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Good morning, everyone. I'm Saurabh Paliwal from Biocon Investor Relations team, and I would like to welcome you today for the fourth quarter and full year ended March 31, 2023 Earnings Conference Call. [Operator Instructions] Please note that the chat box has been disabled for this conference call, but you can raise any technical concerns by sending us an e-mail at investor.relations@biocon.com.
I would like to also bring to your attention that this conference call is being recorded. The recording will be made available on our website within a day, and the transcript will be made available subsequently. Today, to discuss the company's business performance and outlook, we have Dr. Kiran Mazumdar Shaw, our Executive Chairperson; Mr. Siddharth Mittal, CEO and Managing Director of Biocon Limited, along with senior management colleagues across our business segments including Generics, Biosimilars and Research Services.
Now I would like to allude to the safe harbor related to this conference call. Comments made during this call may be forward-looking in nature based on management's current beliefs and expectations. They must be viewed in relation to the risks that our business faces that could cause future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. At the end of this call, if you need any further information or clarifications, please feel to reach out to us. With that, I would like to turn the call over to our Chairperson for her opening remarks. Over to you, Kiran.
Thank you, Saurabh. Good morning, everyone. Let me start with a high-level summary for FY '23. Biocon has delivered a total revenue of INR 11,550 crores, a growth of 28% over FY '22. All business segments contributed to the growth with operating revenues in Biosimilars growing 61% to INR 5,584 crores, Research Services by 23% to INR 3,193 crores and Generics by 13% to INR 2,637 crores. The year gone by saw the completion of the landmark acquisition of Viatris Biosimilars business, which has contributed to the year's growth. In fact, Q4 reflects the full contribution of the Viatris acquisition. This strategic investment, we believe, will accelerate our journey to global leadership as a fully integrated biosimilars player. Syngene delivered a strong performance, led by its manufacturing services business which includes the signing of our 10-year biologics manufacturing agreement with Zoetis expected to be worth around $500 million over the contract period. The Generics business continued its geographic expansion initiatives with strategic partnerships across markets. FY '23 marked the launch of products in a few ex U.S. geographies such as the U.K. and other emerging markets. And this, coupled with a strong performance in the base business contributed to the segment delivering 13% year-on-year growth. Investments in R&D and CapEx towards a pipeline of complex products, including peptides and oncology molecules are expected to play out positively in the coming years. Sustainability is integral to Biocon's business purpose. The company continues to develop a progressive agenda for its ESG practices in alignment with stakeholder expectations, as well as, of course, the company's objectives. Our efforts continue to receive global recognition reflected by our including scores from leading global sustainability indexes. Biocon improved its score in the Dow Jones Sustainability Index over 2021 from 45 to 52, and based on this performance, we were inducted into the S&P DJSI's prestigious Annual Sustainability Yearbook under the industry mover category. Biocon was also awarded a silver medal by EcoVadis for its sustainability accomplishments. It has certainly been a transformative year for the Biocon group. All 3 business segments are at an inflection point and poised for significant growth in the years ahead. Let me now start with the Viatris acquisition. The integration of the Viatris Biosimilars business is progressing well. Viatris continues to provide commercial and other transition services to Biocon Biologics as part of a transition services agreement. We remain on track to integrate a major part of the acquired biosimilars business region-wise in a phased manner during FY '24. As far as net debt reduction is concerned, we continue to work towards reducing our net debt. As of December '22, Biocon had a consolidated net debt of -- net debt of $1.9 billion. Since then, net debt has been reduced through the following events: $270 million stake sale in Syngene, $130 million through the -- $270 million was brought in through the stake sale in Syngene, $130 million investment by Kotak, $150 million conversion of loan equity in BBL by Serum and $98 million investment by Edelweiss. Post these investments, the net debt has been reduced by $650 million to a level of $1.25 billion, excluding, of course, structured investments. Whilst the present debt level can be comfortably serviced, we plan to raise additional equity at the BBL level during FY '24 to provide us flexibility for any business development opportunities. Now coming to the financial highlights. First, for the quarter 4 and then the full year FY '23. So let me start with the quarter 4 numbers. At the group level, total revenues for the quarter was up 59% year-on-year to INR 3,929 crores. The biosimilars segment revenue more than doubled on the back of the acquisition of Viatris biosimilars business, with Q4 reflecting the first full quarter of consolidation. Research Services grew 31%, while Generics remained flat. The total revenue also included INR 109 crores of the stake dilution gain in Bicara pursuant to the Series B fund raise. Core EBITDA grew by 56% to INR 1,260 crores, representing continued healthy core operating margins of 35%. R&D spend stood at INR 342 crores, which is an increase over INR 152 crores for the same period last fiscal and it corresponds to 12% of revenues ex Syngene. EBITDA for the quarter was up 75% to INR 1,152 crores versus INR 659 crores in the same period last year. EBITDA margin stood at 29% as compared to 27% for the same period last year. Depreciation, amortization and interest increased by INR 389 crores over last year, and this is primarily related to the biosimilars business acquisition cost. Consequently, profit before tax and exceptional items stood at INR 500 crores, up 30% year-on-year. Net profit for the quarter excluding exceptional items, stood at INR 335 crores versus INR 262 crores in Q4 FY '22, up 28% year-on-year. It must be highlighted here that there is an impact of higher minority interest due to stake dilution of Biocon shareholding in both Biocon Biologics and Syngene in the consolidated results. Now coming to full year numbers. Total revenue for FY '23 was up 38% to INR 11,550 crores. Revenue from operations in Biosimilars, Research Services and Generics were up 61%, 23% and 13% respectively. The total revenue includes INR 217 crores of stake dilution gain in Bicara pursuant to their fund raise during the year. Core EBITDA was up 43% to INR 3,807 crores representing core operating margins of 34% versus 32% last year. Now I come to R&D spends for the full year which were at INR 1,119 crores, a big jump over INR 524 crores last fiscal, representing 14% of revenues ex Syngene. We also recorded a ForEx loss of INR 160 crores in FY '23 as compared to a gain of INR 58 crores during FY '22. EBITDA for the year was up 32% at INR 2,888 crores versus INR 2,183 crores in the same period last fiscal with EBITDA margins at 25%. Profit before tax and exceptional items stood at INR 1,189 crores, which is up 9% year-on-year. The growth in PBT is not commensurate with growth in EBITDA due to additional depreciation, amortization and interest charges primarily related to the biosimilars business acquisition cost. Consequently, net profit for the year before exceptional items stood at INR 787 crores versus INR 722 crores in FY '22, which is still up 9% year-on-year. Now coming to exceptional items for the full year FY '23. For the full year FY '23, there were exceptional items amounting to INR 324 crores net of tax and minority interest as compared to INR 74 crores last fiscal. These include deal-related expenses of the Viatris transaction and a MAT credit balance charge as Biocon decided to adopt the new tax regime of 25%. As a result, net profit stood at INR 463 crores. Now let me turn to the segmental business performance during the quarter. Let me start with Generics. The Generics segment reported an operating revenue of INR 717 crores for the quarter, similar to Q4 last fiscal. Profit before tax stood at INR 75 crores. For the full year, the Generics segment recorded an operating revenue of INR 2,637 crores, delivering a growth of 13% year-on-year, which is in line with our guidance. Profit before tax stood at INR 264 crores with PBT margin at 10%, in line with last year. Now coming to the key highlights for the Generics business. Q4 performance was driven by API immunosuppression sales as well as growth in the base business of generic formulation products in the U.S. as well as certain new product launches. Margins were lower compared to previous year, mainly due to price erosion in our base business products, particularly statins. During the quarter, we secured 4 product approvals, 1 each in the U.S. and EU and 2 in emerging markets. On the regulatory front, our API manufacturing facility in Bengaluru underwent an EU GMP inspections in February with no critical or major observations. And most recently, last week, the U.S. FDA concluded a pre-approval inspection for Site 3 located at Hyderabad, Telangana with no observations. On a full year basis, the business recovered from a muted performance in FY '22. Growth during the year came from API sales again, from immunosuppressants and specialty APIs as well as generic formulations where a higher volume market share of products launched in FY '22 contributed to revenue growth.
