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Budget 2022 needs to give research incentives to biotech firms: Kiran Shaw

Budget 2022 needs to give research incentives to biotech firms: Kiran Shaw

On the back of a strong quarter, Biocon boss Kiran Mazumdar-Shaw spoke exclusively to Business Today Televison's Aabha Bakaya on the company's growth drivers among biosimilars and what the Union Budget needs to focus on as far as the healthcare sector is concerned. 

Kiran Mazumdar-Shaw believes government needs to realise that as well as realise the gestation risks in investing in R&D in pharma and biologics space Kiran Mazumdar-Shaw believes government needs to realise that as well as realise the gestation risks in investing in R&D in pharma and biologics space

On the back of a strong quarter, Biocon boss Kiran Mazumdar-Shaw spoke exclusively to Business Today Televison's Aabha Bakaya on the company's growth drivers among biosimilars and what the Union Budget needs to focus on as far as the healthcare sector is concerned. Edited excerpts.

AB: Revenue is up 17 per cent to Rs 2174.2 crore vs Rs 1857.4 crore. Also, Biocon has seen a 17.68 per cent increase in consolidated net profit at Rs 219.6 crore for the third quarter. What aided the growth this time ?

KMS: Largely driven by contribution of biosimilars and launch of our insulin Glargine was a significant contributor. Generics also saw growth supported by launch of Everolimus 10mg tablet. As you know even biologics delivering growth of Rs 16 crore this quarter, so both of these were significant contributors.

AB: Margins have improved but still not what the company has been earlier working with. How do you see margins panning out in coming quarters?

KMS: One factor that has led to muted margins has been mark to market loss which operationally should not be looked at because this is a notional loss of Rs 77 crore. If you remove that loss then margins are at a very healthy level of 28 per cent, stronger than last year. Mark to market loss through our investment in Adagio is misleading. If look at EBIDTA itself, on reported basis its Rs 536 crore. 

What it could be on non-mark to market loss is Rs 614 crore. Even when u look at profit before tax, [it has] jumped from Rs 269 crore reported value to Rs 346 crore. Mark to market loss is misleading in terms of operational level of performance.

AB: Biosimilars vertical clocked revenue of Rs 981.4 crore as compared to Rs 768.9 crore YoY, while the generics segment had a revenue of Rs 607.4 crore as against Rs 567.1 crore earlier. Not much growth here…. How do you see the mix panning out in the coming quarters?

KMS: Biosimilars always going to lead the growth as it’s the most important segment for us in the foreseeable future. [There is a] very large emerging opportunity for growth and will continue to be a leading-edge growth driver. Generics segment is also gaining traction as large number of approvals in pipeline which will happen in coming years and will drive growth FY’24 onwards. So, while biologics will deliver strong growth FY’23 onwards, generics will also add to it. We are in a good position as multiple growth drivers across segments. Apart from biosimilar insulin Glargine, we also have approval in FY’23 for two other products. Hopefully regulatory delays we are seeing because of Covid will be behind us.  

AB:  Biocon has qualified for Production Linked Incentive (PLI) scheme. How do you see Biocon reaping benefits under this scheme and what is the game plan?  

KMS: Biocon has qualified under category B which means Rs 250 crore over 6 years. That will be spread across some of our manufacturing initiatives. And will contribute Rs 40 – 50 crore a year in terms of tax benefits. We will need to look beyond incremental incentives and will want to see large announcements this Budget in research-linked incentives. Our R&D expenses are going up exponentially and that’s not something investors want to hear. Our business is very R&D dependent and driven so won’t like to reduce investment in R&D. 

However, if we get weighted tax reduction on R&D, [it] puts us in a better place. Most companies need to up expenditure in R&D and government needs to realise that as well as realise the gestation risks in investing in R&D in pharma and biologics space. I hope to hear more on this and strongly hope it won’t be ignored again. 

AB: During the quarter, Biocon got three new approvals – one in the U.S. and two in Europe, when do you expect the revenue to start pouring in from these approvals?

KMS: Revenue [is] coming from insulin launch already. Two Europe approvals will address in coming months and will hopefully translate into good business. Europe [is] not as lucrative as US as price levels are much lower in Europe. EMs offer better opportunity many times. Nevertheless, these are also important markets and as global healthcare provider will look at all opportunities in all markets.

AB: On Covid-19 and Omicron concerns, are we have passed the worst or do you see continuing uncertainty around the ongoing pandemic?

KMS: Well, we are highly vaccinated in India and globally. India now has a 70 per cent fully vaccinated adult population. I hope we will be vaccinated at an even higher level and focus on rapidly vaccinating children. I also believe that Omicron is a very transmissible virus that has infected large parts of population, irrespective of vaccination and booster shots, so boosters don’t seem to be preventing infections. 

What we are seeing world over is a moderated disease. Not as severe as [it] used to be. That should give us some comfort. We also have a large arsenal of treatments now. We should feel confident of ability in managing the pandemic better. And I don’t see [the] end of [the] pandemic in near future, so whether you call it pandemic, continuing pandemic, endemic, fact of the matter is it's not the last variant. There will be many more variants. And time to say we have overcome worst of it and need to open up. The situation doesn’t merit any more testing, quarantine, curfews or lockdown. Need to open in massive way. And only test symptomatic patients. 

Also read: Budget 2022: More funding, setting up NRF; here’s what R&D industry expects

Also read: Budget 2022: Healthcare industry eyes increased budgetary allocation