Biocon Limited (NSE:BIOCON) Q3 FY22 Earnings Concall dated Jan. 20, 2022
Corporate participants:
Aishwarya Sitharam — Head of Investor Relations
Kiran Mazumdar Shaw — Executive Chairperson
Nikunj Mall — Head of Investor Relations
Shreehas P. Tambe — Deputy Chief Executive Officer
Chinappa M. B. — Chief Financial Officer
Siddharth Mittal — Chief Executive Officer and Managing Director
Arun Chandavarkar — Managing Director
Indranil Sen — Chief Financial Officer
Analyst:
Damayanti Kerai — HSBC — Analyst
Tarang Agrawal — Old Bridge Capital — Analyst
Surya Patra — PhillipCapital — Analyst
Shyam Srinivasan — Goldman Sachs — Analyst
Prakash Agarwal — Axis Capital — Analyst
Yash Tanna — Equity Research — Analyst
Nitin Shakdher — Green Capital — Analyst
Sameer Baisiwala — Morgan Stanley — Analyst
Harith Ahamed — Spark Capital — Analyst
Vikram Agrawal — HCA Stockbrokers — Analyst
Nithya Balasubramanian — Bernstein — Analyst
Chintan Chheda — Quest Investment Advisors — Analyst
Patrick Stadelhofer — Atlantic Lion Investments — Analyst
Vipul Shah — Sumangal Investment — Analyst
Ashutos — Private — Analyst
Presentation:
Aishwarya Sitharam — Head of Investor Relations
Good morning, everyone. I’m Aishwarya Sitharam from the Biocon Investor Relations team, and I would like to welcome you to Biocon’s earnings call for Q3 FY ’22. [Operator Instructions] To discuss the company’s business performance and outlook, we have with us today the Biocon leadership team comprising of Dr. Kiran Mazumdar-Shaw, our Executive Chairperson, and other senior management colleagues. I’d like to take this opportunity to also remind everyone about safe harbor.
Today’s discussion may be forward-looking in nature based on management’s current beliefs and expectations. It must be viewed in concurrence with the risks that our business faces that could cause our future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. At the end of this call, if you need any further information or clarifications, please do get in touch with Nikunj or me.
I would now like to turn the call over to Dr. Kiran Mazumdar-Shaw. Over to you, ma’am.
Kiran Mazumdar Shaw — Executive Chairperson
Thank you, Aishwarya, and good morning, everyone. I welcome you to Biocon’s earnings call for the third quarter of FY ’22. Let me start this earnings call with warm wishes for a happy, healthy and hopeful 2022. As I reflect on the year that went by, I recall the optimism at the start of 2021 with the flurry of vaccine approvals and signs of the pandemic receding. However, this was short-lived with the Delta variant delivering a devastating second wave, halting the global economy which was just beginning to recover. Vaccines were deployed across the world to attain levels of protection that would enable revival.
When it seemed like the pandemic was reaching an endemic stage, yet another strain of the virus, Omicron, emerged. Omicron were three times more transmissible than the former variant Delta, seems to be far less severe with low hospitalization and death rates. While the outcome of this variant is yet to be seen, mass immunization through vaccination or boosters and expanded therapeutic arsenal and lessons from the earlier waves will help blunt the impact of Omicron. This however may not be the last variant, and we as a community need to brace ourselves for more variants in the future and continue to adhere to COVID-appropriate protocols.
Pediatric trials need to be sped up so that children can also soon get protective immunity. I also encourage everyone to take booster doses when available. The need for vaccines has never been stronger as the world continues to battle infectious diseases. As you are aware, Biocon Biologics has recently formed a strategic alliance with Serum Institute, enabling it to enter the vaccine space. Collaborations such as this, along with our existing COVID portfolio, will enable us to continue to be at the forefront in the fight against COVID-19. Biocon remains committed to provide a comprehensive solution of affordable therapeutics for global health care.
Let me move to the next slide, where I will now start discussing the key highlights for Q3 FY ’22. Let me take you through a few of these. For the first time, we entered the prestigious Dow Jones Sustainability Index in the emerging market category for our progressive environmental, social and governance or ESG practices. We made a formal submission for corporate sustainability assessment for listing on the DJSI and made it to the Emerging Markets index with a total sustainability score of 45 as against an industry average of 18, achieving a 93 percentile. We also secured an improved carbon disclosure project rating of B from C which earlier as per their 2021 report.
We are working to establish a strong ESG framework that can endure the test of time and stakeholder expectations whilst enhancing our responsible corporate citizenship. Biocon has been selected to participate in the government’s production-linked incentive scheme 2.0 for the pharmaceutical sector. Under the scheme, Biocon will receive financial incentives of up to INR250 crores over a period of six years, lead to investments in manufacturing, infrastructure and corresponding incremental sales of pharmaceutical goods.
Several companies had applied for this scheme, and we were among the 55 companies that were selected based on parameters such as manufacturing investments over the last 10 years, number of regulatory approvals, R&D spend as a percentage of manufacturing revenue, etc. I would now like to turn to certain management updates. Biocon Biologics has appointed Matthew Erick as the Chief Commercial Officer, Advanced Markets. Matthew’s appointment reflects our strategic intent to build commercial capabilities in the advanced markets of North America, Europe, Australia and New Zealand. Matthew will be based out of the U.S.
The second management update relates to Dr. Mandar Ghatnekar, who has been appointed as Chief Digital Transformation Officer at Biocon Biologics and will be leading their IT and digital solutions initiatives. Ajit Pal Singh has joined us at Biocon Biologics as Head, Branded Formulations, India. Ajit will be responsible for spearheading near-term plans and long-term strategic investments for existing — our existing portfolio as well as building brands to drive sustainable growth. I will now move you — move on to the financial performance of this quarter.
At a consolidated group level, revenues for Q3 FY ’22 were INR2,223 crores versus INR1,885 crores, a year-on-year growth of 18% and a sequential growth of 14%. Revenues from our Biosimilars business delivered a robust year-on-year growth of 28%, while that of our Research Services business grew by 10% and Generics revenues grew by 7%. We recorded a ForEx gain of INR19 crores this quarter as compared to INR six crores during Q3 FY ’21. A loss of INR77 crores arising on account of mark-to-market loss on Biocon Biologics investment in Adagio Therapeutics is reported for the quarter.
We also recorded a gross R&D spend of INR178 crores for this quarter, which corresponds to 12% of revenue ex Syngene. Of this, INR138 crores have been expensed in P&L, while the balance amount has been capitalized. Core EBITDA margins, that is EBITDA margins net of licensing, ForEx mark-to-market loss on Adagio investment and R&D, stood at 33% compared to 31% in the same quarter last year. This is on account of an improved performance in both Biosimilars and Generics. EBITDA for the quarter was INR537 crores, a 25% year-on-year growth. The EBITDA margin stood at 24% as against 23% reported in Q3 FY ’21.
Profit before tax, or PBT, for the quarter stood at INR269 crores, up 14% versus INR236 crores during the same quarter of last fiscal. Net profit for the quarter stood at INR187 crores versus INR169 crores in Q3, a growth of 11%. However, if we adjust for the mark-to-market loss on investment in Adagio, our EBITDA during the quarter would be INR614 crores, reflecting an EBITDA margin of 28% as against the reported margin of 24% previous — margin of 24%. Profit before tax for the quarter would be INR346 crores as against the reported INR269 crores. Let me now turn to the performance of our business segments during the quarter. Let me start with Generics.
The Generics segment delivered quarterly revenues of INR607 crores, indicating a sequential growth of 15% and a year-on-year growth of 7%. Profit before tax for the quarter stood at INR67 crores versus INR53 crores in the same period last year, and PBT margins were up 11% as against 9% in the previous fiscal. The business saw a robust sequential growth due to the successful launch of our vertically integrated complex formulation, Everolimus, in the U.S., which was also a day one launch for its 10-milligram strength. We also had a good uptick in our API business.
