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Biocon Ltd.

BSE: 532523 Sector: Health care
NSE: BIOCON ISIN Code: INE376G01013
BSE LIVE 15:51 | 09 Dec 943.25 20.75
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NSE LIVE 15:53 | 09 Dec 943.65 19.30
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VOLUME 109941
52-Week high 1020.00
52-Week low 430.80
P/E 36.46
Mkt Cap.(Rs cr) 18865.00
Buy Price 0.00
Buy Qty 0.00
Sell Price 943.25
Sell Qty 615.00
OPEN 930.00
CLOSE 922.50
VOLUME 109941
52-Week high 1020.00
52-Week low 430.80
P/E 36.46
Mkt Cap.(Rs cr) 18865.00
Buy Price 0.00
Buy Qty 0.00
Sell Price 943.25
Sell Qty 615.00

Biocon Ltd. (BIOCON) - Chairman Speech

Company chairman speech

Chairperson’s Review

Dear Shareholders

Strategic Capabilities

We are living in extraordinary times where technology is revolutionizing life sciencesby decoding diseases at the cellular and genetic level and helping usher in safer and moreeffective therapies for patients. Today’s medical paradigm is rapidly evolving from a’one size fits all to a customized solution of the right treatment for the rightpatient at the right time’ with the aim to minimize side effects and maximizepositive outcomes. These advances in understanding disease mechanisms diagnosis andtreatment using genomics and cell biology are coinciding with the rapid spread of apandemic of non-communicable diseases (NCD) worldwide. It is estimated that 38 millionpeople succumb to NCDs like cancer diabetes cardiovascular diseases and chronicrespiratory disease annually. Low- and middle-income countries (LMICs) bear adisproportionate share of the NCD burden accounting for nearly three-quarters of NCDdeaths. Of these NCDs like cancer and diabetes have not only emerged as the leadingcauses of death and disability in the developing world but are forcing about 100 millionpeople into poverty every year owing to unaffordable access to life-saving drugs. Todaycancer is the cause of ‘one in seven’ deaths worldwide while diabetes nowaffects nearly ‘one in 11’ adults globally. This looming crisis is spurring aflurry of research activity to develop more effective diagnostics and therapies foraddressing these diseases. Biocon has been committed to addressing challenges associatedwith NCDs for over a decade with the objective to develop affordable chronic therapies fordiabetes and cancer. In this endeavor we have leveraged our expertise in fermentationtechnology refined it and brought it to a global scale. We have created a highlycross-functional matrix focused on products processes and people to reliably andconsistently develop and deliver differentiated products. We have rapidly moved up thepharmaceutical value chain from small molecules to recombinant proteins to antibodies. Wehave leveraged India’s value advantage of unmatched scientific talent andcost-competitive manufacturing to deliver scale speed and quality. We have increasedoperating efficiencies and production capacities through calibrated manufacturingexpansion in India and overseas. We have balanced high cost of R&D and marketaffordability. Most notably we have enhanced our credibility through an excellent trackrecord of intellectual property creation regulatory compliance good corporategovernance industry leadership and a high commitment to socially responsible practices.Over the years we have successfully met many of our goals of providing key life-savingadvanced biopharmaceuticals for diabetes and cancer to patients in India and otherdeveloping countries at price points that make them affordable and thus accessible. We areproud of the impact our efforts are making and are better positioned than ever to leverageadvances in biology genomics and technology for tackling chronic diseases. We are now‘credibly capable’ of extending the benefits of our low-cost high-qualityproducts to a global patient population.

This year we achieved a major regulatory milestone with our first biosimilar approvalfor Insulin Glargine in a highly regulated market like Japan.

Being Credible

Biologics like insulins and monoclonal antibodies have emerged as a class of highlyeffective transformational life-saving drugs targeted at chronic diseases like diabetesand cancer. Biologics differ from chemically synthesized drugs in that the regulatoryclinical and development requirements are considerably more exacting making them 20-50times more expensive than conventional drugs. The high cost of biologic therapies pushesthem out of the reach of many patients especially those in LMICs like India where drugregimens can cost several months’ wages making the treatment of chronic disease likediabetes and cancer simply unaffordable. This large unmet need can only be addressedthrough affordable generic versions of biologic drugs or biosimilars that providecost-effective alternatives to expensive reference biologics. Unlike conventional chemicalsynthesis based generic pharmaceuticals the development of biosimilars involve complexprocesses and analytical skills along with fairly large and lengthy clinical trials toestablish comparable safety and efficacy with the reference product.

