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Despite setback, we sense promise in oral insulin molecule research: Kiran Mazumdar-Shaw

Interview with CMD, Biocon

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is moving towards the cusp of breakthrough innovations in oncology and diabetes, and is working with the best of the world’s top majors to commercialise these. India’s top biopharmaceutical major has also delivered consistent results for various products. Kiran Mazumdar-Shaw, the company’s CMD, tells Raghuvir Badrinath about the exciting road ahead in drug discovery and on the Indian pharmaceutical scenario. Edited excerpts:

The Indian pharma sector is seeing the exit of a lot of players from the generics business. How should an investor approach this sector?
Globally, innovator companies are stepping into the generics business. This business continues to be a good opportunity for Indian players, but companies are increasingly realising the need to also invest in innovation. Generic opportunity is here to stay, considering the strong need to make healthcare affordable for a larger population. To achieve this, most governments are encouraging generic substitution.

Biocon has traditionally been focusing on the better margin business. As other players have started moving towards this, how do you see Biocon squaring up against such a play?
Biocon, as the leading country’s biopharmaceutical company, has been focusing on a differentiated business model. Our business is modelled around five growth verticals: small nolecules, biosimilars, novel molecules, branded formulations and research services. Some of these businesses may have better margins, but all of these are high investment businesses with relatively complex entry barriers. The Biocon business model is unique with an appropriate risk balance approach. We do not see the prospect of many players in this field making the play difficult for us. We are one of the few companies in India which is truly committed to delivering affordable innovation.

There are five-six major drug pipelines which Biocon is working on. Can you explain the roadmap for their commercialisation?
The novel molecule programme is a long-cycle programme. What we have is a high potential product pipeline with six molecules at different stages. All these are very promising. Two late stage molecules are progressing particularly very well. For AC 165198, for diabetes, our partner has filed an IND (investigational new drug) in the US. For Anti CD6-Itolizumab for psoriasis, we have completed phase-3 clinical studies in India, with very encouraging results, and we are looking at taking this forward for a global clinical study. For oral insulin molecule, the clinical study outcome indicated the efficacy of the product, but the results fell short of the desired expectation, which we are working on further. This molecule continues to hold promise; we will take it forward. Commerciali-sation for our pipeline is still a distant target, but its progress is very encouraging. We are in talks with prospective partners for our late-stage molecules. We are committed to innovation, and our endeavour is to take our programs significantly forward before we look for partners.

There has been repeated talk about Biocon research services tapping public markets, but it is getting deferred due to market conditions. What is strategy now? Will you tap the private equity route?
I have said this before, we are clear about our intention to go public with our research services business in the next 12-18 months. We have a great business model; our research services business has performed extremely well. For YTD FY2012, this business has grown by 28 per cent. We are in no hurry to raise funds; will go to market at an opportune time. We are cash-positive. With the current net cash position at Rs 580 crore, we are not desperate for funding.

During the third quarter, your sales and, so, the net profit dropped due to a drop in the licensing income. You said it was due to seasonality. However, will you be able to forecast such income more accurately, so that investors can plan their strategies?
Licencing income, as you know, is lumpy and has inherent periodic variability. Last year, there was a sizeable one-time licensing income from Pfizer, which is not there this quarter. Licensing income is an integral part of our earnings; it will continue to be so.

However, it is best viewed on an annualised basis, since it is linked to development milestones which cannot always be achieved every quarter to be reflected in quaterly earnings. Our investors and analysts need to understand this business model and factor it in accordingly. Going forward, we see some of our licensing discussions reach fruition over the next 12 months.

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