Biocon Limited

Biocon is undergoing a strategic transformation, with the planned merger of Biocon Biologics into Biocon, valuing Biocon Biologics at USD 5.5 billion. This aims to create an integrated biopharma enterprise combining biosimilars and specialty generics. Over the past year, the company proactively addressed acquisition-related leverage by raising nearly $1 billion through two QIPs, enabling the full retirement of structured debt associated with the Viatris transaction. This has materially de-risked the capital structure and enhanced financial flexibility, leading to credit rating upgrades from S&P (BB to BB+) and Fitch (stable to positive outlook).

The biosimilars segment delivered strong growth, with revenue up 9% year-on-year to INR 2,497 crores and EBITDA increasing 44% year-on-year to INR 700 crores, achieving a 28% margin. This margin improvement was attributed to a favorable product and geography mix, prioritizing high-margin markets. The company disclosed three new biosimilar oncology assets (Trastuzumab subQ, Nivolumab, Pembrolizumab) targeting a US$75 billion market opportunity. Additionally, Biocon secured full global rights for Hulio® (adalimumab), a successful franchise generating over US$200 million annually, aiming for full integration and expanded offerings.

The generics business demonstrated strong momentum, with revenue growing 24% year-on-year to INR 851 crores, driven by ongoing launches of generic Liraglutide in the EU and improved performance in the base formulations business. The company achieved significant regulatory progress, including final U.S. FDA approvals for Tofacitinib extended-release tablets and Everolimus tablets for oral suspension. Furthermore, key manufacturing facilities in Cranbury (OSD), Visakhapatnam (API), and Bangalore (API) received favorable VAI status EIRs or GMP certifications from the U.S. FDA and ANVISA Brazil, respectively.

The CRDMO business, Syngene, experienced a 3% year-on-year revenue decline in Q3 FY26 to INR 917 crores, impacted by challenges with one customer. Despite this short-term pressure, management expressed confidence in the segment's medium-to-long-term growth trajectory, citing differentiated scientific capabilities, long-standing client relationships, and a diversified model. Syngene extended its partnership with Bristol-Myers Squibb through 2035 and expanded its advanced chemistry capabilities, focusing on diversifying its customer base to increase capacity utilization.

Biocon is transitioning from a phase of significant capital expenditure, with group-level capex moderating from over $275 million to less than $225 million annually. Further moderation is expected as the Malaysian capacity build-up concludes, shifting towards maintenance capex. The company successfully retired approximately $550-600 million in structured debt over the last two quarters, leading to a sequential decrease in finance costs by over INR 62 crores. The net debt-to-EBITDA ratio is now below 2.5x, and management aims for further reduction through organic cash flow generation.