The launch of Everolimus was also a key driver in the year-on-year growth of the segment. And since the launch, the product has gained traction and we expect that this product will continue to contribute to the growth of our Generics portfolio. During the quarter, operations, which have been impacted due to COVID-related challenges in previous quarters, started normalizing. However, the business continued to face pricing pressure headwinds in various markets. While margins improved for the quarter, there was an impact on profitability due to higher raw material costs, particularly solvents, and higher cost of logistics. I think this has been felt across industries.
During the quarter, we also continued to make progress on our product pipeline. Following the remote interactive evaluation conducted by the U.S. FDA in the last quarter for our oral solid dosage manufacturing facility in Bengaluru, we received an ANDA approval for mycophenolic acid delayed release tablet at the end of November. During the quarter, we also received the dossier approval for Everolimus tablets and Fingolimod capsules for the EU market. In line with one of our strategic priorities to expand our presence in newer geographies, we signed a partnering deal with Tabuk Pharmaceuticals to commercialize several specialty generic medicines in the Middle East and North Africa and Egypt.
This is an important milestone for Biocon as we strengthen our commitment to provide affordable health care for patients around the globe. Our greenfield immunosuppressants API manufacturing facility in Visakhapatnam remains on track to be commissioned in FY ’22, with qualification and validation in FY ’23. As we add new capacities, accelerate new product launches in key markets, supported by our efforts for driving cost efficiencies, we expect continued growth in the quarters to come. Now let me turn to Biosimilars. Biocon Biologics recorded revenues of INR981 crores for Q3, a year-on-year growth of 28% and a sequential growth of 32%.
EBITDA for the quarter was up 12% year-on-year at INR236 crores. This includes a mark-to-market loss of INR77 crores made from the investment in Adagio at its IPO. Core EBITDA, including R&D, ForEx, licensing income and mark-to-market loss on Adagio investment, stood at INR363 crores, which is up 27% year-on-year. Core EBITDA margin was at 38% for the quarter, in line with the same period last year, demonstrating our ability to profitably grow this business. Profit before tax, excluding the mark-to-market loss on the Adagio investment, stood at INR201 crores, which is up 82% year-on-year. The strong growth in revenue and profits are backed by robust demand across products and geographies.
We launched our 351(k) biosimilar insulin glargine in the U.S., paving the way for interchangeable biosimilars in the region. The U.S. Court of Appeals for the Federal Circuit has ruled in favor of our partner, Viatris, on all the five Sanofi Lantus SoloSTAR device patents, indicating our long-held position on intellectual property. We expect significant uptake of the product in the U.S., evidenced by several commercial arrangements already in place. Semglee has received preferred status in the national formularies of key PBMs, including Express Scripts and Prime Therapeutics, and, will also be offered through Walgreens Prescription Savings Club. Viatris has established a range of options to support patients such as patient assistance and co-pay programs.
We continue to see gradual improvement in the market share of Ogivri in the U.S., which was paid at 11.4% in December. It continues to be a leading biosimilar trastuzumab in Australia and Canada. We are witnessing growth from Europe with steady improvement in performance in the markets where Viatris is present. We have seen impressive growth in the Biocon-Biologics-led commercial franchise in emerging markets. We have made good progress on our strategy of entering new markets, enabling sustainable growth in our B2B business. For example, we have forged commercial partnerships for biosimilar bevacizumab in about 20 countries post the EMA approval in April 2021.
The Branded Formulations India business, which is our front-end commercial engine in India, continues to see healthy growth with nine months’ revenues for FY ’22 exceeding the full year FY ’21 revenue. We continue to progress our Wave two R&D pipeline and expect some of them to enter the clinic this quarter. Encouraged by the demand for our current insulins globally and the pipeline ahead of us, we have initiated investments for the expansion of our insulin manufacturing facility in Malaysia. Our strategic alliance with Serum Institute Life Sciences, which involves a merger of Covishield Technologies Private Ltd into Biocon Biologics with effect on October 1, 2022, is on track.
We will be submitting the relevant regulatory filings this month. To summarize, the strong performance of the Biosimilars business, underpinned by its robust business fundamentals, validates its long-term potential. There are multiple near-term catalysts such as revenues from the vaccines alliance with Serum Institute and the U.S. launch of biosimilar bevacizumab, aspart and adalimumab in the future, which will further propel the business. Now coming to novel programs. Equally, our U.S.-based partner is on track to initiate a pivotal study in early 2022 for the use of itolizumab in first-line treatment of acute graft-versus-host disease.
Equillium is also conducting a proof-of-concept study for its use in lupus — SLE or lupus nephritis. SLE is an autoimmune chronic inflammatory disease with over 100,000 patients in the U.S. and over 45,000 patients in India, many of whom do not respond to standard available therapy of steroids and immunosuppressant drugs. We believe itolizumab can address this unmet need with better remission rates, more durable responses and a better safety profile. Our clinical strategy for itolizumab was further supported by the recent publication of a manuscript in the Journal of Clinical Investigation, highlighting the contribution of CD6-ALCAM pathway in lupus nephritis.
After observing positive trends in the Part A of its Phase Ib EQUALISE study for SLE and LN, or lupus nephritis, indication, Equillium has also now expanded the Part B portion to clinical centers in India after obtaining approval from the Drugs Controller General of India. During the quarter, our Boston-based associate, Bicara Therapeutics, completed enrollment for the dose-finding part of the Phase I trial for its lead program, BCA101, as a single agent and in combination with a PD1 inhibitor. Bicara established all doses tested to be safe and tolerable for both monotherapy and in combination and is on track to open three expansion cohorts at the start of 2022.
I now turn to our subsidiary, Syngene, which hosts our Research Services business. Revenue from operations stood at INR641 crores for the quarter, indicating a year-on-year growth of 10%. Profit before tax for the quarter increased by 10% year-on-year to INR128 crores. Discovery services and the dedicated centers were three — key growth drivers, while development services and manufacturing services delivered sustained performances. A significant milestone for Syngene in the dedicated centers was the extension and expansion of the long-standing, multidisciplinary research collaboration with Amgen until the end of 2026.
Last year, BMS also extended their contract by 10 years. This confirms the stability of both relationships and demonstrates the strategic value that Syngene provides to help their partners build successful pipelines. Syngene is well positioned to meet the evolving requirements of the client, and the company has raised their revenue growth guidance for Q4 and for the full year from mid- to high teens. I would now like to conclude my remarks by saying that we are tracking well across our businesses and we are confident that we will end this fiscal on a strong growth trajectory. I once again wish you all a happy, safe and hopeful 2022.
And I would now like to open up the floor to questions. Thank you.
Questions and Answers:
Nikunj Mall — Head of Investor Relations
Thank you, ma’am. [Operator Instructions] First question is from Damayanti Kerai from HSBC.
Damayanti Kerai — HSBC — Analyst
Hi. Good morning. This is Damayanti from HSBC Securities Mumbai. So, thank you for the opportunity. And my first question is regarding your launch of Semglee interchangeable product in the U.S. So since you launched the product in November 2021, so can you share like what kind of response you have seen so far from your competitor in response to your interchangeable launch, whether they have gone more aggressive in terms of pricing offer or some other changes which you might have noticed in the market? Thank you.
Shreehas P. Tambe — Deputy Chief Executive Officer
Hi, Damayanti, this is Shreehas. Thanks for your question. I think the — as we’ve discussed in the past, many of these formulary listings happened in that August to September — July to September timeframe. And we were very successful. Our partner, Viatris, was able to win a preferred status with Express Scripts in the formulary contracting cycle, which allowed us to get a status displacing Lantus, which was the preferred brand until then. So clearly, we’ve been able to display some of the incumbents and move them out from that preferred status. So we really see ’22 as a place where we will be in a position to move the market in the manner that we projected. So we are not really looking at a competitive dynamics playing out during the course of the contracting cycle with the accounts that we’ve been able to secure.
