BIOCON Chairmans Speech

Dear Shareholders,

The Era of Biologics

The global pharmaceuticals industry is witnessing transformative change. Biologic drugs or protein therapeutics like antibodies, interleukins, and vaccines derived from microbial and mammalian cells have ushered in a paradigm shift in treating chronic diseases. Targeted therapies and precision medicine are poised to disrupt the future of disease management.

The Indian pharmaceuticals sector built global scale and leadership by reverse engineering expensive, chemically synthesized, small molecule drugs to produce cost effective generic alternatives. In doing so, it earned the label of being the ''''Pharmacy of the World''''. After dominating the traditional generic drugs industry for decades, many Indian companies are now in the race to create generic versions of biologic drugs, or biosimilars, which are far more complex to make but offer a large global opportunity.

Biocon is ahead in the pursuit to develop the first wave of biosimilars for global markets and expand access to a number of essential and lifesaving biologic drugs that are facing patent expiry. We are also developing a pipeline of patented biologics to address unmet medical needs.

It is noteworthy that 10 of the Top 15 drugs by sales in 2016 were biologics* and it is forecast that by 2022 biologics will contribute up to 50% of the value of the Top 100 drug products sold globally#. Global sales of biotechnology drugs are projected to grow to USD 337 billion# by 2022.

Getting ''''Ahead of the Curve''''

At the turn of the millennium, Biocon chose to embark on a biologics-led pharmaceutical journey with a differentiated business strategy. We invested ''''ahead of the curve'''' in the promising future of targeted biologics that are revolutionizing the treatment of chronic diseases. We recognized that for a company of our size, it was an audacious plan. We took the plunge because we believed it would provide us with a head start in an overcrowded generics market place. We decided to take on the complex development, manufacturing and regulatory challenges inherent to biologics as we were confident of our capabilities. This stemmed from our knowledge and expertize in enzyme technology, with which we started our biotechnology business. We pursued an innovation strategy rooted in affordability by leveraging India''''s cost base and set out to address the unfolding opportunities. By choosing to lead rather than follow, we have been able to transform scientific discoveries into advances in human healthcare and generate incremental value for our shareholders.

Biologics: At the Cutting Edge

In 2006, Biocon earned the distinction of being the first company in India to launch a novel biologic, Nimotuzumab, a humanized anti-EGFR (epidermal growth factor receptor) monoclonal antibody (mAb), for head & neck cancer patients.

We followed up with the launch of our second novel biologic, Itolizumab, in 2013 for psoriasis patients in India. This was a path-breaking anti-CD6 mAb that offered a less aggressive dosing regimen and a longer treatment free period.

We had entered into a co-development partnership with US-based Mylan for a portfolio of biosimilars in 2009. This collaboration led to the launch of the world''''s first biosimilar Trastuzumab in 2014. Patients suffering from

HER2-positive metastatic breast cancer in India gained access to an affordable version of this lifesaving drug when the rest of the emerging world only had recourse to the expensive innovator product.

Biocon and Mylan have one of the longest-standing partnerships in the global biosimilars space. We have leveraged our mutual strengths to build one of the largest and most diverse biosimilar pipelines, spanning insulin analogs and monoclonal antibodies.

First off the Blocks

As early movers in the biosimilars space, we have put three of our advanced biosimilar assets on track for anticipated regulatory approvals in developed markets. These address an aggregate market opportunity of USD 20 billion.

During FY17, we filed two Biologics License Applications (BLAs) in the US and three Marketing Authorization Applications (MAAs) in EU.

We were the first to file regulatory applications for a proposed biosimilar of Trastuzumab in both the US and EU. This has positioned Biocon and Mylan among the first companies to be able to address the critical need for a high-quality biosimilar to treat certain HER2-positive breast cancers in the US and EU.

Our applications for biosimilar Pegfilgrastim have also been accepted for review in the US and EU.

We submitted a Marketing Authorization Application for our biosimilar Bevacizumab with the Indian drug regulator after completing an emerging market-targeted India clinical trial. The MAA has recently been granted.

The global clinical trials for our biosimilar Adalimumab in plaque psoriasis have been completed. We expect regulatory submissions in various geographies to start in FY18.

Our biosimilars development capability was endorsed this year with the publication of the HERITAGE study by the prestigious Journal of the American Medical Association (JAMA). The study results confirmed the efficacy, safety and immunogenicity of the proposed biosimilar Trastuzumab co-developed by Biocon and Mylan in comparison to the reference product.

