Biocon 2020 Annual report takeaways.

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Biocon: Bring high quality affordable medicines to all.

  • Generics division: Crossed an annual revenue milestone of Rs 2000 crs. (31% of sales)
    • Extended footprint to China through a licensing deal for 3 Generic Formulations.
    • Started construction of a Rs 600 crs greenfield, fermentation-based manufacturing facility in Andhra Pradesh, India to cater to anticipated growth in APIs business.
    • Clients acquisitions increased market share in APIs. 
    • Pipeline of niche, difficult-to-make molecules with high barriers to entry. (fermentation-derived statins and immunosuppressants)
  • Novel molecules: 
    • R&D stage, No revenues as of now.
    • Started global clinical trials for first-in-class oral insulin molecule, Insulin Tregopil, in Type 1 diabetes. Type 2 diabetes completed Phase II. 
      • More than a 100 million people require insulin therapy for their diabetes. The ‘silent pandemic’ that currently affects 475 million people worldwide)
  • Started a clinical trial in India to study Itolizumab in treating moderate to severe patients with COVID-19 complications.
  • Biologics: Plan to list Biocon Biologics in next 2-3 years+ Reach $1B in rev by FY22 (addressable market size by $33 billions)

(Read more about Biologics & Biosimilars  here: https://t.co/5N2CKHLG7m?amp=1 )

  • Revenues at Rs 1953 crs (29% of sales)
  • Touched the lives of 2.1 million patients through access to our biosimilars.  A pipeline of 28 molecules which will require investments.
  •  PE investment for a minority stake, indicating an equity valuation of USD 3 billion (~ 10 times EV/ sales)
  • Expanded commercial footprint of key biosimilars: (US- most lucrative)
    • Pegfilgrastim (Australia, Canada)
    • Trastuzumab (US, Australia, Canada)
    • Insulin Glargine (Australia)
  • Growth opportunity: Increasing market share in biosimilars
    • The recent launch of Trastuzumab in the US.
    • The upcoming launch of Insulin Glargine in the US, & Pegfilgrastim in the EU coupled with the launch of Insulin Aspart and Bevacizumab in EU and US (Partner: Mylan)
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  • Received regulatory clearances from both U.S. and EU regulators for our Insulin Glargine manufacturing facility in Malaysia.
  • Dream: Universal access to high-quality insulin nearly 100 years post its development by providing rh-Insulin at less than 10 U.S. cents per day in low- and middle-income countries. (by government collaboration)
  • Research Services: Syngene (Biocon owns 70%)
  • Branded Formulation: Sales of Rs 536crs (8% of sales)
    • Strong pricing pressure in India & UAE (40% price decline across 60% of our product range)
    • Wounded up the JV entity in the UAE as the partner came under investigation for governance issues.
  • 78% of sales is international: significant Fx risk.
  • Trend: The future will call for a new approach to prevention, screening, diagnosis, therapy, monitoring and management of disease. Demand for therapies that are patient-focused, data-driven and digitally enabled will increase.
  • India exported $ 19 billion worth of pharmaceuticals in FY19. Also, caters to 60% of the world’s vaccine demand.
  • No dividend for FY20 to maintain liquidity.
  • Guidance on gross R&D spends: In FY21, is expected to remain between 12% and 14% of revenues ex-Syngene. 
  • Guidance on capex spends: USD 200 million in FY21, split equally between Small Molecules and the Biosimilars businesses. (Capex during FY20: Rs 974 crs)
    • Will be funded through internal accruals, debt raise (until debt/equity < 0.5) & additional PE funding in Biocon Biologics.
  • Employee cost increased by 25% YoY, as it is a front ended with high operating leverage.
  • Board consistency of good pedigree in strategic fields.
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  • Bull case for Indian generic Pharma: Combined value of drugs for which patents will expire between 2020 and 2023= $127 billions.
  • Power to challenge current policies & bring change:
  • 8 of the top 10 institutional shareholders increased their stake in FY20.

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