Damayanti Kerai — HSBC — Analyst
Thank you, Shreehas. And my second question is again on Semglee. So obviously, you have got listed in some of the biggest PBMs in the US. So, any update on your progress towards moving to government program, whether it’s Medicaid or Medicare?
Shreehas P. Tambe — Deputy Chief Executive Officer
So if you look at the launch strategy that Viatris came up with, we came up with a dual-brand strategy. And that dual-brand strategy was essentially to address exactly the kind of question you’ve asked, where we address patients in all types of segments regardless of their insurance or their payment plans, whether it is in the commercial space or the formulary listings, which is roughly about 30-odd percent of the market, or the Medicare Part D which you just referred to, which would be around 35% of the market.
The government-supported programs or the part were the managed Medicaid part of it, which would be another 15% to 17%. With these initiatives and the two-brand strategy that we’ve come up with and the programs that Viatris has launched, whether it is the senior citizens’ programs or the Walgreens Prescription Saving programs, we are looking to cover patients across the spectrum regardless of their co-pay strategies so that we can really provide this affordable biosimilar interchangeable insulin to patients in the U.S. So it’s a very comprehensive strategy to provide these insulins to people with diabetes in the U.S.
Damayanti Kerai — HSBC — Analyst
Thank you. I’ll get back in the queue.
Shreehas P. Tambe — Deputy Chief Executive Officer
Yeah.
Nikunj Mall — Head of Investor Relations
Thanks, Damayanti. Our next question is from Tarang Agrawal from Old Bridge Capital.
Tarang Agrawal — Old Bridge Capital — Analyst
Hello, good morning. Two questions from my side. On appointment of Matthew — just give me a second, please. Yes. On appointment of Matthew, if you could give us some broad brush on the scale of commercial capabilities that is being envisaged on the front-end. And would the focus be concentrated on specific therapeutic areas?
Shreehas P. Tambe — Deputy Chief Executive Officer
So let me respond to that, Tarang. I think the — if you’ve seen over the last few quarters that we’ve come back, we’ve actually built our leadership team and leadership capabilities across all parts of our business. And during the last three quarters, we’ve set up our emerging markets, commercial front end, with a very strong leadership. In fact, even today’s sales announcement saw that we strengthened our commercial front end further in India despite the fact that we’ve performed very, very strongly in the current three quarters, which have exceeded the full year revenue of last year.
Our conscious strategy has been that we expand our presence into advanced markets. And Matt joining us is basically to expand into the vision and the strategy that we had set for ourselves, starting with our recombinant human insulin, which becomes our first product to get into the U.S. market and then to get our Wave two products across the various geographies where we intend to commercialize our products across the world. We have always developed a global biosimilars business. And now that we’ve strengthened our presence in emerging markets in India, we’re looking to expand this to the advanced markets as well. So that’s where the — Matt’s joining us is with Siddharth.
Tarang Agrawal — Old Bridge Capital — Analyst
Got it. The second, on Semglee, can you give us some strength on the strategy behind launching branded and unbranded glargine?
Shreehas P. Tambe — Deputy Chief Executive Officer
Yes. So I just explained on a previous question to Damayanti. I think the important part was to cover patients in — or people in all types of insurance coverages that they would have regardless of whether they have a particular formulary listing and coverage through a particular formulary or not, because we may have a coverage with some of the largest formularies in the national formulary listing with Express Scripts and with Prime Therapeutics, but there could be people who would be in need of Semglee or the insulin glargine interchangeable who may not be in this coverage. And that’s where we brought in the second brand, which then allows us for a much wider, broader coverage regardless of any particular patient’s insurance coverage. So that’s really the thought behind it.
Tarang Agrawal — Old Bridge Capital — Analyst
Thank you.
Nikunj Mall — Head of Investor Relations
Next question from Surya Patra, PhillipCapital.
Surya Patra — PhillipCapital — Analyst
Yes. Thank you for the opportunity and congrats, a good set of numbers. My first question is on the sequential swing in the Biosimilar business, what we have witnessed. Is it fair to believe that the larger chunk or a chunk of that has come from the interchangeable Semglee?
And a related question on that. So the interchangeable branded version of Semglee watered has been launched at double the price of the earlier version. So how’s — what difference that we should see in terms of profit efficiency going ahead since this is going to be a kind of a very chunky contributor throughout this calendar year given the exclusivity that we are — we will be having?
Shreehas P. Tambe — Deputy Chief Executive Officer
Surya, I think the two questions — the one — the sequential growth that we’ve talked about, I think we’ve had sequential growth for last three quarters. We’ve essentially had sequential growth all through. And fair to say that while we’ve had growth in all our segments across products, I think a large part of our growth has also come because of the launch of the insulin glargine interchangeable in the U.S.
That’s a fair comment. And we expect some of this to stay as we get into calendar ’22. So this kind of increased sequential growth is something that can be driven by insulin glargine. That is a fair point. The second aspect is where you talked about the markets and whether there is an opportunity to see that these margin improvements will happen over time. I’ll defer that question to Chinni to respond to that second half of the question. Chinni, over to you on that part.
Chinappa M. B. — Chief Financial Officer
Surya hi. Just — sorry, I didn’t catch the second half of the question. But yes, the sequential growth is for Q3 particularly. It’s on the back of the starting supplies of interchangeable insulin for the U.S. markets. We see that picking up as we go into 2022 and, of course, the profit shares that will flow through as we — I mean as this converts into — in market sales because right now, what you see in our Q3 books is just a supply of product from Biocon Biologics to Viatris. In terms of pricing and profitability, we don’t want to comment on that. And there is, I would say — I mean there’s always a gross price, net price but we don’t comment on pricing.
Surya Patra — PhillipCapital — Analyst
Sure, sir. So — and I think there are a couple of new initiatives that has been taken by the company. So if you can just provide us some clarity on those initiatives. Let’s say, for example, the PLI thing, what we have heard. So can you share something about that? What is the kind of investment commitment, the nature of the product that you’ll be targeting, whether it is the future initiatives on the PLI front is entirely commentation-oriented, something on that front? This is one, the new initiatives, I would say.
Secondly, even on the vaccine foray through the Serum Institute alliance, so how confident you are in terms of optimally utilizing the targeted capacity of Serum that is around 10 crore doses per annum starting from, let’s say, second half, what you have mentioned? So that is the second. And similarly, the third point I would ask here is that how should one look at this INR150 crore losses, what has been booked so far relating to the investment into the Bicara? So if you can clarify these three new initiatives, then I think that will give us kind of a greater clarity about the next year’s performance.
Kiran Mazumdar Shaw — Executive Chairperson
Maybe Siddharth, you would like to address some of these queries, PLI and Bicara maybe Chinni could talk about the others.
Siddharth Mittal — Chief Executive Officer and Managing Director
Sure, sure. I can do so. Surya, the PLI scheme, as you know, the government has announced the scheme — the second scheme, which was not necessarily linked to any products. It was linked to — it was a broad-based scheme which covered the complex generics, biosimilars. And as a group, we are investing heavily in capex, whether it’s Syngene or Biosimilars or Generics. And in that Category B where we were — where we had reapplied, we were the top company which was selected.
And the benefit would be INR250 crores, which will come over a period of six years on incremental sales. And the revenues which would be eligible for this would be coming from both Generics as well as Biosimilars. Now we do — there’s no change in strategy as far as investments are concerned in capex because we continue to invest, let’s say, in Generics itself, whether it’s in fermentation or synthetic or peptides facilities. And in insulin, for — in Malaysia, which obviously does not qualify for PLI benefit but other antibody facilities in — for biosimilars in India.
