'Tariffs will hurt insurance, patients and everyone'

'If people have to build new facilities, and by the time they are operational, it will be time for a new President in the US.'

After registering a net profit of Rs 25.1 crore in Q3FY25 and consolidated revenues growing by 7 per cent on a like-for-like basis, Siddharth Mittal, chief executive officer (CEO) and managing director, Biocon, told Sohini Das/Business Standard in a virtual interaction that local manufacturing in the US is a trade off between cost and qualifying to do business there.

For products like pegfilgrastim and trastuzumab, you have been gaining market share in the US. Is there any further headroom to raise shares without pricing pressure?

There is market share gain compared to last year.

Any biosimilar might be able to take on a four-five or six player market.

Now, one has to understand that there is a trade off between getting more market share and pricing at which you get the additional market share.

Because if the market is established for these products and new customers are targeted, then you have to go in at a lower price compared to the existing supplier.

So, one has to be very careful where one draws the line in terms of gaining market share versus the price at which one gets that market share.

Why are the margins under pressure? Will Liraglutide’s UK launch boost margins?

Yes, margins have gone down, but I wouldn't use the word ‘under pressure’.

Margins have gone down for two reasons — one is R&D expenses have gone up and secondly we have capitalised our Liraglutide facility during the quarter.

And, the expenses for this facility have started from this quarter.

We had also capitalised a part of our Vizag’s new facility in the previous quarter.

So again, this quarter we have seen the impact of expenses coming in from Vizag.

Now, till we launch products from these facilities, we would see a bit of a margin compression.

But once the products are in the market, they would contribute to margins going up to the previous levels.

In the coming quarters, we have a couple of important launches.

I don’t expect Liraglutide launch in the UK to be a significant margin booster.

It is a fairly small product in the UK as a large number of patients moved to Semaglutide.

What is your take on Trump’s tariff policies and will you consider increasing US production?

It’s a trade off between cost and qualifying to do business there.

From a volume perspective, India contributes almost 70-80 per cent on the generic side.

Tariffs will hurt insurance, patients and everyone. I don’t think the US would take on this kind of volume with tariffs; it will make drugs more expensive.

The focus should be to make drugs more affordable and accessible.

So, it is likely that they will target other segments before they get into pharmaceuticals.

Companies are looking to evaluate if manufacturing in the US makes sense.

Last year, we had announced an acquisition in the US for one solid dosage facility, and this quarter we now have approvals for three products from this facility.

We will commercialise those. We want to remain flexible, and at the same time, we don’t want to duplicate our infrastructure.

It is very expensive infrastructure, especially on the biologics side.

So, we'll have to watch out what's the best way forward.

If people have to build new facilities, and by the time they are operational, it will be time for a new President in the US.

Biocon board approved purchasing a 1.5 per cent stake from an existing investor in Biocon Biologics. Will you be raising your stake further?

One of the existing investors, who had certain rights to exercise their put option, did so.

So, we had to buy out the stake they had, and we raised a short-term commercial paper to fund this acquisition.

We are looking at how to reduce debt and how to fund the company in the coming months.

All the facilities have now been cleared out by USFDA. We started receiving approvals again.

We've seen the revenue growth come back to mid teens levels.

So, I think that's going to give confidence to existing investors of Biocon Biologics and hopefully they believe in the business.

That's why they invested in it and are staying put. . But if some investor does decide to cash out or exercise the put option then we'll have to again arrange for funds like we did for this investor.

Despite capacity constraints, why aren’t global innovators coming to you to make GLP-1s?

We are also a competitor in a way for them.

None would share their IP and processes because it’s a very complicated manufacturing process.

Like today, Novo Nordisk manufactures the API (for these GLP-1 products) through a recombinant route.

We have both the recombinant as well as synthetic technologies, but the generic filing (for the GLP-1 product) has been through the synthetic route.

It’s not going to work for them anyway.

What is the growth outlook for Syngene? By when do you see meaningful volumes from China+1 strategy?

We are looking at positive momentum across all businesses.

The discovery services business continues to grow, and also steady performance in development and manufacturing services (biologic manufacturing).

We would slowly start to see the impact.

The volume of business on the pilot projects could be small compared to when it’s a full-fledged contract.

There is some lead time for a pilot to become a full-fledged project.

Also while our customers or partners while they are identifying vendors in India, this does not necessarily mean that they will stop buying from China.

So we do not expect a big needle change in short to medium term.

But the bigger boost on the numbers would come only once you know the approvals come in.

Customers start allocating their procurement between Indian and Chinese companies and that could take few years.