During the fiscal, we had 32 filings and received 19 approvals for our generic formulation products across U.S., EU, U.K. and emerging markets. We continue to focus on the enhancement of our manufacturing capacities and capabilities throughout the year. Our facility in Vizag for immunosuppressants and peptide facility in Bengaluru were commissioned during FY '23 with validation batches at both sites expected to be completed by the first half of FY '24. We are also investing in a new injectable facility as well as expanding our largest-scale peptide synthetic and non-immunosuppressant API manufacturing capabilities. To reduce cost and development timelines, various cost improvement initiatives and projects were undertaken, and the benefits of these are expected to accrue in the quarters ahead.
In summary, FY '23 has been a good year for the Generics business backed by cost improvement initiatives, strategic partnerships and product approvals. Now coming to the biggest segment in our consolidated financials, which is biosimilars. Q4 is the first full quarter with consolidated financials from our base and acquired Viatris Biosimilars business representing the new reference point for Biocon Biologics as a fully integrated enterprise. Biocon Biologics recorded revenues of INR 2,102 crores for Q4, ending the year on a $1 billion trajectory as per our guidance. Core EBITDA, which excludes R&D, ForEx, licensing income and MTM on financial instruments was at INR 742 crores with margins at 39%, demonstrating continued healthy profitability post consolidation of the acquired business. EBITDA was at INR 573 crores with a margin of 27%. Depreciation, amortization and interest pertaining to the acquisition impacted the quarter's profit before tax, which stood at INR 152 crores, which is up 5% year-on-year. Moving to the full year performance, Biocon Biologics recorded revenues of INR 5,584 crores in FY '23, a year-on-year growth of 61%. Core EBITDA for the year was at INR 2,216 crores, up 68%. Net R&D spend for the year was at 16%, which is higher than our guidance of 12% on account of the closing timelines of the Viatris transaction. I might remind you that we concluded this deal at the end of November. We had expected to conclude it a little earlier, but this has impacted the R&D spend in terms of percentage of revenues. This we -- the R&D spend we expect will normalize to around 12% in the coming quarters. EBITDA for the year subsequently, stood at INR 1,338 crores compared -- and which is a 32% year-on-year growth. And profit before tax and exceptional items was at INR 403 crores, which factors in acquisition-related amortization and interest costs, which actually amount to INR 379 crores. Let me also share some highlights, starting with our vaccines collaboration with Serum. We have restructured our original equity structure with Serum under the strategic alliance announced in September 2021. As for the new arrangement, BBL will have access to 100 million doses of vaccines annually together with distribution rights to Serum's vaccines globally without any assured revenues and EBITDA. BBL will no longer be issuing the 15% stake to Serum, thereby increasing Biocon's stake in BBL. Serum will now have an aggregate equity investment of $300 million in BBL. Moving on to business performance. We continue to see a strong performance of our biosimilars globally. There were more than 35 launches in FY '23 increasing the depth and breadth of our reach. In the U.S., Fulphila’ or Pegfilgrastim achieved a 14% market share, growing from 11% in December. Ogivri continues to maintain its 10% market share and our biosimilar insulin glargine market share has improved to 12%, in line with the new prescription trends or the NRx trends observed in the prior quarter. There is a strong interest in the upcoming launch of Hulio backed with its performance in Europe, which will be a key growth driver in FY '24. In Europe, Fulphila, Ogivri and Hulio continue to experience improvement in performance. For instance, in France, each of these products are more than [Audio Gap] Franchise continues to be robust with Ogivri having a 35% market share. Hulio which has recently launched in Canada has already attained a market share of 6%. We continue to see strong demand in our emerging markets business, driven by a growing portfolio coverage and several new launches. Through our partners, we have won tenders for glargine in Mexico, trastuzumab in Belarus and bevacizumab in Algeria. On the regulatory front, our new B3 mAbs facility received a certificate of GMP compliance for our biosimilar bevacizumab from Europe's Health Products Regulatory Authority. We have responded to the CRL for our biosimilar insulin aspart wherein the U.S. FDA has accepted our CAPA plan pertaining to the Malaysia facility and expect this to be followed by a site inspection. We are in discussion with the U.S. FDA on our CAPA plan submitted for biosimilar bevacizumab. We continue to progress our pipeline with biosimilar Denosumab, Ustekinumab and Pertuzumab. And we are on track to complete the studies for Ustekinumab and Denosumab by the end of 2023 and 2024 respectively. In summary, FY '23 has been a transformational year for Biocon Biologics driven by the Viatris -- the acquisition of Viatris' biosimilar business. This has enabled us to create a unique, fully-integrated biosimilars enterprise with clear growth catalysts. The focus in FY '24 will be on integration, transition and execution in the commercial arena. Coming to Novel. I will now provide you with an update on the Novel's business, starting with itolizumab which continues to make progress. Patient enrollment has ramped up with 70 clinical sites operationalized as a part of the ongoing pivotal phase equator study of itolizumab in patients with acute graft versus host disease. The Phase Ib clinical study for lupus nephritis also remains on track and Equillium expects to report top line data from the Ecolab study on lupus nephritis in the first half of 2024 and remains on track for the interim review of Phase III Equator study later in 2024. Coming to Bicara Therapeutics, its lead candidate, BCA101 continues to make good progress in Phase I/Ib development in head and neck cancer. And based on the promising data generated thus far, Bicara completed an oversubscribed $108 million Series B financing, which will help to advance this asset. As mentioned earlier, fund raises during the year resulted in a step-up gain recorded in Biocon's consolidated P&L statement. Biocon stake in Bicara currently stands at 38%. It is expected to reduce to a little over 23% post receipt of the full amount from the Series B financing in FY '24. Coming to Research Services. Syngene ended the year on a strong note with positive performance across all 4 divisions. In fact, it was the strongest quarter ever for Syngene. Revenue from the operations grew 31% to INR 994 crores over the corresponding quarter last year and reported revenues crossed INR 1,000 crores for the first time. Profit before tax was at INR 231 crores, up 29%. Strong performance in the fourth quarter added to performance over the course of the year and ensured that Syngene delivered full year results ahead of its upgraded guidance. In fact, it delivered the highest absolute year-on-year increase in revenue and EBITDA in the last 5 years. Operating revenues were INR 3,193 crores in FY '23, a growth of 23% over last year, while reported EBITDA was up 18% to INR 1,005 crores with EBITDA margins at 31%. Profit before tax was up 15% to INR 594 crores. For the quarter, the digital services business, discovery services and dedicated centers delivered sustained good performance. And in the manufacturing services this quarter also saw the start of manufacturing of drug substance at commercial scale for Zoetis, which added to the strong year-on-year growth for Syngene. To conclude, I'm pleased to announce that the Board of Directors have recommended for approval by the shareholders a final dividend of INR 1.50 per share, INR 1.50 per share, representing 30% of the face value of each share for the financial year 2023. I would like to conclude by saying that all business segments in Biocon are well positioned to grow in FY '24. We expect a mid-teen growth trajectory for the generics business, driven by enhanced capacities in our API business, volume growth in our base business and new launches in generic formulations in the U.S. and other geographies. With the Viatris transaction concluded in FY '23, Biocon Biologics is also well positioned with clear growth drivers in place. The upcoming launch of adalimumab in the U.S. and the anticipated approvals and launches of aspart and bevacizumab should help us to build upon the $1 billion revenue run rate which -- on which we have concluded FY '23. Syngene sees the healthy demand for its services continuing in FY '24 with the start of commercial manufacturing and biologics burning the growth momentum. And with this, I would like to open the floor to questions.