Surya Patra — PhillipCapital — Analyst
Got you.
Siddharth Mittal — Chief Executive Officer and Managing Director
As far as Bicara’s investment is concerned, we have residual carrying value of investment in our books of INR25 crores, which we expect would be going through the P&L in the fourth quarter. Bicara is also in discussions with third-party investors to raise a fund — to advance its pipeline as we had said that Bicara will look at external fundraise for future R&D expenses. And we expect some movement in the fourth quarter, after which we will see that those expenses will not be on the consolidated P&L.
Chinappa M. B. — Chief Financial Officer
That’s it.
Surya Patra — PhillipCapital — Analyst
My last question.
Chinappa M. B. — Chief Financial Officer
Surya, I’ll take the vaccines question.
Surya Patra — PhillipCapital — Analyst
Sure.
Chinappa M. B. — Chief Financial Officer
See, yes, of course, we see very strong demand for our vaccine portfolio. Initially, of course, there’s a bias toward the COVID portfolio then rolling into the next-gen vaccines and then progressively as we enter developed markets, which is our — in our medium- to long-term plan. To convert that into financial terms, initially, at the pricing, we believe this could play out closer to the 100 million units, could translate to close to $400 million of revenues and profits, which is in line with our core EBITDA margins, which is in the mid- to high 30s.
Surya Patra — PhillipCapital — Analyst
Whether you have started some marketing effort there, so — because of just marketing around 10 crore or 100 million doses from nowhere, whether it will be a staggered ramp-up that is by — or you have taken up your marketing efforts seriously and hence, you are confident to utilize optimally within the first year.
Chinappa M. B. — Chief Financial Officer
Yes. There’s a lot of joint commercialization efforts underway, and we believe that the revenues will start to play out right from the start of the merger. I mean right now, it will be through CTPL. And as CTPL merges into BBL, we will record the revenues.
Surya Patra — PhillipCapital — Analyst
Thank you.
Nikunj Mall — Head of Investor Relations
Thank you, Surya. Next question is from Shyam Srinivasan from Goldman Sachs.
Shyam Srinivasan — Goldman Sachs — Analyst
Hi, thank you for taking my question. Quick three questions and I’ll stop. So first one is on — if you look at biosimilar pricing, it has been, again — if you look at the latest 3Q data calendar from CMS, another 6%, 7% decline Q-o-Q. Our brands have taken 3% cut. So both the two sets of growth brands in Biosimilars have taken significant cuts. If I were to plot the 15, 16 quarters, sir, since biosimilars have launched in the U.S., we have seen a 50% drop in prices. So I just want your comment on how you look at pricing. In fact, if I look at Biocon, it has taken some other lesser pricing. So how should we kind of look at price versus volume? What are some of the aspirations? So that’s question number one.
Question number two is on capital allocation. We have had some cost speculation around you looking at Mylan’s biosimilar business in a combined entity. If you could care to talk about that or at least give us what are — your capital allocation priorities are. And the third question is on the split of Biocon Biologics revenue this quarter, EM versus DM, and how does this progress? Thank you.
Shreehas P. Tambe — Deputy Chief Executive Officer
Hi Shyam. Thanks for your question. I think — let’s talk a little bit about price erosion first. And I think the important thing is that — and I’ve talked about this before. The general acceptance of biosimilars particularly in the U.S., which was something that was a big question mark, has been quite resoundingly addressed that there is no concern around biosimilars’ acceptance. So that’s a very positive takeaway. We are seeing multiple players enter the market and be successful now. There is an acceptance of that. We also aren’t seeing a very steep decline. We were expecting with increased competition — that’s the whole idea behind having biosimilars.
That’s the whole idea behind having competition to see that there is a more affordable option to the brand. And we have expected this all along, and we’ve signaled that right from the beginning. The U.S. has been more accommodating steady market, where price sanity has prevailed if you look overall. And we — basically, between Viatris and us, our strategy has been to preserve value as we’ve gone so we do not chase market share in pursuit of that. We’ve not eroded value like many others. So we’ve continued to hold on to that, and our market shares have been steady in that 8% to 10% market share range that we’ve had, whether it is in Fulphila or whether it is in Ogivri.
And we, of course, see it now inch forward with Semglee with the discussions we just had now in Semglee. In Europe, we see a slightly different trend. It’s not a homogeneous market. It’s a heterogeneous market, several market appetites where you see that — where there is a single win tender particularly in the Nordics, you would see a more aggressive pricing trend and you would see someone — a winner takes all kind of a strategy, and then there is more aggressive pricing in such markets in certain cases. In most other markets within Europe, you have also seen a position where there are mandated price reductions year-on-year once there is a first biosimilar launch. So some of these are predicated, some are pre-decided, and we are seeing that. Given that there is a 10% to 25% reduction, which you would have factored in, the market remains in line with where we had expected it to move.
Emerging markets sometimes have surprised us with the kind of price that they have held on to. And that’s where we’ve also seen encouraging signs for the products that we’ve brought in market. Kiran talked about signing 20 new partnerships in recent times in emerging markets, and we are encouraged with the response that we’ve received in several markets and the partners that we are working with. So on the whole, I would say price erosion is along the expected lines and really something that biosimilars were expected to do when they — as a basic principle to bring them into the market. So that was the first question. Let me answer the third question that you that you talked about where — I think you asked us about the EM versus DM split in — for the quarter.
And I think what’s been our case so far is with the launch of the interchangeable insulin in the U.S., we are starting to see that — the we just start to move towards the developed markets. But it’s still at this stage, I would say, given that we’ve had a strong emerging market performance, it’s more or less at this point around that 50% mark. So it’s balanced still. We expect it to probably start moving as we gain more supplies into the U.S. with Semglee and other products. I will leave the question on speculation out at this time because there’s no point of responding to speculation. But unless Arun or Kiran want to respond to anything beyond that.
Shyam Srinivasan — Goldman Sachs — Analyst
Maybe the question then on capital allocation, Shreehas. Are there colors?
Shreehas P. Tambe — Deputy Chief Executive Officer
Chinni, can you respond to the capital allocation part?
Chinappa M. B. — Chief Financial Officer
Hi, Shyam. I mean of course, there is two types of investments needed to be successful in the biosimilar market — or let’s say, three. We have the commercial infrastructure, so the R&D, the capex and the commercial infrastructure. As you’ve seen, we’ve been investing quite significantly in building up capex — capital infrastructure to service both the developed and ROW markets. So a significant amount of investment has already been made.
We expect that to play out over the next two years as we — actually commission one of the large-scale monoclonal antibody facilities in the coming fiscal and another facility into — in FY 2024-FY 2025 time frame. R&D investments, you will see that going up as we bring some of our Wave two molecules into the clinic. But clearly, there is a lot of investments going into this both in building the capital infrastructure capex and the R&D investments needed to give us that long — medium to long-term growth from Wave two and Wave three molecules.
Shyam Srinivasan — Goldman Sachs — Analyst
Thank you, Chinni and all the others.
Nikunj Mall — Head of Investor Relations
Thank you, Shyam. Our next question is from Prakash Agarwal, Axis Capital.
Prakash Agarwal — Axis Capital — Analyst
Yes. Am I audible? Hi.
Aishwarya Sitharam — Head of Investor Relations
Yes.
Prakash Agarwal — Axis Capital — Analyst
Yeah. Hi. Good morning to all. Question is on R&D. So we saw in the last two quarters, R&D is kind of coming off. It’s down 5% Y-o-Y on nine-month basis. Just wanted to understand how do we see this for the rest of the year as well as next year, what would be the outlook? And is there any update on the Sandoz pipeline? We had talked about that around calendar 2022, we will give some color. So these two questions, please?
