About the Company

Syngene International Limited is a contract research and manufacturing company which provides drug discovery and development services in India and internationally. The company serves start-up companies, pharma/biotech, agrochemical, chemical, nutrition, and animal health companies. It has partnerships with Bristol-Myers Squibb Co.; Baxter International Inc.; Amgen Inc.; Zoetis Inc.; GSK; Merck KGaA; Artelo Biosciences, Inc.; PharmAust Limited; HiMedia Laboratories; and Zumutor Biologics. The company was incorporated in 1993 and is based in Bengaluru, India. Syngene International Limited is a subsidiary of Biocon Limited.

 

Q4FY22 Updates

Financial Results & Highlights

Standalone financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 773 676 14.3% 652 18.6% 2654 2244 18.3%
PBT 178 192* -7.3% 127 40.2% 482 467 3.2%
PAT 147 160 -8.1% 103 42.7% 394 404 -2.5%
Consolidated financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 773 677 14.2% 654 18.2% 2657 2249 18.1%
PBT 179 192* -6.8% 128 39.8% 484 469 3.2%
PAT 148 160 -7.5% 104 42.3% 396 405 -2.2%

*Contains an exceptional item of Rs 35 Cr

Detailed Results:

  1. Consolidated revenues were up 14% YoY in Q4. Profit has fell by 7% YoY in the same quarter while profit after tax before exceptional items was up 7% YOY. 
  2. EBITDA margin for the period was at 34% with EBITDA growing 13% YoY.
  3. PAT margins stood at 19%.
  4. FY22 was decent for the company with revenue growth of 19% YoY and EBIDTA growth of 15%
  5. It also continued to manufacture remdesivir for COVID-19, under a voluntary licensing agreement from Gilead.
  6. The company is guiding for 30% EBIDTA margins due to higher investments & travel related expense, single digit PAT growth due to effective tax rate being higher by 200-300 Bps & revenue growth to be atleast in Mid-teens.
  7. The company is on track to receive huge regulatory approval for its Mangalore plant.

 

Investor Conference Call Highlights

  1. The company crossed the $100 million revenue mark in a quarter for the first time.
  2. The company’s expenditure on raw materials increased by 390 basis points due to the change in the mix with more early-stage manufacturing projects as well as input cost inflation.
  3. The Employment cost was reduced by 5% year-on-year due to a special bonus in Q4FY21.
  4. The hedge gains led to an improvement in the margin by 50 basis points
  5. The company’s effective tax rate stood at 18% Vs 12% YoY.
  6. The management states that supply chain challenges and long lead times constrained the growth of the biologics in FY2022, but it expects things to improve in FY2023 and expect biologics to contribute an increasing share of revenues.
  7. The company’s Investment during the year was Rs.621 Cr and this included capital projects under progress and capitalization of lease rentals from long-term lease arrangements.
  8. Out of the total investments in the current year, the company invested approximately 70% in the research business while it also added laboratory capacity in Hyderabad in two phases and expanded facilities in Bengaluru as part of the contractual commitment for dedicated centres.
  9. Around 10% was invested in development services mainly in completing the clinical scale fill-finish facility of its formulation operating unit & another 10% was invested in the manufacturing business mainly for the capacity addition of its fourth reactor in biologics as well as completing the microbial development and manufacturing facilities. The remaining investments were in common assets including added power grid capacity which is commonly used by all divisions.
  10. The management expects Q1FY23 to be significantly lower due to the very high contribution from Remdesvir (covid medication) in Q1FY22 which is not expected in the current quarter.
  11. The company expects strong growth from its manufacturing side from FY23-24 onwards.

 

Analyst’s View:

Syngene is a fast-rising player in the CRMO space and has established itself well with its associations with industry leaders in the pharma space like Bristol-Myers Squibb, Amgen and others. The Company had a mediocre Q4 with a revenue increase of 14% YoY. The company expects the Mangalore API facility to get USFDA approval in the next 2 years. The management remains confident of the company’s revenue growth guidance of 13-15%. It remains to be seen whether the company will be able to maintain its growth momentum, how long will the elevated raw materials prices prevail and what challenges it will face when expanding into the API industry. Nonetheless, given its scientific capabilities, its associations with industry leaders for drug discovery, and its expanding reach in the global pharma space, Syngene is a pivotal midcap pharma stock to keep in mind for all investors.