[Operator Instructions] The first question is from Cyndrella Carvalho from JMFL.
So congratulations on consolidating the entire Viatris. How should we see any synergies do you see from this transaction as we go ahead? Would you like to highlight -- on the balance sheet side, you said that you have reduced the net debt from December level. But what is the plan for the FY '24? Could you help us understand what would be the further debt reduction that we are looking at? On the R&D side, you also highlighted that the number should look more close to 12%. Just to clarify, is it ex Syngene we are looking at? Or is this overall sales that this number should look closer to 12%. These are my questions at this point in time. I have more questions. I'll join back in the queue.
So let me answer your second question, and I'll turn over your other 2 questions to both Chinappa and Shreehas. As far as the 20% R&D spend is concerned, obviously, the large part of R&D is attributable to Biocon Biologics. And we -- as we said, we would like to be at a 12% of revenue level, right? As you heard this fiscal, we've been much higher than that. It's been at 14%, so we would like to reduce that level. Over to Shreehas and Chinni -- Chinappa to answer that question. So over to you, Shreehas.
Cyndrella, your question was more about the synergies that we would look at once we integrate -- now that we've integrated the Viatris business. So just to bring you back to how we've structured the contract with Viatris, we've, of course, now started consolidating the revenues and the profits and you've seen the first full quarter of revenues and profits flowing in into the on Biocon Biologics book. But we've also signed with them a TSA or a transaction -- Transition Services Agreement through which they provide us services for a period of 2 years. So at this point in time, Viatris continues to provide us services and our numbers factor in the charge that Viatris levies on us for the services that it provides in the geographies that they operate in.
Going forward, like we've said in the past, that we've been integrated a fully-integrated player, we would be looking to see how we become more nimble and flexible. But at this point in time, that's not what's changed. We've got a fixed charge through the TSA that flows into our P&L. But Chinni, if you would like to add something, over to you.
You covered this, Shreehas. Cyndrella, any follow-up to these 2 questions.
Yes. I mean the follow-up is, is there any synergies as you're saying that there is a charge with us. So where do you see this charge going beyond 2 years, do you have any -- I mean, the numbers that you had earlier shared with us, does that change? And more from a synergy perspective, do you see the market share ramp up giving us -- we've seen our gross margins being more stable, but do you see any scope of improvement here with Hulio launch coming up. Are we prepared for the launch? Are we in the depression world already? If you can help us understand that?
Cyndrella, I'll take the first part of your question, and then hand over to Shreehas. Just to clarify on the charges, Viatris is still running the commercial engine and the cost charge -- costs are at actuals to us. So it's a cost that's currently the incurrent cost charges. But once we transition out Viatris, we would be incurring the cost directly on our books.
Yes. And to answer the other part of it, as we look to get passed into this year into the full fiscal, we are looking at and making sure that we take on the Hulio launch and Viatris is right now the marketing authorization holder. But Matt and his team are fully involved in leading that launch. So obviously, we are looking at a very successful launch that we expect in the U.S. So we expect things to move forward. But at this point, the important message is, as we've integrated the full quarter revenues, you've seen the health of the business is very strong, and you've seen the core EBITDA margins at the same level is at that 39%, 40% that we've had in the past. So it reflects the basic help in a very, very strong position.
And we are also seeing some good uptick in some of the market share of key products in the U.S. and other markets.
And on the debt side, if we can have that number for FY '24, where do we bring the debt down, any number?
I think we will share this information with you as and when we progress. But at this point in time, I think what we have done thus far is what we can share with you, but we will aim to reduce it further.
The next question is from Tushar Manudhane from Motilal Oswal.
Yes. Just on the licensing income, if you could share further details related to this of INR 175 crores.
Yes. Shreehas, would you like to take this?
Yes. Let me respond to that, Tushar. The licensing income is a part of our routine business. As we develop our portfolio, we've seen opportunities where we in-license products and we out-license some of the assets. There are some assets that we see may or may not be synergistic to our portfolio. We see an opportunity to out-license them. We see an opportunity to in-license some where we see gaps in our portfolio now that we are a fully integrated organization with the commercial engine. There are so many more things that we can do. So these are things that you will see happening during the course of the year. You'll see some in-licensing assets and revenues, and you'll probably see some out-licensing happening during the course of the year. What's happened in this particular quarter is we saw that there was an opportunity for us to out-license a particular asset in our portfolio and that's something that has flown through. And this will happen as and when we proceed -- when we see opportunities to either out-license or in-license products.
So from that perspective, this 175 seems not to be taken as a sustainable number, right?
It will be as and when the things happen. You will see that as and when things will progress.
And just to add to this, so if this licensing income, while considering that as and when it comes, so the PBT margin, excluding this seems to be much lower for biosimilar segment.
So Tushar, I want to interrupt you right here. Please understand that our R&D spend has increased significantly. And I keep reminding people that this business has to be looked at, at the core EBITDA level. Please do not look at isolated numbers because if you could see what we have done, we have actually offset some of this increased R&D spend with this licensing income. So if you look at it in that context, you will see that the core EBITDA margin is what you really need to look at.
Sure. And considering the vaccine of Serum deal going away, but at the same time, adalimumab launch happening. So if you could refresh in terms of biologic sales for FY '24.
Yes. I did indicate that we were exiting this fiscal at a $1 billion trajectory. And we believe that we will build on this $1 billion trajectory in FY '24. And like you pointed out, yes, the Serum income will not be available to us this fiscal, and we will look to building momentum on the $1 billion trajectory that we have exited at.
And just lastly, on this new debentures, which have raised to the tune of INR 800 crores. So would there be any provisioning on account of this in P&L and at what rate, if so?
Chinappa, would you like to take this?
Tushar, so the -- yes, the fund raise from Edel is like a quasi equity. It is a loan, but to be repaid to the sale of BBL shares. They would carry an accounting charge, but no cash interest cost associated with it.
Got it. So what would be that -- so while it would not consider cash, but the accounting charge will be how much on INR 800 crores?
It would be linked to the fair value movement of the BBL shares. But for modeling, you could take 12% to be.
The next question is from Prakash Agarwal from Axis Capital.