Shreehas P. Tambe — Deputy Chief Executive Officer
So Prakash, I think we talked about it in Kiran’s opening remarks as well, our R&D pipeline has been quite robust. We have in fact — we are looking to get our products into the clinic this quarter. So you will — you’re right in noting that our R&D expenses so far have been more or less, not as high as we would have expected. That’s because our products have not hit the clinical stage until now.
But this quarter, we are expecting them to be in the clinic, and you will see that there will be a big catch up in terms of the R&D development investments that we will be making once these products move into the market. In terms of the Sandoz pipeline, we had talked about these products being under development, and we will disclose the — to the investors once we’ve reached that stage where we can talk about them publicly.
Nikunj Mall — Head of Investor Relations
Prakash, any follow-up questions on that?
Prakash Agarwal — Axis Capital — Analyst
Yeah. Am I audible?
Nikunj Mall — Head of Investor Relations
Yes.
Prakash Agarwal — Axis Capital — Analyst
Yes. Sorry. So any outlook we can give for the R&D expense next year, like we always do about 12% to 15% has been our outlook for fiscal 2022?
Shreehas P. Tambe — Deputy Chief Executive Officer
Chinni, do you want to respond to that?
Chinappa M. B. — Chief Financial Officer
Hi, Prakas. We will be in a better position to give you guidance for FY 2023 as you drop our full year plan for next year. But yes, we see this trending upwards.
Prakash Agarwal — Axis Capital — Analyst
Okay. And is there any update on the RH insulin progress? I mean, I learned from the Investor Day that it is progressing. What are the timelines we are looking at in terms of going to the next level and approval, if all goes well?
Shreehas P. Tambe — Deputy Chief Executive Officer
So in terms of our RH insulin program, there are multiple products that are in the human insulin, I would say, franchise. And we are developing all of these products to bring them to the U.S. At this stage, these products, we progressed with the soluble product, and we moved that further for discussion with the agency. We are working to bring the other products as well to the agency. And we will, of course, discuss in more detail once we’re ready to have a more complete conversation on that Prakash, but we are moving on that as planned.
Prakash Agarwal — Axis Capital — Analyst
Okay. And lastly, a mix of the conversation we had now. So R&D is going to increase a bit, cost structures given that we are planning to expand in vaccine commercialization, etc, will go up. At the same time, we have higher value in Glargine. I mean, on a net basis, I assume it will add more value. So what is the margin trajectory that we are looking for next year given we have some big products as well, as well as big scale-up of future products?
Chinappa M. B. — Chief Financial Officer
Prakash, I’ll take that. Yes, for the Biosimilars business, we see core EBITDA margins I mean sustained or improving as you go forward with I mean, both the addition of the vaccines business and the increased mix of developed market sales to our total sales. So those two things will help to maintain and grow our net core EBITDA margins. On R&D, I’m not yet in a position to give you specific numbers, Prakash, so…
Prakash Agarwal — Axis Capital — Analyst
Okay. This is despite assuming R&D expense will increase, we are guiding…
Chinappa M. B. — Chief Financial Officer
The core EBITDA margin — sorry, Prakash. The core EBITDA margin is before R&D.
Prakash Agarwal — Axis Capital — Analyst
Okay. Got it. Okay. Thank you. Thank you for your answers.
Nikunj Mall — Head of Investor Relations
Thanks, Prakash. Next question is from Yash Tanna. [Operator Instructions]
Yash Tanna — Equity Research — Analyst
Am I audible now?
Nikunj Mall — Head of Investor Relations
Yes.
Yash Tanna — Equity Research — Analyst
Yes. Good morning, team. Congratulations on a good set of numbers. So my first question is that Viatris and Biocon, so we have won the litigation against Sanofi, Lantus SoloSTAR. And we had mentioned in the press release that the market for Lantus is $1.4 billion and the Lantus SoloSTAR, is around $5.1 billion. So my question is so I want to understand the addressable — total addressable market for the large in product. So it would be around $6.5 billion or $1.4 billion only for the Lantus. So that’s my first question.
Shreehas P. Tambe — Deputy Chief Executive Officer
So there are two different products there. There is — we have a — Lantus is sold as a — in terms of SoloSTAR as a prefilled pen, Yash, and we also sell it as a 10 ml vial, which is also called Lantus. And Viatris and Biocon Biologics are the only player in the market which has both these products. So we would essentially have a complete offering of products and we would have the full addressable market.
Yash Tanna — Equity Research — Analyst
Of $6.5 billion, right?
Shreehas P. Tambe — Deputy Chief Executive Officer
Yes. Those are the full reported numbers, the actual numbers will be…
Yash Tanna — Equity Research — Analyst
Yes. Yes, got it, got it. Thank you. And the second question is a little product-specific question. So a drug called Victoza who sales around $2.8 billion to $3 billion. So I believe the patent is expiring in 2023. And API is liraglutide, which I think we have filed in September 2021. So my question is, what are the status on that approval? And what kind of economic opportunity can that present to us?
Chinappa M. B. — Chief Financial Officer
So let me take that. It’s covered and the product is being developed by the generics business. It’s a very large product in the U.S. and Europe. And we have filed a DMF and we’ll soon be filing our ANDA in the U.S. And we hope to be in the market in line with the second — the second round of companies will be launching because there are only — there are a couple of settlements for day one launch. So we should be in the market in FY ’25 for this product.
Yash Tanna — Equity Research — Analyst
And — okay. So my third question is around the Novel Biologics segment. So I went through an interview of the Equillium CEO, Mr. Bruce Steel and where he mentioned that early next year, they will initiate trials for itolizumab for acute GVHD. And if those trials are successful, they will — it will be approved for acute — first-line treatment of acute GVHD which is more than a $500 million market in the U.S., what he mentioned.
And then I went through the Equillium annual report that mentions that there are a few milestone payments that we can — like we can receive upon the approval and sale of this drug, which is, I think, around $550 million. And I think we also have exclusive supply arrangement with Equillium. So my question is, what does the approval of itolizumab present for Biocon in economic terms?
Chinappa M. B. — Chief Financial Officer
Well, there are milestones linked to the various development stages. So there would be the — and the amount that you mentioned is from various indications. The first, the most advanced indication is that acute GVHD, which is also an orphan indication. And we expect once the trial starts this year, we’ll be able to — Equillium will be able to make good progress in the next couple of years. And there are milestones linked to filing and approval, filing of BLA and approval. And then there are royalties which are applicable on sales. And we will be supplying the product. The product itself will be manufactured by Biocon Biologics since it’s an antibody, and we’ll be supplying to equal at a cost plus markup.
Yash Tanna — Equity Research — Analyst
So can you quantify any numbers in terms of milestone payments or anything like that?
Shreehas P. Tambe — Deputy Chief Executive Officer
Yash, it’s a little premature to comment on the payment because we are still a few years away.
Yash Tanna — Equity Research — Analyst
Okay, sure. Thank you these are my questions and best of luck for the team.
Nikunj Mall — Head of Investor Relations
Thank you, Yash. Next question is from Nitin Shakdher from Green Capital. [Operator Instructions]
Nitin Shakdher — Green Capital — Analyst
Hi good morning to the management and good morning to Mrs. Kiran Mazumdar Shaw as well. I have two simple questions. My first question is in relation to the strategic alliance between Biocon Biologics and the Serum Institute Life Sciences. Does the management feel that in terms of the growth of the communicable diseases and the vaccine market seems to be far higher in the future versus the growth in Biosimilars? Can you sort of comment to that point, please?
Kiran Mazumdar Shaw — Executive Chairperson
I don’t think it could suggest that communicable diseases are much — are unlikely to grow much faster in terms of the vaccines and Biosimilars. These are absolutely two separate categories. I think as a company that is focused on global health care, up until now, we were really focused on noncommunicable diseases. And this pandemic actually shown the spotlight on communicable diseases, which we had not really looked at seriously. And we believe that in the future, it’s important as a global health care player to cover both communicable and noncommunicable diseases.