The presentations of the study results at the American Society of Clinical Oncology (ASCO) Annual Meeting in Chicago, US and the European Society for Medical Oncology (ESMO) Congress in Copenhagen, Denmark in 2016 by Dr. Hope Rugo were appreciated immensely by the scientific community.

Consolidating Market Leadership

We have built market leadership in insulins on the back of our global manufacturing scale. We are now moving steadfastly towards our aspiration of providing our insulins to ''''one in five'''' insulin-dependent people with diabetes around the world.

We achieved a key milestone in our journey towards this visionary goal when we launched our ready-to-use, disposable Insulin Glargine pen in Japan through our partner FUJIFILM Pharma. Our Insulin Glargine is the first biosimilar from India to be launched in Japan. It is also our first biosimilar in a developed market. The confidence our product has gained among prescribers and patients in Japan has endorsed the quality and efficacy of our product and enhanced Brand Biocon''''s reputation across the world.

We also started commercial supplies from our first overseas insulins manufacturing facility in Malaysia this year. Our recombinant human insulin (rh-insulin) became Malaysia''''s first locally manufactured biosimilar product to be sold in the Southeast Asian nation after we signed a three-year, MYR 300 million Off-Take Agreement with the Malaysian government.

We are looking forward to our insulin’s foray into larger developed markets following the submission and acceptance of our filings for Insulin Glargine with the European Medicines Agency (EMA) and the US FDA.

The commercialization of the Malaysia facility in FY17 will strengthen our position among the Top 3 biosimilar players globally for insulins#.

Novel Molecules: Poised for the Leap

As practitioners of frontier science, we have built a pipeline of novel biologics to address local as well as global unmet medical needs in diabetes, cancer and autoimmune diseases. The basket of novel assets under clinical development represents an interesting combination of early and advanced stage assets.

We believe Insulin Tregopil, a ''''first-in-class'''' oral prandial insulin, is the most advanced program in the global oral insulin space and promises to transform diabetes management. We have set the stage for pivotal studies with Insulin Tregopil on different diabetic populations in India, which will form the foundation of a broad global program envisioned for this novel molecular entity.

The successful journey of Itolizumab from the laboratory to the market in India has put us ahead in the race to unlock the potential of its unique mechanism of action in multiple autoimmune indications. In FY17, we reported encouraging progress in our tests with a patient-friendly subcutaneous form of Itolizumab.

Small Molecules: Enabling Partners

The significant brand equity that we have built worldwide for our fermentation-derived small molecule APIs across stations, immunosuppressant’s and other specialty products has made us a leading global supplier of these products. We built on this reputation to emerge among the first wave of suppliers of Rosuvastatin API to our partners for the US launch upon patent expiry in 2016. During the year, we received our first generic formulation approval for Rosuvastatin Calcium from the US FDA.

To become a vertically integrated player in the niche space of difficult-to-make generic formulations, we have leveraged our strengths in fermentation technology and molecular characterization.

Branded Formulations: India & UAE

We initiated our Branded Formulations business in India in 2004 with the launch of the country''''s first indigenously developed rh-Insulin, which brought down the cost of insulin therapy by a third. Since then, we have aimed at staying ''''ahead of the curve'''' by deftly balancing innovation and affordability with an intent to bring cost-effective biologics and differentiated small molecule formulations for chronic conditions to patients in India, UAE and other select markets.

This year, the business reported an overall growth of 24%, on a like to like basis this segment was down marginally compared to last year. Though sales in India were sluggish, we continued to improve prescription share for some of our key brands such as Insugen®, Basalog® and CANMAb™. Our robust growth in UAE placed us among the Top 15 pharma companies this year with most of our products ranked among the Top 5 brands in their respective segments.

The recently announced leadership changes across our India Branded Formulations business will provide us the ability to pursue a strong growth trajectory.

Syngene: Integrated Research Services Provider

Syngene, our Research Services subsidiary, is the only publicly listed Contract Research Organization (CRO) in India that offers end-to-end drug discovery and development services for novel molecular entities to the global life sciences sector. As a front runner in the contract research space, Syngene further expanded its role in FY17 as an ''''innovation partner'''' through new strategic partnerships with Amgen and Herbalife Nutrition with dedicated R&D centers.