Congratulations on good operating performance. First question, trying to understand the outlook better on the upcoming product data. So if I see Amgen's performance, I mean, the first 6 months has been a very slow start on that molecule. So how should we look for us like modeling in for fiscal '24 and '25? Is it going to be a slow start and then ramps up? Or we are better prepared -- you could help on that? And secondly, you mentioned uptake in products. I mean, if I see trastu and the other products. So it seems to be stabilizing. And do you expect them to improve and including glargine outlook that will be helpful.
Matt, you might want to take these questions.
Yes, sure, thanks. And thanks for the question. I think from a standpoint, as we're looking at this, the opportunity still remains very large. And as we think about our Hulio product and the timing of this launch, I see that from the channels that we have in regards to the payer channel, we see a lot of inquiry about our Hulio product. We see a lot of interest in our product from specialty pharmacy. And we also remember we're very well positioned and have been talking to key prescribers about Biocon Biologics not particularly about our product because of the settlement date. But there's a tremendous amount of interest as these new products are coming to market. And I think what we're seeing is a steady state from the payers in waiting. And this is why you're seeing the slower uptake with Amgen. And also, I think if it was the other way, decided that the opportunity to be much smaller. So we feel very confident in our 4 channel strategy from payers to our prescribers to the specialty pharmacies and then the inpatient. As we look at our position with our portfolio, our patient assist programs are top-notch. Our product from a standpoint of our auto-injector, there's a lot of excitement about our product. And I think when we go forward and start being able to see the recognition at the time of launch, which will occur July 1, you'll see a tremendous amount of interest with our Hulio product as we progress. So I'm happy that the market is still large and we have this opportunity from the payer perspective and then also from a prescriber perspective. And then we'll be able to compete as the market evolves, either on the high rebate side or on the low side from a WACC standpoint because we will have our Hulio branded product, and we'll have the authorized, that would be the adalimumab. So we're able to play in all channels, and we're in a good position.
That's great to know. And if you could just give some color on if there could be uptick in the existing large products, the 3 products we have in the market in the U.S.
I'm sorry, could you repeat that question? I couldn't hear you very well.
Could you give us some outlook on the market share outlook on the 3 products, trastu, Peg as well as glargine.
Yes, certainly. So let me talk about this from a franchise perspective. When we look at our Pegfilgrastim and tras as well as our bevacizumab from a therapeutic area, we see tremendous amount of growth in the first time in the U.S. on the peg and tras, were over 10% in market share. Particularly on the Pegfilgrastim, we've crossed that 14% mark. And I think this is attributed to our franchise with our selling team and understanding of ASP and being good stewards of balancing our rebates with the payer, but also understanding how physicians are looked to be incentivized for the work that they do. And then we're seeing a tremendous uptick in our insulin glargine, as you've seen with the market share as well as the new Rxs. And we continue to be optimistic about continuing to add new customers with our insulin glargine because of a lot of interaction we're getting today with current customers. When you think about the franchise though of tras and peg across all advanced markets. Remember, from a trastuzumab, we have over 35% in Canada. In Australia, Germany and Italy, we are approaching 15% to 20% market share. So we have a great franchise and the opportunity to continue to grow there not only in North America, but also in our European as well as our gens opportunities.
Okay. So you do expect some improvement in the market share versus stability.
Yes. I think what I would say from market share, we've seen continued improvement in our insulin glargine or Semglee and continuous improvement in our market share with Pegfilgrastim. We see a steady state in the U.S. and other places on our trastuzumab, but that's where we're seeing the growth in our peg as well as our insulin glargine.
Perfect. That helps. And second question is on the cost side. We did fairly well in stabilizing the staff cost. So is there any one-off there? And also outlook on the interest cost. So you mentioned about trying to reduce the debt, but these are quasi equity. So while accounting interest would still be there for the quasi equity debt we have taken from Kotak and Edelweiss. So 1 is on the staff cost and the second is on the interest cost outlook for fiscal '24.
Prakash, I'll take that. So staff cost is about 10% of revenues. We see it in that range. Interest cost has been higher than what we had previously expected, let's say, at the beginning of last year, and that's tracking the increase in interest rates. So roughly 50% more than where we wanted to be. That should largely get corrected through the additional fund raise that came separate.
Can you repeat that, sir? I missed that? How will it reduce?
Through the equity fund raise, equity fund inclusion into BBL.
Okay, which is expected in fiscal '24?
Yes.
And it would also convert the quasi equity into equity. So that accounting interest will also not -- be not there. And you'll raise additional funds in the company. Is that right?
Yes. But we'll have clarified this closure to the fund raise or when we announced the deal.
And staff cost, you said 10%.
9%. That's there.
No. So this quarter, you were 15% and for the year, you were 19.5%. So I don't know so what I meant -- you were talking about BBL level. I was talking more from company level, sir?
Apologies. Sorry, I was just referring to BBL.
I think, Prakash, this quarter, if you look at INR 529 crores was the staff cost, of course, this is time for the annual increments. So we will see increments come in quarter 1. Apart from that, Shreehas, maybe you can just talk about the incremental absolute staff costs from BBL perspective as the transition happens in FY '24.
It's really on the console revenues. BBL is at above INR 188 crores for the quarter, which is 9% but you see this at the 10% range for BBL. Apologies.
The next question is from Damayanti Kerai form HSBC.
Coming back to cost, actually, I'm not clear on the operating cost movement since Viatris integration. So staff, if we look at the console level, it remains like flat, more or less compared to the December quarter despite the fact that last quarter only had 1 month of Viatris cost, right?
So if you can clarify that. And I also wanted to understand the TSA costs, which will continue for 2 years. But right now, I believe it's not part of operating expense, and we are booking a professional expert fee. If you can clarify on that part also, please.
I'll just clarify on the BBL perspective. Will just go on the TSA cost charge. So there are 2 components in the TSA cost charge. One is a reimbursement of expenses at actuals. So they are incurring the SG&A getting the employees and other contracts on their books and the charges -- across charges. Then there is an additional for a year of -- or a charge of $44 million per year, which is TSA fee that they charge and that's been announced along with the deal. That cost -- there's a fair value of debt that gets charged through the P&L and the balance goes into purchase consideration. So that really covers for the overheads. Once we absorb the business, we would have -- we would incur those overheads on -- directly on ours.
Just to clarify, once, right now, like this cost is getting reimbursed by Beatrice. And after 2 years, once it's part of Biocon, it will be coming into your P&L. Right now, not flowing into the numbers.
That's right. On TSA exit, we would incur the cost directly. During the TSA period, they incur the cost and across charge it to us.
So the exceptional which we are booking, that include both this cost reimbursement as well as the exit fee if you can also...
That we booked -- include both. And there is -- we don't really see any savings coming there as the transition out of Viatris sound to be here.
Okay. So any cost synergies which we are looking from this portfolio will likely happen once everything comes into your book and then you see a pickup on the top line, et cetera, to see the better result.
Yes. Yes.
Okay. And then my second question is on -- ma'am mentioned there are plan to further raise equity for BBl in '24. So right now, what is parent stake in BBL and where you would like to settle it down finally?
I think, Chinni, I think the question is what is the Biocon stake in Biocon Biologics at the moment? Where could we expect it to finally land.
So right now Biocon stake is 70%, Damayanti, and if you raise additional 10%, you would get diluted upon.
As you know, Damayanti, it all depends on the value at which you fund raise. So it could be maximum 10%, but much lower than that is what we're aiming.
Okay. So up to 10% stake dilution, we can see. But obviously, it depends like as and when it happens.
And the valuation you get.