 


Q2FY22 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY22 Q2FY21 YoY % Q1FY22 QoQ % H1FY22 H1FY21 YoY%
Sales 622 531 17.1% 606 2.6% 1228 966 27.1%
PBT 82* 94 -12.8% 94 -12.8% 176* 160 10.0%
PAT 67 84 -20.2% 77 -13.0% 143 141 1.4%
Consolidated Financials (In Crs)
Q2FY22 Q2FY21 YoY % Q1FY22 QoQ % H1FY22 H1FY21 YoY%
Sales 623 533 16.9% 607 2.6% 1230 970 26.8%
PBT 82* 94 -12.8% 95 -13.7% 177* 161 9.9%
PAT 67 84 -20.2% 77 -13.0% 144 142 1.4%

*Contains an exceptional item of Rs 30.7 Cr

Detailed Results:

  1. Consolidated revenues were up 17% YoY in Q2. Profit has risen 20% YoY in the same quarter. PAT before exceptional items was up 9% YoY.
  2. EBITDA margin for the period was at 31% with EBITDA growing 12% YoY.
  3. H1 was very good for the company with revenue growth of 27% YoY and PAT before exceptional items growing 19% YoY.
  4. The exceptional item in Q2 was related to the reversal of service export incentives.
  5. The company made key appointments in executive and operating leadership during the quarter.
  6. Syngene’s client base in biologics manufacturing expanded during the quarter.
  7. It also continued to manufacture remdesivir for COVID-19, under a voluntary licensing agreement from Gilead.

Investor Conference Call Highlights

  1. The export incentive benefit was capped at INR 50 million by the govt of India.
  2. The management expects the Mangalore API facility to get USFDA approval in the next 2 years.
  3. Material costs have risen from 24% of revenues last year to 27% of revenues in Q2FY22.
  4. The company is making procurements in advance to prevent any risks arising from potential disruptions.
  5. Syngene continues to see a rising number of new clients in Discovery Services, particularly in the emerging biopharma segment.
  6. The capex during the quarter was around INR 1 billion, which comprised of Discovery Services expansion at Hyderabad and Mangalore, expansion of dedicated centers, and investment in the new Biologics facility.
  7. The capex guidance has sustained between INR 7.5 billion to INR 9 billion during the year, and this included about INR 2.5 billion rollover from the previous year. In the first 6 months, Syngene has invested around INR 1.8 billion and has already committed close to INR 5 billion for execution.
  8. The management maintains the guidance for 13-15% revenue growth in FY22.
  9. The management expects the demand for biologics to rise a lot in the near future.
  10. The drop in gross margins was mainly on account of manufacturing remdesivir and due to an increase in raw material costs.
  11. The company has preferred to carry a higher inventory than usual because of uncertainty regarding logistics and supply chain issues in the world.
  12. The capex guidance for the year includes the expansion of the biologics plant.
  13. The management is confident of maintaining margins near 30% at the bottom and expects the revenues and to triple in 5 years.
  14. The management has clarified that the Mangalore plant is not margin dilutive and it should deliver good performance once the necessary approvals are done.
  15. The company’s profits have gotten affected due to the rise in inventory as many of the raw materials stocked like solvents are expensed immediately according to the management.
  16. At this point, 1/3 of revenues comes from dedicated centers, 1/3 from Discovery, and 1/3 from Development and Manufacturing.
  17. The management FDA approval for Syngene’s Mangalore plant to be done by H1FY24.
  18. The company also has a biologics facility that is a mammalian manufacturing facility and it is looking to get regulatory approvals for it too. The microbial facility has just come online and will take more time to get the necessary approvals.

