Biocon Biologics expects R&D expenses to hover between 10-15% in the next financial year

Biocon Biologics Limited, a subsidiary of biopharmaceutical major Biocon, expects its R&D expenses to hover between 10-15 per cent in the next financial year (FY23), as it is advancing its pipeline of biosimilar molecules to drive future growth, the company told BT.

The company said that this will be a significant jump from the R&D spending of Rs 310 crore it reported for FY22, which represented 9 per cent of its revenue for the year. For the fourth quarter, its net R&D expenses were Rs 112 crore, representing 11 per cent of revenue.

"The higher R&D spends in Q4 were because Biocon Biologics had moved "two major assets", Denosumab and Ustekinumab, into the clinic during the quarter.  The ramp up in R&D spends in FY23 will be commensurate with the clinical progress of these molecules," said Shreehas Tambe, Deputy Chief Executive Officer, Biocon Biologics Limited.

Biocon Biologics is independently developing Denosumab, a monoclonal antibody to treat osteoporosis in post-menopausal women who are at high-risk for fracture and prevent bone fracture in patients with multiple myeloma and bone metastases from solid tumours; and Ustekinumab, an antibody treatment for Crohn's disease, plaque psoriasis and psoriatic arthritis.

These two assets are part of the Wave 2 of biosimilar molecules that the company said will provide "a sustainable growth opportunity in the years ahead."

The 'next wave' of biosimilar opportunities includes Aflibercept, a proposed to biosimilar to Regeneron's Eylea, which is indicated to improve eyesight in patients with neovascular age-related macular degeneration and other specific neovascular retinal diseases.

Biocon Biologics said it has exercised the option to acquire Viatris' rights for biosimilar Aflibercept "as a part of the transaction".

Earlier in February, Biocon Biologics has announced a "transformational acquisition" of its partner Viatris' global biosimilars business for up to $3.335 billion in cash and stock. At that time, it had said it had the option to acquire its partner's rights in biosimilar Aflibercept.

Viatris filed the first biosimilar of Aflibercept in the U.S. Regeneron reported worldwide sales of $9.38 billion in 2021, including $5.79 billion in the U.S., for the innovator product, Eylea.

"Our portfolio of next wave of biosimilars will address a market opportunity of approximately $20 billion to drive growth in the medium term," Tambe said, adding that the strategic acquisition of Viatris' biosimilars business is progressing towards regulatory approvals and is on track close in the second half of calendar year 2022.

Of the $3.335 billion that Biocon Biologics is paying to Viatris, $2 billion is upfront cash, $1 billion is convertible preferred equity representing a stake of at least 12.9 per cent in Biocon Biologics (on a fully diluted basis), and up to $335 million of additional payments.

Biocon Biologics had said in February that the cash payment of $2 billion will be funded through a combination of equity infusion in the company and debt.

Biocon Biologics has received firm commitment from financial institutions for debt financing, the company said in a statement.

Biocon Biologics delivered a healthy financial performance both for the quarter and the full year, with Q4 revenues growing 48 per cent YoY and annual revenues increasing 24 per cent over last FY.

"The strong topline performance was driven by robust demand for our products in both developed and emerging markets, especially significant market share gains of our interchangeable biosimilar Glargine in the U.S," Tambe said.

"The 78 per cent year-on-year (YoY) rise in the company's core EBITDA for the quarter and 30 per cent growth for FY22 reflected the health of our operational and business performance," he said.

Biocon Biologics defines core EBITDA as EBITDA net of licensing, forex, mark- to- market loss on investments and R&D expense. At a consolidated level, Biocon reported a 70 per cent jump in quarterly gross R&D spends to Rs 232 crore and a 13 per cent increase to Rs 711 crore for the full year.

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