I think each one of these businesses has its own growth potential, its own growth segments. And we believe that, obviously, from our business point of view, our focus is on the pharmaceutical and biopharmaceutical opportunities as the primary focus for us as a company. But we also believe that vaccines can add to this focus and make us truly a global health company focused on both aspects of a disease.
Nitin Shakdher — Green Capital — Analyst
Thank you ma’am. My second question is in relation to the specific partnership with Adagio Therapeutics to manufacture and commercialize the neutralizing novel antibody. So I just wanted to get a sense of what are the specific products which are going to be launched for the prevention of the treatment? Does the management have a sense of the product line at this point in time?
Kiran Mazumdar Shaw — Executive Chairperson
Well, the principal product is a product for ADG20, which was an engineered monoclonal antibody for the treatment of obviously COVID-19. And at this point in time, of course, its efficacy on all previous variants was very high. And therefore, it was considered to be a very differentiated antibody and because it was an intramuscular jab as opposed to an IV infusion, it had a very strong differentiated profile. It had high efficacy with all previous variants as well as a very differentiated drug delivery profile, which is why we believe that this was a very good partnership, and it is a very good partnership. Recently, they had a setback because the efficacy vis-a-vis the Omicron virus was substantially reduced.
However, they have also shared with the — in the public domain that the reduction in efficacy of their antibody is more different to that of the two antibodies, the [Indecipherable] and the AZ antibody cocktails, which also have shown a reduction in the efficacy to treat Omicron patients. So they believe that they are on par with these other antibody preparations. And they would like to now actually have an adaptive trial design that can actually enhance the dose form of their current dosage to see if they can actually deal with Omicron in a better way.
So I think that’s the reason why they’ve had a bit of a halt in the clinical trial program. But having said that, they have indicated to us that ADG20 continues to be a very important opportunity, a very important product. And as you know, the pandemic is not over as yet. We don’t know what variants will come next. But at this point in time, we believe that this pandemic does require treatment interventions, and we believe that antibody treatments are a very important part of this treatment required for dealing with the pandemic.
Nitin Shakdher — Green Capital — Analyst
Thank you, ma’am. Thank you for the clarifications. That’s all from my side and all the best for the next financial year.
Nikunj Mall — Head of Investor Relations
Thanks, Nitin. Next one is from Sameer from Morgan Stanley.
Sameer Baisiwala — Morgan Stanley — Analyst
Hi. Good morning, everyone. My first question is on Aspart. How are you thinking about the CRL issued by FDA? And is it connected with the six open observations? And by what point you think you would be able to resolve this and get the approval?
Shreehas P. Tambe — Deputy Chief Executive Officer
Hi, Sameer. The Aspart CRL was a disappointment for us. Really, we’ve gone through the CRL letter, and there are essentially two aspects to it. The agency came back to us and said that there was a particular diluent, a diluent is used alongside the Aspart vial that we have. And that is given to patients who are of very low body weight, very clearly pediatric [Phonetic] patients.
And they would probably need — they need this diluent to dilute their dose, so that they can take that rapid-acting analog and they wanted more information of that diluent, which is essentially a water filled [Indecipherable] along with some excipients. So it doesn’t have the product at all. So it’s a separate product in itself. So that is something that we have to provide more information to them, which we will — we are working to provide.
And the second one was to the updates on the infection that we had provided them in terms of the CAPA responses that we had given them. And they wanted us to provide us a completeness of that data, and we will be submitting that information to them. We have been in correspondence and dialogue with the agency to understand was something that is currently ongoing. And once we’ve done with that, we should have a more clearer picture how we will be able to and how quickly we’ll be able to resolve the CRL.
Sameer Baisiwala — Morgan Stanley — Analyst
Yes. Thanks. But just putting these things together, do you think you’d be able to secure the approval in time for contracting for 2023? Or there’s a risk that we slip into later part of this year?
Shreehas P. Tambe — Deputy Chief Executive Officer
So the way that was scheduled is that we were looking to be in line for the second half of the year, and we expect to be there with that, we of course, know once we interact with the agency. But to give a commitment on behalf of when the agency will decide would be actually going too far. But we are hopeful and let’s see how the discussions progress.
Sameer Baisiwala — Morgan Stanley — Analyst
The second question is on insulin Glargine. When you have done the contracting already for 2022, how do we think about the volumes and the pricing? Are these open? You just have sort of a broad umbrella sort of contract? Or are they more specific, if you can share thoughts around this?
Shreehas P. Tambe — Deputy Chief Executive Officer
These contracts are drawn up by our partner Viatris along with the various customers that they’ve got. So we may not be able to share a lot of detail around it. But these are contracts that are executed for a contracting term, which is, in some cases, a year or some cases, two years, which could be defined as such.
But we believe that these are — we’re not looking for a quarter-on-quarter change of situations like this. We believe this to be a sustainable revenue stream for us, a volume stream for us, which is why we’ve guided that some of these things will be much more steady going forward for us.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay. Thanks. One final question from my side, if I may. It’s on the generic business. So sir, if you can just respond two parts. One is, I believe you have spent INR600 crores on the Vizag facility. So what kind of asset turnover can we expect from this and over what time period? And second is on the PAI inspection that was done a few months back. Any update on that final approval? Thank you.
Siddharth Mittal — Chief Executive Officer and Managing Director
Sure, Sameer. So the asset turn is difficult to quantify because the output from Vizag facility would go both for our API business as well as for our formulations business. And we do have an existing facility in Bangalore. So this — the Vizag facility will augment that capacity in Bangalore. But as you know, immunosuppressant has been our biggest growth driver in the last couple of years. And we are capacity constrained, and we definitely see a huge growth coming in from this investment. And we will be, in the future, also looking at adding more fermentation capacity in Vizag, which is beyond immunosuppressant.
So obviously, being a greenfield investment, there’s a lot of infra cost or the capex on Infra was included in the INR600 crores. But in terms of asset turn, it’d be difficult to quantify, but you can look at our API business, asset turn overall was in the range of 1.25 to 1.5. And for the formulations, it’s a little over 2. So I don’t expect it to be anything lesser than that, once fully commercialized.
Sameer Baisiwala — Morgan Stanley — Analyst
Thanks for that. And also on PAI inspection?
Siddharth Mittal — Chief Executive Officer and Managing Director
PAI was concluded for our formulations facility. Immediately after that, we received the approval for Mycophenolic Acid in November, December of 2021. We have coupled a lot more drugs which are pending approval, and we actually expect to get some of these approvals during the fourth quarter.
Sameer Baisiwala — Morgan Stanley — Analyst
Okay, great. Thank you. That’s it from my side.
Siddharth Mittal — Chief Executive Officer and Managing Director
Thank you.
Nikunj Mall — Head of Investor Relations
Thanks, Sameer. Next question is from Harith from Spark Capital. [Operator Instructions]
Harith Ahamed — Spark Capital — Analyst
Yes. Sorry about that. Good morning. Thanks for taking my questions. My first question is on Aspart. So when I look at our launches — biosimilar launches in regulated markets in the past, like pegfilgrastim, trastuzumab and insulin Glargine. Those were followed by successful launches of these products in India and some of the emerging markets. So for Aspart, can we expect to launch in India in the near term? I see that there are fairly large brands from the innovator in aspart in India?
Shreehas P. Tambe — Deputy Chief Executive Officer
So, Harith, we’ve always developed a global franchise whichever product we have picked now. I don’t want to specifically talk about any particular market, but whichever products we’ve picked, the idea has been to build a global franchise with each of the molecules that we’ve brought to the market. It could be depending on the business cases of a particular market or the specialties of a particular market that they could be timed differently, but the intent would be to see that it makes sense to bring them across.