Analyst’s View:

Syngene is a fast-rising player in the CRMO space and has established itself well with its associations with industry leaders in the pharma space like Bristol-Myers Squibb, Amgen and others. The Company had a decent Q2 with a revenue increase of 17% YoY. Besides continuing progress across all our business divisions, growth for this quarter was strongly boosted by the manufacturing of COVID-19 treatment, Remdesivir despite pressure from raw material price increases which have seen margins come to 31%. The company expects the Mangalore API facility to get USFDA approval in the next 2 years. The management remains confident of the company’s revenue growth guidance of 13-15%. It remains to be seen whether the company will be able to maintain its growth momentum, how long will the elevated raw materials prices prevail and what challenges it will face when expanding into the API industry. Nonetheless, given its scientific capabilities, its associations with industry leaders for drug discovery, and its expanding reach in the global pharma space, Syngene is a pivotal midcap pharma stock to keep in mind for all investors.

 


 

Q1FY22 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY22 Q1FY21 YoY % Q4FY21 QoQ %
Sales 606 436 38.99% 677 -10.49%
PBT 94 66.0 42.42% 192* -51.04%
PAT 77 58.0 32.76% 161 -52.17%
Consolidated Financials (In Crs)
Q1FY22 Q1FY21 YoY % Q4FY21 QoQ %
Sales 607 437 38.90% 677 -10.34%
PBT 95 66 43.94% 192* -50.52%
PAT 77 58 32.76% 161 -52.17%

*Contains an exceptional item of gain of Rs 35 Cr

Detailed Results:

  1. Consolidated revenues were up 39% YoY in Q1. Profit has risen 33% YoY in Q1FY22.
  2. EBITDA margin for the quarter was lower at 29% in Q1FY22 as compared to 32% last year.
  3. The EBITDA margin excluding other income and export incentives was lower by 170bps from 29.5% to 27.8% during the quarter. This was primarily driven by higher material costs mostly due to the high level of manufacturing activities.
  4. The company has completed the second phase of expansion in Hyderabad and currently 300 scientists working out of this facility.
  5. The company has signed a five-year agreement with IAVI, to develop and manufacture three recombinant, monoclonal antibodies (mAbs) for HIV. The mAbs will be used for phase I and II human clinical studies.
  6. The revenue performance in the first quarter was also boosted by the manufacturing of remdesivir to fulfill high demand for the drug from Indian healthcare providers.

Investor Conference Call Highlights

  1. The revenue from operations grew 41% YoY to Rs 594 Cr. It was boosted by two factors which were the low base last year and the high demand for Remdesivir.
  2. The management expects the Mangalore API facility to get USFDA approval in the next 2 years.
  3. The drop in EBITDA margin during the quarter was primarily driven by the high raw material cost of remdesivir.
  4. Staffing costs have increased 21.9% YoY due to the addition of almost 500 employees in the past 12 months.
  5. The company did a capex of Rs 77 Cr in Q1 and it approved projects to build around 200,000 square feet of additional capacity catering to Dedicated Center and Discovery Services.
  6. According to the management, the cost of raw materials as a percentage of revenue grew from 24 percent in FY21 to 34.2 percent in Q1 FY22, due to owing to Remdesivir as well as the purchasing of raw material in advance,
  7. The company’s depreciation is Rs.74.7Cr, up from Rs.66.1Cr in the same period last year. The YoY is mostly due to new investments made in the last year.
  8. As part of the expansion agreement, the company also began the process of establishing a new 50,000 square foot dedicated facility for BMS, which is expected to be operational by the fourth quarter.
  9. The company is starting the third phase of expansion in Hyderabad, which will expand capacity by 200 scientists, and it will be completed in the second half of this fiscal year. It will have a capacity of filling 2000 vials per hour
  10. Syngene already has a clinical and commercial supply capability for oral dosage formulations, with a yearly production capacity of up to 30 million tablets.
  11. The expansion of the company BMS is going well, and they intend to expand the number of scientists actively involved in cutting-edge discovery science by 25% of the total 40 percent increase projected under this contract.
  12. In the biologics business, the company has commissioned a microbial platform with a 500-liter capacity and is now in the process of adding a 2,000-liter bioreactor to their mammalian biologics facility.
  13. The Indian Drug Regulatory Authority has approved the Mangalore API facility.
  14. The management maintains its previous revenue growth guidance of around 15% growth in FY22.
  15. The management is expecting production in the Mangalore facility to go up to 20% by the time it gets USFDA approval.
  16. The contract with 3DC is mainly discovery focused while the IAVI contract is mainly focused on development and trials.
  17. The CAPEX in the biologics industry has been close to $50 million as of now and according to the management, Capex is expected to rise by another 15-20% this year.
  18. The biologics business is mainly about manufacturing and a very small part is in discovery.
  19. Albireo, a client of Syngene, has received FDA and EMA approval for Odevixibat. Syngene supplies the API for this drug.
  20. The management states that Syngene is involved in cell and gene therapy discovery for several years for biotech clients.
  21. The management mentions that Syngene has the capability to work on projects involving new technologies like CRISPR Cas9 and protein degradation.