Okay. And my last question is clarity on your net debt. The current position which you have given is excluding the structured asset as mentioned in the presentation. So just to clarify, that Goldman Sachs investment is not included here, right?
Yes. It's at the console level no, no. We have taken out Goldman Sachs and Kotak for the purpose of net debt calculations in our company.
But Edel is part of that.
Edel has came in only in May. So it's not reflected in there.
The next question is from Harith Ahamed of India Spark.
In your press release, you have mentioned a tentative approval for lenalidomide capsules. So it will be helpful if you can give some details around launch timeline? Just trying to understand if it's a FY '24 opportunity for us or FY '25. Some color would be helpful.
It's confidential settlement terms with Syngene, so we cannot disclose the dates. But it's not imminent. Let me just say that, it's not definitely in FY '24.
Okay. My second question is on aflibercept. We have a deferred consideration that's due for this product. Can you refresh on the exact amount and when the payment is due? And any comment again on updated launch timelines and whether we'll have an exclusivity post our launch for this particular asset?
Chinni, why don't you talk about the amounts and I can take the second question.
Harith, the consideration -- the consideration is $175 million payable in FY '25.
And on the question related, Harith, to the launch at this point in time, when we acquired the asset from Viatris, we were -- we are first to file, we are currently in a litigation with the originator, regional arm. So that litigation is currently ongoing. It wouldn't be fair on our part to talk about the launch dates at this point in time, but we will update you as things go in the process of the litigation.
Okay. And last 1 is on insulin pricing. We've seen a lot of developments in recent months around insulin pricing in the U.S. The major innovator brands have seen a significant price reduction on their list prices. So does this, in any way, impact pricing for our glargine product now and when we think about our future incident launches, does -- do these developments have any kind of an impact on our pricing.
Matt, you might want to take it.
Currently, what we're seeing, remember, some of these don't go into effect until 1/1. So right now -- of '24. Right now, we don't see a lot in changing in our model. We certainly are taking a look at it, but we're well positioned in regards to our cost structure and well positioned in the market to be able to play with both the channels, meaning the rebate channels with the payer and then the lower side on the low WAC channel.
So it's pretty much in line with what we're seeing right now, and we don't anticipate a lot of change. But I do want to keep -- remember, we're well positioned in this growth in our market share and the opportunity really says a lot about our franchise particularly in the U.S. on how we are able to play and adjust. And I think it says a lot about our platform, our manufacturing as well as how we're vertically integrated. So well in line with our expectations, and we see continued growth, as I said, with our market share uptake as well as the new Rxs and interest from customers within the U.S.
We'll take the next question from Shyam Srinivasan from Goldman Sachs.
Just the first 1 on the biosimilar overall revenue, INR 2,100 crores, like roughly making $250 million. You talked about the $1 billion run rate annualized. Can you let us split this revenue into your top products? And maybe it's a request going forward as well that from a disclosure perspective, if you could give us what the top 3, 4 products are and how these are trending. But if you could, on this call, at least, maybe a rank order and how should we look at that particular revenue pile.
Well, there are very few products, so all of them are key products for us. And I don't think we will be able to give you granular data on each product because there are multiple markets, multiple regions, and it will be very difficult for us to give you -- share with you that kind of data. But we've heard what you said, and we'll try and see how we can give you some indicators going forward.
Kiran, just maybe getting the rank order also is helpful. So which are the largest products. So is it insulin glargine? Is it adali, Europe. You've talked about the Europe market share. So any sense that we could get -- I'm just adding a follow-up here on what are the learnings from Europe Hulio, which will help us gain share? Are the numbers at 18.5% for Germany or 10% in France. Is that the numbers we need to kind of extrapolate in U.S.? Or it would be a different ballgame.
I think you have to wait for the business to come into our hands. You have to also wait for the market to actually start shaping up because these are very, very early signals. I don't think we are the kind of company who wants to forecast things without really understanding very comprehensively what we are talking about. So please bear with us for some time. This is an early days of our acquisition, we would like to really do a good job of presenting the real business prospects, but please bear with us for a while until we actually integrate the business fully.
Got it. That's helpful. Second question is on the status of the plants and the pending applications because of plant compliance issues. If you could help us update? And is there any refresh timelines around at the beva or insulin aspart, please?
Like I said, in terms of compliance, you know that all our facilities are fully compliant with EU, GMP and others. We've got all the approvals that we had applied for under the EMA. Now the only to pending approvals that we are waiting for is, of course, aspart, biosimilar aspart from our Malaysia facility and the bevacizumab in -- from the Bangalore facility. Now we are -- as you know, we have already submitted the CAPA plan to the U.S. FDA for aspart, which they have accepted. We are hoping that we will get an inspection soon. We are in the process of providing the CAPA plan to U.S. FDA for bevacizumab from Bangalore. Again, we hope to be inspected thereafter. So hopefully, in FY '24, we are expecting to be inspected and approved. That is our hope. We are in a very high state of preparedness. We have taken all the steps that are required to ensure that we are in the state of readiness and preparedness from a U.S. FDA point of view.
Got it. Helpful. And my last question is on the mid-teens guidance for the generic business. So that maybe if you could help us understand, you said generic limit is also not there. So what are some of the drivers? Is it more on API? Is it linked to the capacity that we have added?
So Shyam, it's a combination of both the new capacities that we have added. We will also have our immunosuppression and peptides facility commission qualified in FY '24 and some of the additional capacity enhancements we had done last year. So we will see a full year impact of those capacities in the coming fiscal. Apart from that generic formulations, as we've got additional contracts on our base business in the U.S., which will lead to the growth in FY '24 plus some of the new launches in FY '24. So combination of these 3 would drive the growth to that mid-teens level next year.
And what is your -- what are you penciling in for base business erosion? Is it different versus '23 versus '24? Has it seen an improvement, do you think?
The pricing part is similar lines. We have not really seen any significant change. So both on our API as well as formulations business, the price erosion would be anywhere between 7% to 10%.
We'll do the next question is from Surya Patra from Philip Capital.
First, clarification, let's say, about the licensing income in the INR 109 crore kind of a stake sale gain. Whether these are 2 different things or this INR 109 crore of stake sale gain is part of the licensing income, if you can just first clarify that.
Let me clarify that. So both are very different, Surya. Bicara had done fundraise of $108 million, which led to the step up of the investment that Biocon has -- that led to the onetime gain. Licensing income, of course, is, as Shreehas have mentioned, business transaction, and it was considered in the other income under the licensing line. So that you can see in the fact sheet as well as INR 175 million -- INR 175 crores as licensing income.
Okay. So sir, then just on the licensing. This is 1 of the highest ever licensing number that we have seen. So is it possible to kind of indicate what asset that is possibly bringing this kind of income. And since now that we are progressing with our pipeline and all that. So any visibility on this licensing front and how focused and serious about this revenue stream that.
I might remind you that we had much higher licensing deals in the past. So it's not correct to say that this is the highest licensing deal.
Yes. So basically, in the recent past, ma'am.
But I'm just saying that this is part and parcel of our business, and we keep reprioritizing our pipeline. And please understand that, as I mentioned earlier on, this is to calibrate the R&D spend, which, as you know, we would like to maintain at a 12% level of revenue. So when we look at these opportunities and see the ability for us to out-license certain assets, we will also calibrate it with in-licensing certain assets, like [indiscernible] is a very important in-licensing opportunity for us. So I think you have to view this business very differently. You will have opportunities to out-license, you will have opportunities to in-license. But overall, we would like to calibrate our R&D spends at a 12% level by and large.
