Kiran Mazumdar’s contract research and manufacturing firm Syngene International has been on a roller coaster ride on Dalal Street in the ongoing calendar year. Meanwhile, shares of the firm declined nearly 12 per cent on a year-to-date (YTD) basis till September 28. On the other hand, the benchmark BSE Sensex retreated around 3 per cent during the same period.
However, management and market watchers are sounding positive despite the recent stake sale of 5.43 per cent by promoter Biocon Limited on September 6, 2022. The biopharmaceutical firm held a 69.99 per cent stake in Syngene as of June 30.
Management view
Jonathan Hunt, MD and CEO, Syngene International sees positive momentum from clients. “We are optimistic about the year ahead. At present, we are well established in the contract research market with a strong emerging presence in development and manufacturing services,” he said.
In an interaction with Business Today, Hunt further added that Syngene International works for 18 of the top 25 biopharma companies in the world and most of them are multi-year relationships.
Some of the major clients of Syngene include AMGEN, Bristol Myers Squibb, Johnson & Johnson, Merck and Sanofi. In the animal health space, the company works with players like Bayer, Zoetis and Merck.
“We are benefitting from the investments that we have made in building capacity and capabilities. The growing demand for biologics manufacturing has encouraged us to continue building capacity year on year,” Hunt said, adding that the company set up and commissioned a new microbial cGMP facility and expanded the capacity of the mammalian cell manufacturing facility in 2021.
While sharing his views on long-term contracts and capital expenditure, Hunt said that the company has signed a 10-year agreement with Zoetis for commercial manufacturing of their drug substance, Librela®️, which is used for treating osteoarthritis in dogs. The company has also earmarked a $100 million CAPEX. Out of that, $50 million will go towards the research side of the business and $30 million will be towards the biologics business building capacity for deals such as Zoetis. The rest, which is about $20 million will be spread across different areas of the business such as IT and building infrastructure.
“In the years to come, you can expect to see a gradual rebalancing between our research businesses,” he said.
Financials
For the year ended March 31, 2022, Syngene International reported a 2.25 per cent drop in consolidated net profit at Rs 395.80 crore. The figure stood at Rs 404.90 crore a year ago. On the other hand, the top line of the company increased by 19.22 per cent YoY to Rs 2,604.20 crore during the same period.
Analyst view
Commenting on Syngene International, market watcher Rajesh Pherwani, Founder and Portfolio Manager, Valcreate Investment Managers said, “The company is a stable business with marquee clients and has established a good track record over the years. With a huge opportunity in outsourcing and China cost increases, the outlook for Indian companies offering contract research as well as manufacturing services is big.”
He also said that only companies which have good execution skills and a non-compete approach will stand to gain. “Syngene has capitalised on this growing business over the years. As long as it manages to maintain the current approach, it could continue to grow in size. Capex is driven by new business such as the one from Zoetis which the company has detailed in its recent presentation. The growth in this business is likely to be consistent with additional one-off opportunities driven by sudden demand from innovators such as that during Covid,” Pherwani said.
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