Analyst’s View:

Syngene is a fast-rising player in the CRMO space and has established itself well with its associations with industry leaders in the pharma space like Bristol-Myers Squibb, Amgen and others. The Company made a strong start to the financial year with a revenue increase of 38% YoY. Besides continuing progress across all our business divisions, growth for this quarter was strongly boosted by the manufacturing of COVID-19 treatment, Remdesivir despite the seasonal pressure seen in the CRAMS industry. The company also get approval from the Indian Drug Regulatory Authority for the Mangalore API facility which is expected to get USFDA approval in the next 2 years. It remains to be seen whether the company will be able to maintain its growth momentum and what challenges it will face when expanding into the API industry. Nonetheless, given its scientific capabilities, its associations with industry leaders for drug discovery, and its expanding reach in the global pharma space, Syngene is a pivotal midcap pharma stock to keep in mind for all investors.


 

Q4FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 677 628 7.80% 601 12.65% 2244 2094 7.16%
PBT 192* 153 25.49% 116 65.52% 467* 516** -9.50%
PAT 161 120 34.17% 102 57.84% 404 412 -1.94%

 

Consolidated Financials (In Crs)
Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 677 628 7.80% 602 12.46% 2249 2094 7.40%
PBT 192* 153 25% 117 64.10% 469* 517** -9.28%
PAT 161 120 34% 102 57.84% 405 412 -1.70%

*Contains an exceptional item of gain of Rs 35 Cr

**Contains an exceptional item of gain of Rs 71.3 Cr

Detailed Results

  1. Consolidated revenues were up with 7.8% YoY in Q4. Profit has risen 34% YoY in Q4 and 15% YoY when not accounting for exceptional gains. 
  2. FY21 saw revenue growth of 7.4% YoY while profits fell 1.7% YoY. 
  3. EBITDA margin at 33% in the quarter and 31% in FY21. 
  4. Syngene extended strategic collaboration with Bristol Myers Squibb until 2030.  
  5. It also completed qualification for Mangalore API facility for GMP certification. 
  6. Syngene received ISO/IEC 27001:2013 accreditation for the majority of its units. 
  7. Syngene also commissioned HPAPI lab to support scale up for manufacturing. 