Biocon is among the pioneers in bringing the benefit of high quality yet affordablenovel biologics and biosimilars to thousands of patients.

FIGHTING DIABETES

There are nearly half a billion diabetes patients in the world. Of the 100 millionpeople who need insulin only ‘one in two’ can manage and afford costsassociated with chronic insulin therapy. As the largest Asian insulins player and thefourth largest producer of insulins in the world our aim over the next 10 years is toprovide our insulin products to ‘one in five’ diabetes patients in need ofinsulin-based therapy anywhere in the world.

This year we achieved a major regulatory milestone with our first biosimilar approvalfor Insulin Glargine in a highly regulated market like Japan. This we believe earns ushuge credibility and validates our mission of delivering the highest quality at the lowestcost. Our partner FUJIFILM Pharma expects to launch this product soon. We see this as asignificant achievement in our journey to make a global impact in diabetes managementthrough our affordable biosimilar insulins. This also paves the way for our foray intoseveral other overseas markets including key ones like Brazil Russia and South Africa.Currently our insulins are registered in over 65 markets that represent 40% of the globaldiabetes population. We continue to progress our efforts to take Insulin Glargine to otherkey developed markets in Europe and US with our co-development partner Mylan. We expectto file for regulatory approvals in EU and in US in FY17. The increasing regulatoryclarity around biosimilars in the US led us to collaborate with our long- standing partnerin Mexico Laboratorios PiSA for the development and commercialization of our rh-Insulinfor the US market. Through this collaboration

Biocon is committed to develop Insulin Tregopil for Type 1 and Type 2 diabetes patientsas a follow up to the successful outcome of the Phase I clinical studies conducted in theUS.

we will introduce rh-Insulin under the Biocon brand to address the USD 1.5 billion USmarket opportunity.

BATTLING CANCER

By 2030 new cancer cases worldwide are expected to rise to 22 million resulting in 13million deaths annually. This cancer burden is expected to be sizeably larger indeveloping countries. By introducing the world’s most affordable follow-onTrastuzumab (CANMAb™) in 2014 we enhanced access to a more affordable treatment forHER2-positive metastatic breast cancer in India. This important life-saving drug hasalready made a significant difference in the lives of several thousand patients. We alsocommenced Trastuzumab sales in emerging markets this year and expect to take thisimportant biosimilar drug to several more in FY17.

Our global Phase III clinical trials for Trastuzumab progressed towards anticipatedfilings in US and Europe in FY17. We also successfully completed the global Phase IIIstudy for Pegfilgrastim another biosimilar from our portfolio being developed for cancer.This study met the primary endpoints of demonstrating clinical equivalence with thereference product putting us on track for regulatory submissions in US and Europe inFY17.

Regulatory filings for the four most advanced biosimilar programs - Insulin GlargineTrastuzumab Pegfilgrastim and Adalimumab - are likely to provide us an early moveradvantage in an over USD 30 billion addressable market. We are positioned among the earlywave of biosimilar entrants in the developed markets.

DEVELOPING NOVEL THERAPIES

During the year we also made good progress in the clinical development of two of ourbreakthrough therapies – oral insulin or Insulin Tregopil and the first-in-classanti-CD6 antibody Itolizumab.

Biocon is committed to develop Insulin Tregopil for Type 1 and Type 2 diabetes patientsas a follow-up to the successful outcome of the Phase I clinical studies conducted in theUS. We are in consultation with our scientific board to design the next clinical study inFY17.

To make our ‘first-in-class’ novel anti-CD6 biologic Itolizumab morepatient-friendly we are conducting a bridging Phase I pharmacokinetic and safety study inhealthy volunteers in Australia. The completion of the first sentinel dosing demonstratedthat the drug was well-tolerated with no adverse effects. The study is expected to enablea global IND filing with a subcutaneous route of administration.

