an expedited manner.

Analyst asked about pending approvals for Bevacizumab and Aspart after facility clearances. Management clarified that only site GMP status was pending, which is now resolved, and they are seeking expedited reconsideration from the FDA.

Asked by Neha Manpuria (BofA Securities India Limited)

Biosimilars Market Share vs. Revenue Growth & Price Erosion Direct
We have, obviously, in any market, when you have competition, you will see a steady erosion, but it is not something that has been unexpected or unplanned that has impacted the gross margins, which have moved like Kedar pointed out in the previous call that have moved from Q3 to Q4 to 150 basis points. But beyond that, we have seen a very healthy contribution. To give you more additional colour, maybe Kedar, you can comment on that as well. Yes, that is right. I think the price erosion is in line with what we had budgeted for. And in addition, Shyam, I think one adjustment you need to make in the reported numbers is the removal of the BFI revenues.

Analyst questioned the disconnect between strong market share gains and revenue growth, implying price erosion. Management confirmed price erosion was budgeted and emphasized the need to adjust for BFI revenues for accurate comparison, stating oncology portfolio remains strong.

Asked by Shyam Srinivasan (Goldman Sachs India Securities Private Limited)

Capital Allocation Strategy (Syngene stake, Debt) Partial
Shyam, thank you. I will start on that question. Sid, you may want to come in as well. So, Shyam, I mean, it is a balancing act over time. We have had a series of obligations that we had to meet, and we've been meeting them properly, obviously, the Viatris full and final settlement on the acquisition, we have spoken about. We have had other financial obligations, which we have met. That is been balanced with the investment in the business to prepare for this next wave of growth, which is now much more clearly in line of sight... In regard to the specific question about the holding in Syngene, I think we're down now to around 52%. And I think we would like to keep it there, and we'll be exploring other options going forward.

Analyst probed the company's capital allocation strategy, specifically regarding its Syngene stake and debt reduction. Management described it as a 'balancing act' between meeting obligations and investing in growth, stating they intend to maintain Syngene holding around 52%.

Asked by Shyam Srinivasan (Goldman Sachs India Securities Private Limited)

Ustekinumab Preparedness & Denosumab Launch Direct
Thanks Surya, for that question. And I will invite my colleague, who is the Chief Commercial Officer for Advanced Markets to respond to this along with me. Surya, we have been in this space now having run the business for a full year after we have integrated it and market shares for all our products have grown significantly over the course of the last year. So that tells you that there's a lot of customer confidence in what we do and a lot of it is what Matt has led, and the North America team has led there. So, I will let Matt respond to that to your question on our confidence and our preparedness in the biosimilar Ustekinumab launch. Matt, would you like to comment to Surya's question? ... Yes. Thank you, Shreehas. And I will add on to the original question. We are well underway in our launch planning with our customized with our customers in regard to the channel strategies we have in Part D. We are leveraging the existing relationships we have, and we will be driving the synergies that we have in the United States already established. I think what's clearly different, that's probably on a lot of people's minds is, how is this different than Adali? and how it's different than Adali is we've had plenty of time now to engage and also communicate to customers. Adali had a legal kind of hold where we couldn't speak to them because of all the settlements. The other thing that's different is that there's now a track record in this immunology piece in which players are more comfortable. And last thing I'll say here is that because of our active engagement, because of our sales force, we have already secured some important contracts that are part of our plan, and we look to continue to expand upon that as it gets closer and closer to our launch date. So, I couldn't be more positive about the team, about the opportunity in Ustekinumab, and we are well positioned. Last thing I will say is that I believe this is the power of our portfolio, meaning that not only do we have the oncology portfolio in the United States, but we also have our immunology portfolio and we can drive those synergies across as we launch more products, as you are thinking about Bevacizumab or Aspart, all that is additive to our strategy in our platform that we fully integrated and consolidated, and now you're seeing the growth in our market share numbers. Thank you for the question.

Analyst asked about preparedness for the upcoming Ustekinumab launch and Denosumab launch timeline. Management expressed high confidence in Ustekinumab launch, citing strong planning, existing relationships, and secured contracts, and indicated an accelerated early FY26 launch for Denosumab.

Asked by Surya Patra (Phillip Capital (India) Private Limited)

3 min read 6 chapters

Detailed narrative

Overall Group Performance and Outlook

The Biocon Group delivered a progressive Q3 FY25, achieving a 10% year-on-year operating revenue growth on a like-for-like basis, reaching INR 3,821 crore. This performance was in line with expectations, driven by sustained growth in Biosimilars and a return to growth in Research Services. Group core EBITDA stood at INR 1,007 crore, up 4% YoY, with a margin of 26%. The company maintains its outlook for a transition to growth in the second half of FY25 and into the next fiscal year, with improved visibility across all businesses.

Generics Business Performance and Future Drivers

The Generics segment reported revenue of INR 686 crore, experiencing a marginal 2% decline year-on-year but a healthy 10% sequential growth. This sequential improvement was primarily fueled by higher API sales and better performance in generic formulations. Core EBITDA for Generics was INR 102 crore (15% margin), though reported EBITDA was lower at INR 39 crore (5% margin) due to operating expenses for new facilities and increased R&D. Future growth is expected from new product launches, including the GLP Liraglutide in the UK and EU in Q4 FY25, and additional launches in the US.

Biosimilars Business Growth and Market Traction

Biocon Biologics demonstrated strong performance with INR 2,289 crore in revenue, marking a 14% year-on-year like-for-like growth and 5% sequential growth. The segment's EBITDA was INR 487 crore, with a 22% margin excluding Forex impact. The company saw significant market share increases in the US, with Ogivri doubling to 22% and Fulphila rising to 23%. Stable market shares were maintained in Europe, with strong uptake in Germany and France, and positive traction in Japan and Australia through commercial partnerships.

Research Services (Syngene) Recovery and Market Dynamics

Syngene International returned to growth in Q3 FY25, with revenue from operations reaching INR 944 crore, up 11% year-on-year and 6% sequentially. Reported EBITDA for Syngene was INR 302 crore, a 16% increase YoY, with the margin improving to over 31%. Profit before tax grew 27% YoY to INR 181 crore. The growth was broad-based across all divisions, suggesting that market dynamics, particularly in US biotech, are stabilizing, albeit slightly later than initially expected.

Regulatory Achievements and Product Pipeline

Biocon achieved critical regulatory milestones, including successful US FDA inspections of its Bengaluru API sites and insulins facilities in Johor, Malaysia, both receiving Voluntary Action Initiated (VAI) status. This outcome is expected to pave the way for US approvals of biosimilar Bevacizumab and Aspart. The company also secured US FDA approval for Yesintek (biosimilar Ustekinumab), with launch planned for February 2025, and received EU approval for GLP Liraglutide, positioning it for commercialization in fiscal 2026.

Capital Allocation and Debt Management

The group's net debt stands at approximately USD 1.23 billion. Biocon increased its stake in Biocon Biologics by 1.5% to meet an investor's liquidity option, bringing its holding closer to 72%. The remaining USD 160 million of deferred milestones under the Viatris acquisition agreement were fully settled using existing liquidity sources. Management reiterated its commitment to debt reduction, acknowledging it will be a balancing act with ongoing investments in future growth opportunities.

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