Investor Conference Call Highlights

  1. The contract extension with BMS should provide for a 40% increase in the number of dedicated scientists as well as adding some additional lab space.  
  2. Syngene has 10 clients now on IDD projects.   
  3. In the last quarter, 10 of Syngene’s scientists were cited in globally renowned publications.  
  4. Syngene’s investments in digitization and automation have helped improve the speed of delivery and reduce the turnaround time.   
  5. Digitization initiatives now completed include a complete upgrade of the quality management system, a sophisticated document management system as well as the more widespread use of laboratory information management systems.  
  6. Syngene is manufacturing remdesivir under a voluntary license agreement with Gilead. This is not expected to yield any significant profits.  
  7. The company has added 40 new clients in FY21 taking the total to >400.  
  8. The BMS dedicated center now has more than 600 scientists.  
  9. The raw material cost for the quarter has marginally increased from 25% of revenues to 26% due to a shift of business mix towards manufacturing of biologics.  
  10. The headcount has risen 11% YoY to 5400 employees.  
  11. The company saw a forex gain of Rs 5 Cr in Q4 vs a forex loss of Rs 1 Cr last year.  
  12. The exceptional gains in Q4 were due to returns from insurance.  
  13. The company has added capacity to its Mamilion capabilities with 1 additional 2,000-liter reactor.  
  14. Syngene is also looking to start investing in viral vector development and manufacturing capability that will cater to clinical and commercial supplies of viral vectors to be used for cell and gene therapy. The manufacturing facilities will have a scale of operations up to 200-liter bioreactors, which can be further scaled up based on business needs. This initiative is supported by Biotechnology Industry Research Assistance Council under the National Biopharma Mission.  
  15. BIRAC has also provided Syngene a grant to part-fund this project. The first phase of this plant will require around INR 200 crores of investment, and the plant will be ready for operations in 2 years.  
  16. The CapEx plan is expected to be between INR 750 crores and INR 900 crores for the financial year 2022, including unspent CapEx rollover from the previous year.  
  17. EBITDA margins have historically been in the range of 30-33% and are expected to stay in the same range according to the management.  
  18. The management states that the biggest learning from the pandemic was to reduce dependence on physical sales channels and to enhance digital initiatives.  
  19. The management has warned that there might be some margin compression in the near future owing to the hiring of new scientific and sales people in USA, EU and client locations.  
  20. The company is awaiting approval for Odevixibat which is to be used to treat PFIC for children. This is the only treatment for the disease right now. This program is a good example of Syngene’s core integrated end-to-end offering according to the management.  
  21. The management has guided for revenue growth close to 15% in FY22.  
  22. Sales growth in $ terms excluding other income has been 12% YoY.  
  23. The management states that the inherent advantage of India as a research destination is the widespread availability of Masters and PhDs as compared to western economies.  
  24. Around 10% of revenues come from the non-pharma segment.  
  25. The management maintains that in looking for capex projects, Syngene always looks to maintain asset turnover of 1 or more for a period of 5 or more years while revenue generation period should be at least 15-20 years.  
  26. The management remains confident of the IDD potential for Syngene and states that the company’s ability to construct an integrated value chain right from IDD to manufacturing will be what drives its growth in the medium term. 

Analyst’s View

Syngene is a fast-rising player in the CRMO space and has established itself well with its associations with industry leaders in the pharma space like Bristol-Myers Squibb, Amgen and others. It has seen a good Q4 with the contract extension with Bristol Myers Squibb until 2030. The company has also been enhancing its digital side to reduce turnaround time and improve efficiencies. The management remains confident that the IDD research capability and the end-to-end value chain construction ability will be what drives growth for Syngene for the next 5 years. It remains to be seen how long will it take for the company’s foray into CMO to bear fruit and whether there are any surprises in store for Syngene from the 2nd wave of COVID-19. Nonetheless, given its scientific capabilities, its associations with industry leaders for drug discovery, and its expanding reach in the global pharma space, Syngene is a pivotal midcap pharma stock to keep in mind for all investors. 

 


 

Q3FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 601 539 11.50% 531 13.18% 1568 1466 6.96%
PBT 116 106 9.43% 94 23.40% 275 363* -24.24%
PAT 102 92 10.87% 84 21.43% 243 292 -16.78%

 

Consolidated Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 602 539 11.69% 533 12.95% 1572 1466 7.23%
PBT 117 107 9% 94 24.47% 277 364* -23.90%
PAT 102 92 11% 84 21.43% 244 292 -16.44%

*Contains an exceptional item of gain of Rs 71.3 Cr

Detailed Results

  1. Consolidated revenues were up with 12% YoY growth. Profit has risen 11% YoY in Q3.
  2. EBITDA grew 11% YoY in Q3 with EBITDA margin at 32% in the quarter.
  3. Syngene collaborated with Deerfield Discovery and Development (3DC) to advance integrated drug discovery projects, from early target validation through to preclinical evaluation. 3DC has awarded four new Integrated Drug Discovery (IDD) projects.
  4. Syngene has also expanded its research facility in Genome Valley, Hyderabad, India and added capacity for additional 90 scientists.
  5. Syngene has also set up a new RT-PCR testing facility that is approved by NABL and ICMR and has test >1 Lac samples.
  6. In the Discovery Services division, the Company has received NABL (National Accreditation Board for Testing and Calibration Laboratories) accreditation to provide safety assessment services for testing medical devices from its facility in Bangalore.