Harith Ahamed — Spark Capital — Analyst
All right. Second question is on Novel Biologics. I see that we’ve been booking some revenues in this segment, not a very material number, but INR10 crores to INR15 crores in the last two or three quarters. So what exactly is this related to any specific programs? And is this part of the licensing income that we’re disclosing?
Siddharth Mittal — Chief Executive Officer and Managing Director
So, I’ll take that question. So this is actually intercompany billing that is billed from India to Bicara U.S. And Bicara being an associate, this intercompany billing does not get eliminated. So the corresponding leg is sitting in R&D cost — in a share plus under Bicara. So this is not really a third-party income.
Kiran Mazumdar Shaw — Executive Chairperson
No, I think there is also — he may be referring to itolizumab, Shreehas.
Shreehas P. Tambe — Deputy Chief Executive Officer
No, no, Kiran, what he referred is right. This is a biofusion billing to Bicara intercompany billing.
Harith Ahamed — Spark Capital — Analyst
Yes. And last one, again, an accounting related question. What is your current stake in Adagio? And I’m also trying to understand the rationale for taking the MTM losses through the P&L and not through the other comprehensive income?
Shreehas P. Tambe — Deputy Chief Executive Officer
Chinni?
Chinappa M. B. — Chief Financial Officer
Harith, hi. I’ll take the question. It’s — we’ve got a small minority stake in the business. We have invested $5 million in Adagio, we don’t have the specific percentage, but it’s a small minority percentage. The thing of putting it through the P&L, we saw this as a short-term investment and that will take it to the P&L and exit this fiscal, but that price has moved quite a bit, as you saw in Q2 we had gains playing out because of Adagio. And this quarter, we have a huge loss. So it’s something — I mean, in that respect, I say that we should not have — we should have not taken it to the P&L, but it is a decision we have made. And we’ll be looking to exit from this investment in the near term once the price stabilizes.
Harith Ahamed — Spark Capital — Analyst
Got it. Thanks, Chinni. That’s all from my side.
Nikunj Mall — Head of Investor Relations
Thanks, Harith The next one is from Vikram Agrawal, HCA Stockbrokers [Phonetic].
Vikram Agrawal — HCA Stockbrokers — Analyst
Good morning, team. Just one small question. In the recent past, one of the prime reasons why the results had suffered was because of logistical issues, issues such as due to COVID hospitals in the US were not able to treat major therapies, diseases like cancer and the other things and delays in US FDA approvals. So what do you think is the situation of these? And can you comment if these problems have abated? Or we can expect certain similar problems arising in the future also? Thank you.
Shreehas P. Tambe — Deputy Chief Executive Officer
Vikram, some of these logistics issues as I think you noted in Kiran’s original — the initial remarks, I think the pandemic really just when we had thought that it’s behind us, it’s actually come up with a new variant each time. And each time it’s come it’s really impacted the way we’ve tried to return to normalcy as a community. And likewise, in the US as well, where footfalls to hospitals have continued to be challenged — of the noncritical treatments as much as they can. Of course, whatever is critical has to happen.
But some of these things have impacted. They continue to slow things down. But eventually, these things will have to come back to normalcy. At this stage, we do see some trailing impact of these delays because of the forward impediments that are there across the world. But I think we are — as a community, we are learning to deal with it is the way we would see it.
Vikram Agrawal — HCA Stockbrokers — Analyst
Great. Thank you. And all the best for the future.
Nikunj Mall — Head of Investor Relations
Thanks, Vikram. Next one is from Nithya from Bernstein.
Nithya Balasubramanian — Bernstein — Analyst
Hi. Thank you. So two questions, one on Semglee. So Semglee, Shreehas, you had mentioned that you have the interchangeable product, you have the branded product as well. So question is Mylan likely to retain the sales force into 2022 as well? Or is that something they’re retiring? Because I assume your profit share is net of the sales and marketing expenses.
Shreehas P. Tambe — Deputy Chief Executive Officer
Nithya, I didn’t quite catch your question. I think was your question that given that we have a two-brand strategy, what happens to our sales force? Probably my line was bad. Is that the question?
Nithya Balasubramanian — Bernstein — Analyst
The question is Viatris’ retaining the sales force in 2022 and beyond. And the reason I’m asking is, I’m assuming your profit share is net of the sales and marketing expenses?
Shreehas P. Tambe — Deputy Chief Executive Officer
Yeah. Certainly, in terms of the Viatris’ commercial strategy, I wouldn’t want to comment too much on that if that’s best left to them to address. But clearly, we are looking at Glargine as not just one product and the formulary, having been listed in some of the top formularies being the end of the line. We’re looking at more products to follow. And clearly, we are looking at a larger subscription than what we’ve got today.
So we don’t necessarily see this as a ‘we all’ in terms of where it is. We’re looking at a more wider presence than what we’ve created. We see this as the beginning. So wouldn’t necessarily comment on the sales force increase decrease specifically. That may be Viatris specific question. But we see this as the beginning of a franchise rather than just one win or one product situation. In terms of how our profits are accounted, I’ll let Chinni comment on that. Over to you, Chinni, on that.
Chinappa M. B. — Chief Financial Officer
Nithya, we had actually clarified in the past, the profit share with Viatris is based on gross profit and selling and marketing expenses is not a deductible that we share.
Nithya Balasubramanian — Bernstein — Analyst
Understood. The second question was on Aspart. I think in the last earnings call, Lilly had commented that the spot contracting is far more — fast-acting insulins contracting is far more complicated. It happens along with Phoenix insulins and more bond format. Your reaction to — do you see this as a challenge to adopting your aspart when it’s in the market?
Shreehas P. Tambe — Deputy Chief Executive Officer
I don’t specifically recollect that conversation, but we’ve not heard of anything specific Nithya that could be a challenge that is specific to Aspart contracting. We do believe that we will have to be there at the table. We also believe that we will have a product which meets all the expectations of the agency and will be amongst the — will be the first interchangeable analog as well, rapid-acting analog. So we believe we will have what it takes to be approved and be chosen over the competition. So I don’t know or I can’t recollect any specific challenges that you have said.
Nithya Balasubramanian — Bernstein — Analyst
Thank you, Shrehas. I was referring to what Lilly said in the last earnings calls about the your contracting happening in a more bundled fashion along with premixes in the fast-acting insulin category. But that’s what I was referring to.
Shreehas P. Tambe — Deputy Chief Executive Officer
Thank you.
Nithya Balasubramanian — Bernstein — Analyst
Thank you so much and all the best.
Nikunj Mall — Head of Investor Relations
Thanks, Nithya. Next one is from Chintan Chheda from Quest Investment Advisors.
Chintan Chheda — Quest Investment Advisors — Analyst
Yeah. Hi. Good morning. Hello, am I audible?
Nikunj Mall — Head of Investor Relations
Yes.
Chintan Chheda — Quest Investment Advisors — Analyst
Good morning to the team and thanks for taking question. So my first question is related to Semglee. So I just wanted to understand, like up to what level of market share in the US, this Malaysian facility can fulfill the requirements at existing capacity? And this facility had some tax benefits in Phase I. So will the same be applicable for Phase two or future expansions?
Shreehas P. Tambe — Deputy Chief Executive Officer
I think in terms of the ability to supply the US market, I think we’ve got a very good capacity to supply the US market, and we’ve — we’ve said that in the past as well that we’ve got a very — we’ve built a global scale facility in Malaysia, which is a very large integrated facility for drug substance, drug product and pen assembly. And we continue to expand that facility as well. In fact, today, we’ve also shared that encouraged by the rise that we’ve seen and the impending Aspart approval in the near future.
We will be making even further investments on that site so that we can cater to even a higher market share than we’re looking for today. So we’re very confident in terms of the ability to supply the market, and we are looking for, in fact, much more aggressively in terms of volume share as we get into more products ahead of time. So clearly, a very strong position on the capacity front to keep the market.