And even in the past, we have mentioned licensing income is lumpy. So you really cannot predict or put a trend on what it would be.
Sure, sir. And since just continuing on the Bicara, whether the charges relating to Bicara would meaningfully come down for the 24% or how should we think, sir.
So right now, we consolidate 35%. I think once the Bicara raises the remaining $70 million, which is expected sometime this quarter, Biocon would be down to 24%. So we will be consolidating only 24% of their R&D expenses. So it would keep coming down. And as the -- at some point in time, Bicara will also look at raising Series C funding.
I think it will be a fluctuating because it depends at the value at which they raise their Series C funding. So I think it's very difficult for us to project. But I hope you have also appreciated the value creation opportunity that the Biocon group has created through this very, very interesting asset.
My first question is on the benefit of this integration. So in fact, Obviously, we have successfully completed and integrated the -- or in the process of integrating fully the business of this Viatris biosimilars. So sure -- like on the revenue side and let's say, on the EBITDA side, we have seen probation because of the integration, but because of the multiple divestments and the kind of finance cost, capital cost, what we have witnessed. So that has suppressed the overall earning contribution by the acquisition.
Again, Surya, I would like you to focus on the business fundamentals, okay? Business fundamentals are about revenue and core EBITDA. I keep trying to remind you that R&D is a very, very integral part of this business. And under normal circumstances, R&D should be a CapEx rather than an expense but unfortunately, accounting systems require us to treat it as an expense. So I would like you to look at it in that context. Our pipeline is our lifeline. And as you know, as we continue to deliver on this pipeline, we actually can surge the growth prospects of our business in the coming years. Now in the meantime, of course, we are also trying to see how we calibrate our R&D spends and contain them as much as possible. So I think we've done -- we've actually demonstrated to you this quarter what is possible in terms of operating performance and the core EBITDA performance. Now of course, because we have made that acquisition very recently, there are going to be charges and accounting treatments of some of the quasi equity that we have taken to reduce debt. So I think if you look at it holistically, it's a very, very good business with huge growth potential, and I think that's the way I would look at this whole business.
Sure, ma'am. And my last question.
And not just looking at PAT, do you know what I mean?
Yes, yes, sure ma'am. My last question is on Syngene. So the commentary in the press release indicates about 1,000 kind of job additions. So this is for the FY '24 that we are talking about or anything.
I think, [ Shivaji ], if you can answer that question.
Yes, I will. Surya, if you can please repeat what 1,000 you said.
So 1,000 more job additions that has been mentioned in the press release. So is it for FY '24? Or it is that you have been talking for the recent past?
So this is about the recent past we added 1,000 jobs in FY '23, but we are an expanding company. So we'll continue to expand jobs as we expand our both research and development and manufacturing businesses.
We'll take the next question from Neha Manpuria from Bank of America.
My first question is on the core margins. As we go ahead into next year, with the commentary that you've given on improving share in some of our products and new launches possibly. How should we look at the core margins? Is there scope for improvement from the high 39% order level that we have seen? Or give and take, this should be the level that we continue.
I think we have guided for the 39 to -- mid-30s to 40% margins. And I think a 39% to 40% is a very, very strong margin that we think we can find.
Sorry, to add to what Kiran said, we had said mid-30s, mid- to high 30s, and we've been able to continuously deliver above that. I think that's clearly where the range is.
Okay. So more in the 35% to 40% range rather than the 39% that we have done this quarter?
Well, 35% to 40% is the range we have given. So anything in that range, I think, is a good performance.
Shreehas, is it fair to assume that as we see new launches coming through and probably even existing products ramp up -- there is some operating leverage that could come through with the TSA charge, et cetera, and therefore, there's scope for improvement in margins?
Like Kiran said earlier on, Neha, these are things early days in the acquisition, and we are still in the TSA period for a while. So unless we get past it, it wouldn't be fair for us to comment on how things will move. But we certainly expect things to get better. And hopefully, we should be in a higher -- in a better operating performance range. But we will state that as we get closer to those things.
Understood. And Kiran, ma'am, on Biocon stake in Syngene, what is the comfortable level that we are okay to stay -- hold in terms of Syngene's stake?
So we've already indicated we do not plan to reduce below this level, which is at roughly 55% level. I think we will stay -- we will maintain it at this level. We do not need to divest further.
We will take the next question from Ishita Jain from Ashika Group.
Congrats on being on the $1 billion trajectory for BBL. My first question is on Semglee. We have a U.S. market share, you mentioned of 12%. Can you provide some color on how interchangeability helped in this journey? And would the market share look any different without both the interchangeability and the exclusivity.
Matt, do you want to take this question?
I'll take it and Shreehas, please dive in here. We look at it from a standpoint, not just interchangeability, but how has the product performed throughout the market. Interchangeability on this particular product, definitely gives us extra opportunities to talk about, but it's really the franchise of the product itself. And this is the power that we have in regards to the Semglee, the insulin glargine, interchangeability, also the power that we've acquired from Viatris in understanding how market access works as well as all the different influencers in the value chain and how do we position our products. So the more opportunities we have between interchangeability or existing products, it really helps us within formulary, formulary design. And I think this is why you're seeing the success that we're having whether it be from an interchangeability standpoint with the payers or a straight up more market access that you would see where it's more formulary designed with the payers, we're well positioned in both channels.
I mean just to add to what Matt said, if you really look at it stepping back from it, the interchangeability is just a U.S.-specific phenomenon. And the real piece even when FDA approve Semglee as the first ever insulin, which they had approved as an interchangeable they said it was a landmark moment overall. That was because they had to bring this myth about whether biosimilars can be interchangeably used. And I think to that extent, Semglee or our insulin glargine was that water shared moment in the entire biosimilars industry and it's paved the way. So it's taken away that whole myth that you cannot use a biosimilar interchangeably, and that's really helped us gain that market share. Certainly, it's broken that barrier for anyone to any apprehension of whether a biosimilar would be as effective. And I think that's really paved the way. You've seen after that, several other products getting approved. And now if you see biosimilars have got over 80% acceptance in the launches that we've seen in the U.S. So it's really helped, and we see this getting better as we get more products into the U.S.
But to your point, I don't think it is absolutely imperative to get an interchangeability to be able to succeed in the market.
Got it. My next question is you have given the guidance for percentage of revenue that will be R&D spend. What part of that would be earmarked for the Generics segment?
So Generics R&D will be around 10% of the revenues.
10% of the...
No, no. I think she's asking about the total R&D spend in the group. How much of it is contributed by Generics. I would say the large part of the spend would be contributed by biosimilars.
See generic spend last year was roughly INR 250 crores of R&D full year and will be closer to INR 300 crores next year.
Understood. And just a final question. I'm not sure if you already mentioned, but do we have an overall timeline on Itolizumab, which is our Novel biologic? And what is our expectation from this opportunity?
