Biocon to invest $200 million on capital expenditure in current fiscal

Biotechnology major Biocon expects to invest $200 million (around Rs 1,500 crore) this fiscal on capital expenditure, according to the company's Annual Report for 2019-20.

Sharing information with the company's shareholders, Biocon CEO and Managing Director Siddharth Mittal said the investment would be split across small molecules and biosimilar verticals.

We expect capex (capital expenditure) spends to be $200 million in 2020-21, split equally between small molecules and the biosimilars businesses, Mittal said.

The capex will be funded through a combination of contribution from internal accruals, debt raise as well as additional private equity investment in Biocon Biologics, he added.

The company's capital expenditure during 2019-20 stood at Rs 974.2 crore, Mittal said.

Last fiscal, the company invested in a new manufacturing facility in Visakhapatnam for immunosuppressant products, which comes under the small molecules segment, he noted.

In biosimilars, major spends were on account of the greenfield antibody facility in Bengaluru, incremental drug substance and drug product capacities within existing plants and R&D (research and development) facility in Chennai," Mittal said.

Noting that R&D remains an integral part of the company's businesses, he added that it will continue to invest in the R&D pipeline across all business segments.

We have a rich pipeline of 28 molecules in our biosimilars business which will require investments. We continue to build on our portfolio of complex generic products in line with our long-term growth strategy. Additionally, we will continue to invest in our select pipeline of novel biologic products, Mittal said.

Absolute spends on R&D programmes are expected to increase in the current financial year as compared with 2019-20 levels, he added.

Gross R&D expenditure is expected to remain between 12 per cent and 14 per cent of revenues (ex-Syngene), Mittal noted.

On the company's aspirational target of reaching $1 billion revenue target in biosimilars segment by 2021-22, he said the market opportunity in the vertical is expected to double over the next couple of years with developed market sales projected to increase in 2020-21 and beyond.

The recent launch of Trastuzumab in the US, the upcoming launch of Insulin Glargine in the US and Pegfilgrastim in the EU coupled with the launch of Insulin Aspart and Bevacizumab in the EU and the US markets through Mylan in the next calendar year will be drivers of this growth, Mittal said.

This will be supported by increased penetration of Pegfilgrastim in the US and Insulin Glargine and Trastuzumab in the EU, he added.

We also believe that the demand for biosimilars in most of the world (MoW) markets is rapidly increasing and will be a meaningful contributor in our growth journey to $1 billion revenue target by 2021-22, Mittal said.

The company already has a presence in the majority of the top-20 markets, which should aid expansion in MoW markets with further uptake, launch of new products and entry into new markets, he added.

"We aim is to be a leading biologics player globally and our ambition is supported by our global scale and competitive cost structure," Mittal said.

The company is, therefore, confident to reach a target of $1 billion by 2021-22, he added.

From a geographic split of revenue in 2021-22, we expect the US to be the dominant contributor, followed by MoW markets, and lastly Europe and other developed markets, Mittal said.

On small molecules business segment, he said the company expects revenue growth in the vertical to be between high single-digit and low teens over the next two years.

Currently, the API (active pharmaceutical ingredients) business contributes significantly to the small molecules business segment. However, going forward, the growth in this segment will be driven by the generic formulations opportunity in the US, Mittal said.

In 2019-20, the company's small molecules segment recorded revenues of Rs 2,093.7 crore, a growth of 18 per cent over 2018-19.