'APIs are a very strategic part of Biocon's business'

'There is no reason why we should break this business up.'

Bengaluru-headquartered biotech major Biocon has been working to reduce its cumulative debt of around $1.5 billion, of which around $1.2 billion was taken to fund the acquisition of Viatris' biosimilars business.

Debt-reduction plans are progressing a tad slowly, said Siddharth Mittal, managing director and chief executive officer of Biocon, in an online interview with Sohini Das/Business Standard.

However, Mittal is clear that no strategic or core assets will be sold.

As for its generics business, the company is in the middle of $500 million capex plan..

Customer demand for generics has moderated due to inventories stocking up. What is the outlook for next year?

Directionally, pricing pressure continues in the US and other parts of the world, which affects our customers' ability to win tenders.

This has impacted how much they buy from us and at what price.

Stocking up has been an issue in some markets. In the next financial year, we see more opportunities from the new facilities being commissioned.

This should guide us to high-single digit growth, especially in the India business.

In the formulations business, we are expecting a couple of approvals in the US, and we will look at geographical expansion as well.

In the generics business -- both active pharmaceutical ingredients (API) and formulations -- we are expecting a mid-teen to low-teen kind of growth in 2024-25.

You are in the middle of a capex plan for the generics business -- both APIs and formulations. Can you update?

We have invested around Rs 600 crore in our formulations facility in Vizag.

There has been an uptick in demand in the global market for immunosuppressants, and Biocon is in a very good position to cater to that.

So, we wanted to expand our base beyond Bengaluru.

This new facility has been commissioned, and it will file for approvals from the regulators.

In Hyderabad we invested in increasing our capacities for non-potent synthetic APIs; in another site in Vizag we invested to create capacities for potent APIs.

This apart, our focus has been on peptides and fermentation products.

In Bengaluru we are expanding capacities for these. We have invested in the first phase of the peptides facility, and now we are more than doubling that capacity in the next one to two years.

We are also building an injectable formulation facility in Bangalore.

Of the $500 million investment, a large part is going into capex across the business of APIs and formulations.

Around 8 per cent of our generics revenues is invested in research and development, and we will maintain that run-rate to create a differentiated pipeline.

This expansion plan will be completed by the first half of FY25.

Can you tell us about your pipeline for the generics business?

We have a pipeline of more than 20 products -- some have been approved, some are filed with the US Food and Drug Administration (USFDA), and some are under development.

This pipeline is for the next four to five years in terms of commercial opportunity.

We are focusing on cancer as well, and trying to reduce health care cost related to cancer.

Our next focus area is diabetes and metabolic disorders.

How will the acquisition of a manufacturing facility from Eywa help the generics business?

We have a strong statins (anti-cholesterol medication) business, of the size of about three billion tablets.

But these drugs are mostly contract-manufactured.

We did not have a non-potent drug-manufacturing facility.

By having this facility, the supply assurance to our customer is improved.

Today customers are looking at suppliers who are fully integrated so that there is less supply disruption.

Are you looking to divest the generics API business?

It's an absolutely baseless rumour. APIs are a very strategic part of our business.

There is a huge advantage when companies are vertically integrated, and customers prefer that.

Our formulations business has grown over the past couple of years -- it's almost a $100 million business now in the US from zero a few years back.

This has happened because of vertical integration.

There is no reason why we should break this business up.

The mission at group level is to bring down health care cost, and we can fulfil this mission only by focusing on the strategic part of things.

There is absolutely no plan to divest any part of the generics business.

What is the USFDA status update of your generics plants?

None of our manufacturing plants has any outstanding FDA issues.

We had two FDA inspections this year -- in Bengaluru and Hyderabad -- and both the inspections were closed with zero observation.

How is your debt-reduction plan going?

The plan is on, albeit at a rate slower than we had expected. That is because of the market situation, interest rates, and some other headwinds.

We are hoping these discussions work out sooner rather than later, and we are able to reduce debt to a certain level.

We evaluate every option that is feasible and that makes most strategic sense.

But we will only view (divestment) when something is non-core and non-strategic.

Our comfort level typically has been a debt-ebitda (earnings before interest, tax, depreciation, and amortisation) ratio of four to five in the short term, and around three in the medium to long term.

Feature Presentation: Aslam Hunani/Rediff.com