Investor Conference Call Highlights

  1. The 4 IDD projects from 3DC are in Oncology and Autoimmune segments.
  2. Syngene has currently close to 175 scientists operating out of the Hyderabad facility.
  3. The company saw EBITDA margin appreciation of 150 bps on improvement in direct cost with raw materials and power cost which has gone down from 28.5% last year to 27% currently.
  4. Staff costs increased by 16% to INR 176 Cr. Other expenses have risen 13% YoY due to new ways of doing business during the COVID-19 times and an increase in cost associated with maintaining necessary health and safety protocol.
  5. Depreciation rose 22% YoY to Rs 70 Cr owing to the investments in the Hyderabad facility, expansion at the main Bangalore campus and the commencement of the Mangalore commercial API plant at the end of the last financial year.
  6. Syngene recorded an exchange gain of INR 8 crores in the quarter. The effective tax rate was at 12.3% vs 13.9% last year. Forex gain in the 9M period was at Rs 12 Cr vs Rs 15 Cr last year.
  7. Capex in 9M was at $53 million. Of this, $8 million pertains to the commercial API manufacturing facility, another USD 16 million was invested in Discovery Services, USD 15 million was invested in dedicated centers, USD 7 million in the biologics manufacturing facility and a balance of USD 7 million in Development Services and other assets.
  8. The company maintains its guidance of spending USD 550 million by end of March 2021. Some part of this may spill over into Q1FY22.
  9. The company continued to work at near 100% operational levels in Q2 and Q3.
  10. Mangalore OpEx is diluting Syngene’s margin by close to 2%. The company has spent $75 million here and will be depreciating this number over 18 years.
  11. The management maintains that the company’s successful track record and its scientific capability are what led 3DC to choose it as its collaborator.
  12. Headcount numbers and people costs will continue to grow in absolute terms as people are a direct revenue generator in terms of how that business model works for Syngene.
  13. There is a general slowness around the whole of the industry globally on starting new clinical trials as all hospitals around the world are running close to full capacity due to COVID.
  14. The management has stated that most of the work Syngene does with BMS is under a research discovery relationship. It is working on the science today that will probably become new product approvals in about 8 years.
  15. The management has stated that it has expanded on the Mangalore facility to be able to win more integrated projects and expand upon the CMO opportunities in the future. The startup period for this venture is expected to be till the next 5 years.
  16. Although the company faces tough competition in the biologics space from global giants like Lonza and Samsung, the management is confident of the company’s value proposition and the space for agile, modestly scaled, and competent Biologics manufacturers in the industry.
  17. Constant currency growth in Q3 is above 10% YoY.
  18. The gestation period for the Mangalore expansion will be around 3-5 years before it starts showing a strong return on capital employed in that investment.

Analyst’s View

Syngene is a fast-rising player in the CRMO space and has established itself well with its associations with industry leaders in the pharma space like Bristol-Myers Squibb, Amgen and others. It has seen a good Q3 with revenues rising 12% YoY and EBITDA margins improving to 32%. The company has seen a good response to its CRO capability and this has resulted in its association with 3DC for its Integrated Drug Discovery platform. The management remains cautiously optimistic on its foray into contract manufacturing with the setup of the Mangalore facility. It remains to be seen how long will it take for the company’s foray into CMO to bear fruit and whether the company can continue its robust growth momentum on its current CRO capabilities. Nonetheless, given its scientific capabilities, its associations with industry leaders for drug discovery, and its expanding reach in the global pharma space, Syngene is a pivotal midcap pharma stock to keep in mind for all investors.

 


 

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