Well, the clinical trial is ongoing for acute graft versus host disease, which is the leader indication of it's going -- its global Phase III trial is going on. And Equillium I think, had indicated that they expect to complete the trial in calendar '24 -- end calendar '24, and then do a BLA filing in calendar '25. And of course, the Lupus is getting into a Phase II. We also have an India Phase II trial for ulcerative colitis, which is going on. And in terms of expectations, of course, William had given an auction agreement to the Japanese company, Ono, who licensed this asset. Ono is expected to exercise that right by end of this calendar year, after which the commercialization in the U.S. and Canada, would be done by Ono. We do not expect commercialization in the near term. As I mentioned, the filing is expected somewhere in calendar '25, followed by review process. It's under a fast-track review by the FDA. So it's -- the launch definitely is not until calendar '26 at the earliest. And we will have supplies which will be done by us as well as we'll get royalties and milestone payments once the asset is commercialized in the U.S.
Will this be a partnered asset?
It's already partnered, right? Equillium is a partner for U.S. and Canada and Australia and New Zealand. We still retain full rights on Europe, which we will license out at a later date.
Next question is from Nithya Balasubramanian from Bernstein.
First question is on glargine. So we didn't really see the needle move much in terms of higher number of covered lives in 2024. Please correct me if I'm wrong. So it seems like you're capitalizing on the payer wins you had last year. And now come 2025, Lantus is expected to lower their list price quite significantly on the innovative product. Can we expect this to be a meaningful opportunity for Biocon given that their ability to rebate at a lower WACC level will be much lesser than before.
I'll take that, Shreehas and then please chime in. So I want to make sure I totally understand your question here, come in FY '25, the changing of the WACCs of the other 3 companies. I think there remains an interesting opportunity in covered lives. When you think about the payers, how they look at their portfolio, it's just not always the low WACC strategy. It's an important one for key customers that they have within their portfolio that has covered lives, but there's still a lot of customers on the other side in which we're talking to every 1 of the payers of looking at opportunities as this market is changing of having more shots on goal in regards to getting payer coverage, especially as we're seeing this market start to switch. So I think you're going to see this play out. And also to remind you, remember, some of the things that you're seeing in the data, IQVIA data or this or lives, some of it's not totally reported. When you think about closed-door pharmacies, things like that. And this is another opportunity for us. So just covered lives is something definitely, but we're looking more in regards to positioning our insulin glargine, Semglee with the payers as we continue through this year and the following year, but also maintaining the lower WACC opportunity and thinking about Biocon's platform, where we make this product, we're in a good situation, I believe, to play in the U.S. on both the rebated side as well as the low WACC where you're seeing some of these pricing components that are being indicated from the other diabetes company. But I'll stop there. Shreehas, anything to add?
I think you covered it comprehensively, Matt. My only comment would be the financial years that were mentioned. I think we probably were talking about, Nithya, fiscal '23 was your commentary and what we've responded to is what happened in the year went by and fiscal '24 is where we are currently, and that's what Matt's talked about. So just correcting for fiscal '25 will be first.
Yes, I think I was talking calendar years but I'm sorry, I'm just going to follow up because I didn't really get an answer here. When Lantus lowers its WACC price, their ability to compete on the rebating channel comes off. They will not be able to give the same level of rebating to the peers.
Do you see that as a significantly important opportunity when that happens? If you can play in both.
Yes, let me respond to that so you get a straight answer to that. If you look at how we priced our insulin large in the U.S. And I will not right now comment on the competitor play because a lot of that is also to do with the U.S. -- the way the U.S. system -- overall system and the market is structured and how the compensations are passed on back from CMS. So I think there's a little bit of that to the action that competitors have taken. But our insulin has been priced always with the high WACC and the low WACC strategy, which allows you to play on both segments, which is -- which allows us to be in the commercial space with that higher rebate opportunity that you talked about, Nithya. And also those with direct purchases or like the hospitals or the veteran affairs where you have the lower WACC product. And we've been always very competitive. So we do not see a challenge like Matt said, of the lowering of the prices because we've always been amongst the lower-priced products in the U.S. and quite competitive with that. It does place us in a good position with the payers, given that everyone else has probably moved to a lower WACC position, and we would have that opportunity. But we really leave it to the buyer and the channel that is procuring product from us to make that decision. But we've been basically pricing it in such a way that every stakeholder in that -- in the U.S. market has an opportunity, and we have an offering for all these channels. I don't know if that gives you clarity, but we're happy to elaborate if you need later.
A quick 1 on Ustekinumab. We now know that the market formation is in early 2025. You had indicated earlier that your development is slightly behind and you'd probably be in the second wave. Can you help us understand when do you expect to participate in that market? And I have 1 more on margins, if you will allow me.
Yes. Just to respond quickly on Ustekinumab and we've seen the 1-1-25 settlement date that's there. We've said in the past that our products ready to file end of '23. We're on track with that. I wouldn't speculate at this point how it places up. But clearly, I think there were discussions about earlier market for mission base. Now I think there's more clarity on where market formation is. It certainly gives us an opportunity to play in that space and brings more clarity on when the market is really going to open up. So it's not '24, but it's not '25 .
Understood. A quick 1 on margins. I think we were -- there was an earlier question about whether the 39% can move up. I actually have a different question, which is that as you are building a commercial infrastructure to support both adalimumab as well as maybe aflibercept, will we see those numbers actually slide down and to what extent?
I think we've always said, Nithya, that we will be in that mid- to high teens -- sorry, mid- to high 30s. And that's what Kiran was also referring to, 35% to 40% is where we see ourselves. We've continued to perform in that range even after we fully integrated the full quarter business from Viatris. As you know, the Hulio launch, the adalimumab launch in the U.S. is something that Viatris is needing in the numbers as we pay the TSA fee that we talked about earlier in the call, and we expect things to be in that space. But as we fit out we stand up the business in the U.S. and other markets, you will see us in that range of mid- to high 30s is our expectation.
We have a follow-up from Cyndrella.
On the reg insulin, can you share the time line for the approval?
So as we've said before, Cyndrella, we had filed that reg insulin is not 1 product. We've got 3 products and multiple presentations. There'll be -- we are the end, which is called the NPH and the mix, which is the 70-30, we were developing, we are developing all of these products. And at this point in time, we had filed the R formulation, which is the soluble one. We've received the CRL, which we've talked about in the past. So we are at this point in time, working with the agency to see what is the best way forward in bringing in the other 2 products, the NPH and the 70-30 to the U.S. market. We are waiting for their views on aspart. And then we will be in a position to take the RHI product and a decision on that, which we will share with you shortly.
On aspart, we shared that we'll have an inspection, right, somewhere in Q1 FY '24, right? So is there any TAT along with it? Or how should we read that? And would that lead to missing the formulary cycle with interchangeability.
Cyndrella, at this point in time, what we have said is we've responded to the CRL. The agency has accepted the CAPA plan, and they've said that an inspection is needed for them to approve us. There is an indication that the agency will inspect us in Malaysia.
We are trying to get clarity whether that will cover both glargine and aspart as we get on past this year. So we should have full clarity on that on whether they will cover aspart and glargine both, and then we should be in a position to do that. We are quite optimistic that we should be able to get both these products covered in the inspection and should be able to be in time for the contracting cycle. There is a lot of interest, as we've said, given that as part when approved, will be the first biosimilar insulin aspart rapid-acting analog in the U.S. And the customers who are really looking forward to us getting that approval and launching it in the U.S.
CRL is not pending anything on the study side or anything, right? It is just for the plant inspection. Is that understanding correct?
That's accurate, yes.