Novel immune check-point inhibitors have created much excitement in the field of cancerin general and cancer immunotherapy in particular. We are enhancing our scientificcapability and credibility in the path-breaking area of immuno-oncology by building anexciting pipeline of fusion MAb molecules. The lead molecule in this program

The resounding oversubscription of Syngene’s IPO has re_ected the trust andcon_dence of the investor community in our research services subsidiary’s valueproposition.

achieved preclinical ‘proof of concept’ and is currently in advancedpreclinical development. Our collaboration with Quark Pharma a leader in siRNAtherapeutics is progressing with an ongoing pivotal Global Phase II / III studyinvestigating QPI-1007 in Non-Arteritic Anterior Ischemic Optic Neuropathy (NAION)patients.

UNLOCKING VALUE: SYNGENE IPO

A crowning moment of this fiscal was the successful IPO of our research servicessubsidiary Syngene. The resounding oversubscription of the IPO reflected the trust andconfidence of the investor community in Syngene’s value proposition. Our ability tocreate long-term value for our shareholders was evident from Syngene’s marketcapitalization crossing USD 1 billion within a week of listing a milestone Biocon hadcrossed at its public listing a little over a decade ago.

MAINTAINING A QUALITY TRACK RECORD

Our commitment to high cGMP standards and quality compliance helped us maintain astrong track record in regulatory inspections with no critical observations. During theyear Biocon and Syngene facilities successfully cleared all audits by various regulatorsincluding those from the US EU and Japan. Our state-of-the-art disposable pen assemblyfacility in Bangalore was also inspected and approved by the Indian and Japaneseregulatory authorities. These certifications enabled new product approvals for commercialsupplies and initiation of clinical studies for new products under development. Ourintegrated Insulins manufacturing facility in Malaysia received cGMP certification fromMalaysia’s National Pharmaceutical Control Bureau and we expect to receive regulatoryapprovals to initiate commercial sales of Insulins in Malaysia and other emerging marketsin the second half of FY17. Our compliance with global standards was

Our compliance with global standards was underscored by the European approval for our_rst generic formulation of Rosuvastatin Calcium a milestone in Biocon’s strategicforward integration from APIs to generic finished dosages.

underscored by the European approval for our first generic formulation of RosuvastatinCalcium a milestone in Biocon’s strategic forward integration from APIs to genericfinished dosages.

BUILDING TALENT EXCELLENCE

Our reputation as an admired global Employer Brand was strengthened with therecognition by US-based Science magazine which once again listed us among the Top20 Global Biotech Employers for 2015 for being the most innovative leader in theindustry having loyal employees and being socially responsible.

CORPORATE RESTRUCTURING

We restructured our legal entities this year to align them with our key businessdrivers. We believe this will enable us to unlock greater value from our strategicbusinesses at an opportune time. As a part of this exercise all our biosimilar assetswill now be consolidated under Biocon Biologics Ltd a new legal entity incorporated in UKand a subsidiary of Biocon Ltd India.

EXPANDING MANAGEMENT BANDWIDTH

Narendra Chirmule our new R&D head at Biocon infused fresh energy and vigour intothis key function. His knowledge of the regulatory landscape for biologics and biosimilarsin EU and US and his leadership experience gained at Amgen and Merck are enhancing thecapability and credibility quotient of Biocon’s innovation pursuit.

I would like to express my deepest gratitude to Peter Bains for his contribution inbuilding Syngene’s reputation as a trusted ‘innovation partner’ in thecontract research space. He has been succeeded by Jonathan Hunt whose experience inbuilding customer-focused organizations and experienced leadership at AstraZeneca made himthe ideal choice for the role of Syngene’s CEO.

We strengthened Biocon’s Board of Directors by inducting Mr. M. Damodaran arenowned financial expert and former Chairman of SEBI India’s market regulator asan additional Independent Director.

FINANCIAL HIGHLIGHTS

FY16 was a landmark year as we finished on a strong note with many firsts to ourcredit. Biocon’s consolidated quarterly revenues crossed B10000 million for thefirst time in the fourth fiscal quarter of FY16 while Syngene crossed B10000 million inrevenues for the full year. Our consolidated top line for the year grew 14% to B35699million driven by robust growth in research services revenues (29% Y-O-Y) increasedsales of insulins and the launch of a key biosimilar in emerging markets. Our bottom-lineincreased 80% to reach B8961 million on account of exceptional income booked from theproceeds derived from the divestment of a part of our shareholding in Syngene at the timeof IPO as well as from recognizing deferred income pertaining to rh-Insulin development.Adjusting for exceptional income our Net Profit stood at B4372 million. Our

We partnered with the Rajasthan government for the _rst time to run three of itsPrimary Health Centres and provide economical e_ective and e_cient healthcare services.

