Bangalore: Kiran Mazumdar-Shaw, Biocon Ltd’s founder and managing director, has often been a vocal critic of the Indian product development ecosystem and feels that the country is losing credibility as an innovation hub. On Friday, after Biocon posted a 4.3% rise in quarterly revenue, Mazumdar-Shaw spoke about the company’s focus on research and development (R&D) spending, capacity expansion at its Malaysia and Bangalore centres, and the challenges the company faces in reaching its revenue target of $1 billion by 2018. Edited excerpts:

Biopharma revenue declined this quarter. What was the main reason?

It is a question of the timing effect. When you book orders, you can either supply it at the end of the quarter or the next quarter. You just take a call on what it is. (But) we’re going to have a very robust year ahead. I don’t think it’s much of a bother. The only challenge we have is—yes, insulin is doing very well and we’re trying to figure out how to meet the demand. Our Malaysia facility is only going to come on in 2015, so we’re likely to get capital and capacity expansion for insulin this year (in Bangalore), which would get us a little more business because we’re just not able to meet demand.

What are Biocon’s goals in R&D?

I get very concerned about India because India as a country is losing credibility in innovation. You go anywhere today, (you’ll see) we’re losing huge value in this sector, and our ability to do research because everybody is following the usual imitation route. Today, if you took to any large pharma (company), they’ll say India is a no-no for us.

Are you referring to the Novartis ruling?

No, Novartis was an acceptable ruling. What is really happening is the compulsory licensing. These are all short-term tactics and we don’t realize the irreparable damage we’re doing to ourselves. Nobody wants to look at India seriously—you won’t get a single drug being launched in India. (Our) level of R&D spending will increase. It would’ve increased by a much higher amount because now we’re co-developing. If we hadn’t partnered with Mylan, it would’ve gone up by 30-40% because as it advances into phase III, then the costs are much higher. But now we’re sharing it and they’re picking up most of the costs.

So where will the R&D spending mostly focusing on?

Each of our verticals today, whether you talk about small molecules where we have R&D focus right now, on ANDA (abbreviated new drug application). We have very high-end APIs (active pharmaceutical ingredients), but why only sell APIs? Then if you look at insulins—big R&D. If you look at MABs (monoclonal antibodies), (there is) R&D. Novel molecules—we’ve got oral insulin, we’ve got CD6, we’ve got a pipeline. Then you have branded formulations where we’ll of course have the benefit of ANDAs. As ANDAs develop new formulations, the branded formulations will deliver. Most of the R&D are in these areas—novel, biosimilars or biogenerics and small molecules.

Leaving aside the R&D spending, some of your other costs have gone up. Going forward, will we see margin pressure?

We’re seeing a better product mix, we’re seeing an improvement in margins. The first two quarters might be a bit challenging, because we have a commitment in our research services business towards a forex hedge we took when the rupee was very strong. And that comes to an end by the second quarter of this fiscal. So from then onwards, it’s only up. We expect to make up after that. But until then, we have this bit of challenge.

How’s your tie-up with Bristol-Myers Squibb progressing? Would we see any filing over the next year?

It’s progressing very well. But no, we wouldn’t expect any filing within the next year (because) the development is ongoing.

What are the challenges you see in reaching the $1 billion revenue target by 2018?

The challenges are regulatory, that’s it. Basically, it’s about getting marketing registration in time, but we’re not so concerned because most of those revenues will come from emerging markets where we’re present in. So right now, the only challenge is capacity—we don’t have enough capacity. Today, my insulin sales would be double if I had the capacity. Because there’s a huge demand for insulin in emerging markets and we can’t supply enough.