Okay. One more question. And this is how should we look at our BBL top line guidance for FY '24, given that now we have seen them out? So what is the number range that we should be looking at? And would you be able to share on BBL what is our RoW and right market? And if we can start getting the split between U.S., Europe and RoW, if that is in future we can incorporate.
I think first half, I think let me respond to your first question on the '24 piece. We talked about when we left the last earnings call, Kiran had guided about the quarter run rate being at $1 billion as we exit fiscal '23. And I think that's what we've delivered on. So we're building off that base of $1 billion in revenue. We certainly have a lot of upsides coming up. We just talked about adalimumab, a bit -- a few minutes ago. There is certainly a big upside coming up with that is the way we see it. It's a big opportunity for sure. We are looking at aspart and bevacizumab getting approved through the course of the year. Now we could fit this out and put that up together and see where that leads us to. But at this point, it's best to wait for these approvals to come through and the launch to play out, and so we can give more guidance and as we get closer there. We also know very clearly that the vaccine integration of the numbers won't happen, and we had said that would be about 300 to 350. So those clearly won't be happening. So if you look at the math, it's clearly upwards from $1 billion. As we progress through the year, we'll say how far that can go and how much we will achieve. But clearly, it's a buildup from here Cyndrella towards where we want to be.
Just a clarification. Will Q1 reflect our preparedness for launch for adi?
And just to understand your question, what does reflect being?
Our preparedness, I mean the launch quantities and all should be -- should start seeing it from the Q1 results?
I think you should realize that the launch itself is after Q1. It's in July 1.
Yes. So I'm asking if we will be seeing some preparedness.
But how can you look at Q1.
Cyndrella, what have we got right now is in the public domain that we have a settlement date where July 1 is our launch date. And given that now we will start accruing revenues only post-secondary sales. I think the supplies to the channel stocks is when you can actually do that only starting in Q2 is where you will start seeing it. Effectively, you won't see that in June 1, but you will see a lot of preparation, which is going on right now, where the teams are getting ready for the launch. But we can't really divulge more than that because of the terms of the agreement that we've got with that.
That's appreciated. And can we give the breakup on reg and non-reg.
Sorry, again, my apologies.
Regulated market and non-regulated market share. The split. Do you want to call out the split the way we used to call.
Yes, maybe the advanced market and emerging market that I can paraphrase that. And then I -- maybe Chinni, you can respond to that if you like to.
Cyndrella, yes. It's about 70-30. 70 developed and advanced markets, 30 emerging markets.
We have the next question from Sandeep Joshi, an individual Investor.
Sorry, can you hear me now?
Yes.
Okay. Just 2 of them. One is on the Serum deal. It was mentioned at the beginning that the equity would be taking back. Can you explain for the $300 million that you are getting in from serum, what is the consideration that they get back?
So let me try and start with answering your question by saying that the original strategic alliance deal, if you recall, was about issuing Serum around 15% equity in return for a short revenues and EBITDA pertaining to 100 million doses of vaccines. And thereafter, of course, Serum infused an additional $150 million and also gave us a loan of $150 million towards our Viatris acquisition. As you know, we were expecting certain court approvals for completing this deal, the original deal, which didn't come through. So the 2 companies decided to withdraw from this alliance and instead convert $150 million loan into equity, thereby giving Serum a $300 million equity into BBL at an average valuation of $6 billion. I think this entails them to about 5% equity stake in the company. And I think the original 15% is no longer required to be issued.
Thanks for the clarification. Would that be considered pure equity? Or would this be quasi equity?
It's pure equity.
So we would take this as a 5% equity being taken by Serum.
Yes. So $300 million would be pure equity.
Okay. And the other question is on the additional borrowing. We look at the P&L and add back the cash for [indiscernible]. It looks like you had a cash flow of over INR 700 crores on the quarter. And I'm just trying to understand what would be the driver to raise additional equity because on an annualized basis, you seem to be generating over INR 2,500 crores in cash.
I don't know whether either Chinni or Siddharth wants to take this question.
Yes. The intend to raise additional equity is to lower than net debt, but there is definitely no concern on cash flow and servicing of debt. We have strong cash flows, as you pointed out, and we can easily service the debt. I think it's an overall improvement in the net debt to -- net debt position, which we'd like to bring down.
Okay. So this would not impact the debt load, the new INR 800 crores that was mentioned to be raised?
So the INR 800 crores that we just raised from Edelweiss, that's a quasi with a -- I think it is to be repaid through the sale of BBL shares and doesn't have a cash interest charge on it. Not really following your question, Sandeep, and the audio is not the best. Maybe you would want to take this offline then.
We'll take the follow-up from Surya.
Just last clarity. So in fact, since we would be approaching a contracting cycle for the subsequent period for most of our products as well as for the adalimumab. So given the facility or the pending observations at our plants, whether it has impacted our contracting capability with the customers either in the recent period or for adalimumab.
Let me answer that question by saying that adalimumab is not impacted at all because it is not from the facilities that I mentioned earlier on. Okay? And as far as our facilities are concerned, we expect to be inspected, and we hope to clear these current queries at the next inspection.
Okay. So basically, my question was that, okay, since the sustained supply of the materials, that is the key for procurement by the customers. So whether it has impacted our volume growth in the recent period and whether we are likely to see improvement on that with the clarity that we might see for our facilities from the regulators in the subsequent period.
So to answer your question, none of our current supplies are impacted by any of these CRLs or pre-approval inspections. And obviously, we are hoping to clear the pre-approval inspections, which will only add to our supply ability for these other products, which is bevacizumab and aspart.
Okay. And just on the PAI approval for the Telangana facility, is it possible to say what is that product out or which API products that we have.
See, there were multiple filings in the U.S., the ANDA filings, which triggered the PAI. One of them was Copaxone.
We'll take the last question for today from Nitin Agarwal from DAM Capital.
Chinni, 2 things, can you just help us with the -- we said Biocon now owns 70% in BBL. So if you can give us a broad sense of the cap table for BBL right now?
Nitin, yes, that's on a fully diluted basis after taking into account stake dilution in favor of both Edel and Kotak, that's clarification 1. I think the next largest shareholder would be Viatris with close to 15% stake. We have Serum close to 5% and the other shareholders largely representing the balance.
So this takes into account just to rephrase the both Kotak and Edelweiss conversion into equity is what -- that takes us to 70%.
That takes us to 70%, yes. That's on a fully diluted basis of assuming dilution for GS, Kotak, Edel et cetera. Viatris is more closer to 14%.
Okay. And secondly, Chinni, when we -- in the press release, you talk about the core EBITDA and the net EBITDA, can you just explain what is -- how you sort of -- what do you include in core EBITDA, and what you -- what is the supply to arrive at the net EBITDA number for the Biologics business?
So core EBITDA reflects the operating performance, and that excludes R&D charge -- costs. We exclude licensing income, we exclude FX gains -- gains or losses and any MTM movement. So these are the exclusions that we don't take into account when we calculate the core EBITDA. EBITDA is calculated after all these items.
So INR 742 crores that we reported in the quarter on INR 200 crores of revenues did not include the licensing income.
No. Yes, it doesn't include the licensing income.
Okay. That gets netted off -- when you're computing the net EBITDA number is when we take a license income and net of the R&D from there.
Yes.
This was the last question for today's call. I thank everyone for joining us today. If you have any follow-ups, please do get in touch with us. Thank you very much, and you can hang up now.
Thank you.
Thank you.
Thank you.