EBITDA for the year rose 21% to reach B9045 million with a healthy margin of 25%. Weimproved our operating margin despite a 63% jump in net R&D spend. Biocon’sR&D expenditure at a gross level touched B4270 million during the fiscal.

CORPORATE SOCIAL RESPONSIBILITY

As an organization that prides itself on being ‘credibly capable’ Bioconhas for over a decade made credible efforts to build our Corporate Social Responsibility(CSR) programs around the delivery of primary healthcare services basic education andbetter sanitation facilities. Our CSR arm Biocon Foundation has been active in addressingchild malnutrition which is responsible for 50% of all childhood deaths in India. Ourinitiatives this year helped improve the nutritional level of over 1200 malnourishedchildren 115 of whom progressed from Severe Acute Malnutrition (SAM) to a normalnutritional status.

The Foundation is harnessing a number of technological innovations to addresschallenges associated with the prevention early detection and treatment of diseases inrural areas. Our path-breaking mobile phone-based health (mHealth) initiative ensures thathealthcare reaches remote and underserved communities in a cost-effective manner. Over8500 individuals were screened for oral cancer in FY16 of which more than 1000 werediagnosed with pre-cancerous lesions and provided immediate medical advice and attention.Similarly over 800 women underwent cervical cancer screening this year and a majority ofthe 40-odd who exhibited abnormal results received treatment and follow-ups at a tertiarycare centre. We also intensified our diabetes and hypertension awareness programs whichled to over 6000 footfalls at these camps. Nearly 6000 more benefited from the homevisits that we conducted under this program.

The success of our primary healthcare programs in Karnataka has given us the confidenceto extend into other states. During the year we partnered with the Rajasthan governmentfor the first time to run three of its Primary Health Centres (PHCs) with the aim ofproviding economical effective and efficient healthcare services to over 70000 people.The Foundation also established clinics in Karnataka based on the unique eLAJ platformwherein electronic medical records will be linked to an individual’s uniqueidentification number for creating a birth-to-death health tracker that will facilitateeffective preventive and primary healthcare interventions.

Biocon Academy the Centre of Excellence for Advanced Learning in Biosciencescontinued to address the skill deficit in the country’s biotechnology ecosystem byimparting high quality industry-oriented life sciences education. To address theknowledge and skill gap of aspiring microbiologists pharmacy and biotech graduates theAcademy introduced an intensive eight-week program in Quality Control in Microbiology incollaboration with a new partner BITS Pilani. Our flagship Biocon-KGI program continuesto develop high quality talent and all 150 students of the first five batches have beenemployed by various pharma and biotech companies and are adding value to their functions.

LOOKING AHEAD

We are fully geared to address the unfolding biosimilars opportunity in emergingmarkets and through market filings in key developed markets. We believe that FY17 will setthe stage for Biocon to emerge as a leading global player in the realm of biosimilars.

The Generic Formulations business is expected to gather momentum in FY17 as weintensify our focus on being a vertically integrated player in the niche space ofdifficult-to-make and technologically intensive generic drugs. Regulatory approvals of ournew manufacturing facilities increased penetration of our biosimilar products andresilience in our Branded Formulations business are expected to boost our biopharmabusiness.

Syngene is expected to accelerate revenue growth on the back of capacity additions andnew services in FY17.

In conclusion I would like to say that our capabilities have led to rapid and tangibleprogress which have in turn translated into commercial success. We are starting to seeattractive returns on our long-term investments in innovative R&D which are beginningto generate rich dividends. We are now closer than ever to unlocking the full potential ofour various businesses. I wish to thank our entire stakeholder family for providing ustheir unstinted support throughout this ‘in-credible’ journey.

Best Wishes

Kiran Mazumdar-Shaw

Chairperson

May 9 2016

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