Chintan Chheda — Quest Investment Advisors — Analyst
And tax benefits, what were the tax benefits? And do they stick if we go further for further expansions?
Chinappa M. B. — Chief Financial Officer
Yes, Chintan I will clarify that, yes, we do have very good tax. We’ve got a long 15-year tax holiday with — linked to our Phase I investments. We are engaged with the Malaysian authorities for incentive supporting the Phase II investment.
Chintan Chheda — Quest Investment Advisors — Analyst
Okay. Thanks for that. And second question is related to Aspart. So for the EU market, we have the approval in hand. So have we gone for the launch in that market? And if yes, then what has been the performance so far in this financial year?
Shreehas P. Tambe — Deputy Chief Executive Officer
So Chintan, we’ve got the approval in the EU and which is why we’re very confident about the science and which is why we are looking for the right time to launch the product. At this time, we are working — Viatris is working out on the right launch strategy and the right markets to launch. And as I’ve said before, Europe is not one country. It’s a heterogeneous market. And it’s about the timing of which product to launch in which markets. They are working on putting that commercial strategy together. And given that we’ve crossed the bridge in terms of the approval part of it, we will be putting together that strategy with test to bring the product to Europe once that’s put together.
Chintan Chheda — Quest Investment Advisors — Analyst
Okay. Okay. Thanks a lot. That’s it from my side.
Nikunj Mall — Head of Investor Relations
Thanks, Chintan. Next question is from Patrick Stadelhofer from Atlantic Lion Investments.
Patrick Stadelhofer — Atlantic Lion Investments — Analyst
Good morning. Just one bigger picture question. How do you see the Biosimilar partnership with Viatris evolving? And given how important Biosimilars are becoming to Europe overall results? How do you strategically think about your ability to control your own destiny here versus having to rely on Viatris whom is a much smaller part of their business, executing for you. Thank you.
Shreehas P. Tambe — Deputy Chief Executive Officer
Arun, would you want to respond to that?
Arun Chandavarkar — Managing Director
Sure. Patrick, if you look at our portfolio of Biosimilars our initial portfolio was partnered with Viatris and they continue to be a strong partner for us on our initial wave of products. We’ve also talked about our increased R&D spends going forward. which essentially reflects the progress we’ve made on our future portfolio, which is not partnered Viatris.
So clearly, as our future portfolio matures, we would be, of course, more I would say, balanced in terms of our commercial channels, what goes through Viatris and what goes directly through us. And we talked about making initial steps in building out our commercial footprint in Advanced Markets through some of the senior hires. And this is the first step towards that destiny that you talked about being completely vertically integrated across R&D, manufacturing and commercial for our future portfolio.
Patrick Stadelhofer — Atlantic Lion Investments — Analyst
Okay. Thank you.
Nikunj Mall — Head of Investor Relations
Thanks, Patrick. Next one is from the Vipul Shah from Sumangal Investment.
Vipul Shah — Sumangal Investment — Analyst
Hi. Am I audible?
Nikunj Mall — Head of Investor Relations
Yes.
Vipul Shah — Sumangal Investment — Analyst
So my question is what will be the capex for expansion for Malaysian facilities? And what is the financial performance of the Malaysian facilities? What is the capacity utilization, what is the EBITDA level performance? If you can comment, that will be very helpful.
Chinappa M. B. — Chief Financial Officer
Hi, Vipul. So the Malaysia expansion will come within our overall capex plans that mean capex spend of about $100 million to $150 million per year. So we look to fund the Malaysia expansion within this overall capex allocation. If you look at Malaysia’s performance for the quarter, this has been a very good quarter because we had positive EBITDA and breakeven at the PBT/PAT line near breakeven. As profit shares accrue from the sales of Semglee in the U.S. we see this trending upward in Malaysia moving to full profitability in FY ’23.
Vipul Shah — Sumangal Investment — Analyst
So a follow-up to that. So should we assume that Malaysia mean at least breakeven from here on all subsequent quarters and years?
Chinappa M. B. — Chief Financial Officer
Yes. We strongly believe that Malaysia will be profitable going forward from Q4 onwards.
Vipul Shah — Sumangal Investment — Analyst
Thank you and all the best all of you.
Nikunj Mall — Head of Investor Relations
Thanks, Vipul. Next one is from Ashutosh. [Operator Instructions]
Ashutos — Private — Analyst
Yes. Can you hear me?
Nikunj Mall — Head of Investor Relations
Yes.
Ashutos — Private — Analyst
Yes. Thanks for giving me the opportunity. My question is, how do you see Biocon different from today’s Biocon in last — in next, say, 10 years? Thank you.
Nikunj Mall — Head of Investor Relations
Kiran ma’am, you are in mute.
Kiran Mazumdar Shaw — Executive Chairperson
Thanks for that question. As you know Biocon seems itself as a fully integrated global biopharma biosimilar company. And I think one of the missing capabilities we have is really to be a strong — to have a strong commercial engine for advanced markets. And I think in the next 10 years, we expect ourselves to be amongst the leading biosimilars companies globally as a fully integrated player in this particular segment with a very large portfolio of products, we expect to have one of the largest portfolio of biosimilars catering to global markets and being dominant in many, many of these markets, especially some of the key global markets, which are the advanced markets and emerging markets. That’s how we want to see ourselves.
Ashutos — Private — Analyst
Thank you.
Nikunj Mall — Head of Investor Relations
Thanks, Ashutosh. Next one is a follow-up from Surya from PhillipCapital.
Surya Patra — PhillipCapital — Analyst
Yes. So just a follow-on on the small molecule side, this immunosuppression dedicated facility, what we are have set up. So with that, obviously, we will have a kind of meaningful noble positioning. So can you just share what is the current positioning in the global market? So for APIs are concerned, and the competitive position versus Chinese players and post this plant, what equation that we can have? And we know that there is a positive trend that is also likely to support that the alternate Chinese source equation, which is a kind of favorable wave, I believe. So given all that, what expectations that you were having out of this immunosuppressant portfolio and let’s say, even the fermentation capability that you have?
Siddharth Mittal — Chief Executive Officer and Managing Director
Thanks, Surya. I will defer this question to Neil, who heads our commercial for our API business.
Indranil Sen — Chief Financial Officer
Yes. Thanks, Surya, for the question. So Surya, we already have a very well-established client based on immunosuppressant and also our clients are well spread globally. And today, we have large market share being advanced markets, emerging markets as well as domestic markets in India. And many of our existing immunosuppressants, we are unable to fulfill the market demand. So we believe the additional capacities that would kick in with our investment, it would fulfill those demand. And our leadership market position that we have would become even stronger. And you’re right with your thought that while there has been a dearth of capacity for past 24 months. we believe that we would be able to overcome the sentiments against China and get a larger market share than what we have today.
Siddharth Mittal — Chief Executive Officer and Managing Director
In fact, if I may just add for the immunosuppressants in fact, we are working with many Chinese companies to sell immunosuppressants for the Chinese market. So that’s — you can understand that if the Chinese companies are buying from India, that shows the uniqueness and differentiated part of this molecule where there are not many companies locally who is able to get the drug at the same quality that they are able to source from us.
Surya Patra — PhillipCapital — Analyst
Sure, sir. Sir, is it free from China kind of product category in terms of?
Siddharth Mittal — Chief Executive Officer and Managing Director
Yes, from a logistics perspective or supply chain dependency we are, this is not dependent on China.
Surya Patra — PhillipCapital — Analyst
Sure. Yes, thank you.
Nikunj Mall — Head of Investor Relations
Thanks. Thanks, Surya. I think this was the last question for the day. We thank you all again for joining today.
If you have any additional questions, please feel free to reach out to Aishwarya or myself. We look forward to seeing you again next quarter. Have a good day.