In December 2016, a fire accident at one of Syngene''''s research blocks in Bengaluru affected the strong revenue momentum of the business. Syngene''''s value proposition to its customers remains strong as it expanded its capacities and acquired new capabilities during the year. An important acquisition to this effect was that of a bioinformatics business from a Bengaluru based genomics company, Strand Lifesciences. On a standalone basis it reported a revenue growth of 14% with a healthy EBITDA margin.

Quality: Unwavering Focus

A culture of quality excellence has helped Biocon maintain a strong compliance track record in regulatory inspections over the years. During FY17, we underwent multiple regulatory audits from various international regulators.

Best Employer Brand

We continue to be the only Asian company on the Global Best Biotech Employers list brought out by the prestigious Science Careers magazine, which I believe is a great testament to our work culture and the opportunities our scientists get within the company. In 2016, we featured among the Top 10 employers globally.

Financial Highlights

We matched our operational performance in FY17 with an equally strong financial performance. We grew our topline by 18% to H40,787 million, while simultaneously improving the quality of our earnings. Our EBITDA margin for the year expanded to 28% from 24% a year ago. Adjusting for the exceptional item that boosted the bottomline in FY16, Net Profit for FY17 jumped 54% to H6,199 million.

Declaration of Bonus Shares & Final Dividend The Board of Directors of the Company has recommended the issue of two bonus shares for every one share held in Biocon, which has been subsequently approved by the shareholders. The Board also recommended a final dividend of H3/- per share for FY17 (pre bonus), which works out to be H1/- per share post approval.

Being Socially Responsible

We strongly believe that the use of technology can address several challenges associated with public health delivery in our country. Biocon Foundation, the CSR arm of Biocon, has taken ahead this belief to develop a unique e-healthcare model and introduced eLAJ Smart Clinics a few years ago.

These clinics are designed to facilitate effective preventive and primary healthcare intervention in the rural areas of India for the benefit of communities with poor access to healthcare. The foundation currently runs 14 eLAJ Smart Clinics covering over 30 gram panchayats across Karnataka and Rajasthan.

Through the eLAJ Smart Clinics we are paving the way for evidence-based public health interventions in these locations by enabling multiple diagnostic tests and generation of Electronic Medical Records (EMRs) of patients. Over the past year, patient footfall at eLAJ clinics has gone up by 50% to more than 9,000 a month.

The eLAJ model is facilitating on-time treatment, helping reduce out-of-pocket healthcare spending and cutting down the need for trips to tertiary hospitals, which is in line with our commitment to enable the ''''Right to Healthcare'''' for every citizen.

Biocon Academy, our one-of-a-kind initiative in the area of skills development, delivered on its commitment to prepare industry-ready students for the biotech sector. FY17 saw the successful completion of three batches of the Biocon KGI Certificate Program in Biosciences and the second batch of the BITS Biocon Program in Applied Industrial Microbiology. The Academy maintained a 100% placement record this year too, even as more than 35 companies visited it for recruiting fresh talent. More than 60% of our students are being employed outside of Biocon and Syngene.

Looking Ahead

FY18 promises to be an exciting year for Biocon as some of the developed market regulatory submissions for our biosimilars could translate into marketing approvals, opening up immense growth opportunities for the Company.

Finally, I would like to thank our shareholders for the trust they have placed in us. We are in a humanitarian business of making a difference to people''''s lives. It is this mission that has spurred us on to fight our way through years of credibility challenges and market skepticism and emerge as the leading Indian company working in the cutting-edge sphere of biosimilars.

Best Wishes,

Kiran Mazumdar-Shaw

Chairperson & Managing Director

June 8, 2017

CIN: U67190WB2003PTC096617. Trading in Commodities is done through our Group Company Dynamic Commodities Pvt. Ltd. The company is also engaged in Proprietory Trading apart from Client Business.

Disclaimer: There is no guarantee of profits or no exceptions from losses. The investment advice provided are solely the personal views of the research team. You are advised to rely on your own judgment while making investment / Trading decisions. Past performance is not an indicator of future returns. Investment is subject to market risks. You should read and understand the Risk Disclosure Documents before trading/Investing.

Disclosure: We, Dynamic Equities Private Limited are also engaged in Proprietory Trading apart from Client Business. In case of any complaints/grievances, clients may write to us at

  • Download our Mobile App
  • Available on Google Play
  • Available on App Store
  • RSS