Pharma major Biocon Ltd announced its quarterly earnings reporting a loss of ₹16 crore for the quarter ending September 30. While the company missed analyst and market expectations, it is poised for growth in the second half of FY25. Siddharth Mittal, CEO and Managing Director of Biocon Ltd spoke to businessline about how the company is aligned with its growth strategy and the guidelines set for the year. He expects that new product launches and increased volumes will serve as key growth drivers in the latter half of the fiscal year

Q

The generics segment has been underperforming, what reasons do you consider as contributors to this degrowth?

Biocon’s Generics business has historically focused primarily in the US and select emerging markets, unlike other Indian generics companies with diversified portfolios across Europe, Latin America, Japan, and Russia. This limited market presence, coupled with ongoing pricing pressure in the generics sector, especially in the US, has impacted growth. And the only way the growth is going to come from is either volume increase or new launches.

With limited product launches in H1FY25, the growth in this segment has been muted. However, we anticipate stronger performance in the second half of the year with launches slated, including Liraglutide API in the UK, Micafungin, and Daptomycin, alongside expanded capacity for synthetic and fermentation products, which are expected to drive volume growth.

Furthermore, the cost-improvement programme, initiated to address competitive pricing pressures from Chinese players, along with the expansion of our production capabilities, is expected to strengthen our market position in core products and drive recovery for the generics business by the second half of this year.

Q

Can you explain the current debt position of Biocon, and what proactive steps are being taken to reduce the company’s overall debt?

 Reducing debt has been a key goal for us. Last year, we repaid $250 million used for acquisition financing, and we aim to keep bringing the debt down further. Currently, the net debt at a group level stands at $1.2 billion, excluding some of the structured equity, covering only bank debt and bonds. Recently, we have refinanced $800 million of bank debt through bonds and restructured an additional $300 million, allowing us to use our earnings and free cash flow to reinvest in the business.

Although, I cannot provide a specific target, our long-term goal is to lower the net debt to EBITDA ratio to between 3 to 3.5, down from the current level of roughly 4.5 to 5.

Q

Biocon’s net R&D investment dropped from ₹264 crore in Q2FY24 to ₹200 crore in Q2 FY25. What factors contributed to this reduction? Are there specific strategic shifts in R&D allocation?

R&D spending is a function of the timing of development programmes. Biocon’s R&D expenses typically fall within 8-10 per cent of revenues. Last year, several biosimilars were in phase three trials, leading to higher expenses; these costs naturally decrease once trials conclude but rise again when new assets enter phase three. Although quarterly variations can occur, like this quarter’s 7 per cent, which may go up to 10-11 per cent in the next quarter. Overall, R&D investments are steady, as they are essential for fuelling future revenue through pipeline development.

Q

What is Biocon’s strategy for capex?

Biocon is maintaining its previous guidance of around $75 to $100 million for both biologics and generics. A significant portion of the capex cycle for generics is nearing completion, and over the next couple of years, the company plans to finalise all ongoing projects. This year is particularly critical, as all the injectable facilities are set to be commissioned by the end of the fiscal year, along with the expansions of the fermentation and peptide facilities, which will also be completed this year.

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