- Revenue for the quarter was ₹644 Cr (8% growth YoY), EBITDA margin for the quarter was 28.5%
- The revenue growth for the quarter was muted compared to the same quarter last year as there was significant sales of Remdesivir last year. Excluding the Remdesivir business, revenues grew by 30% YoY and PAT grew by 31% YoY.
- They have revised full year revenue guidance from mid-teens growth to high-teens growth owing to healthy demand outlook and rupee depreciation.
- Major highlight for the quarter was the signing of the 10 year agreement with Zoetis for the manufacture of the drug substance for Librela – a monoclonal antibody for the treatment of osteoarthritis in dogs.
- The drug has been doing well in Europe and will be launched in the US soon. This will trigger a US FDA and EMA inspection of Syngene’s Biologics facility. The deal is expected to be worth $500 million to Syngene over the next 10 years.
- Till date, Syngene has invested around $550 million in biologics. They expect to have 1X asset turnover as the facilities ramp up. They will also be investing another $30 million into biologics in the current financial year.
- During the quarter, they added a kilo lab for polymer and speciality materials. The facility will reduce the development timelines for clients looking for customizable and flexible systems to expedite formulation and process development services
- As part of their Phase 3 expansion in Hyderabad, they have commissioned a PROTACs (targeted protein degradation) lab and added 150 scientists and analysts.
- They expect 30% EBITDA margin for the full year. Margin expansion is expected in FY24 due to operating leverage as manufacturing facilities ramp up.
- Their policy is to fully hedge their dollar receivables. Therefore, they will not get any benefit from the recent rupee depreciation. It will affect the top line which has resulted in them increasing guidance from mid-teens to high-teens. But a loss will be recognized for hedging which will result in no benefit at the EBITDA level. This will also cause EBITDA margins to decrease.
- The Mangalore API facility is expected to receive regulatory approval in 12 months. Once that milestone is achieved, it will see a significant ramp up in utilization which will improve profitability.
- Their relationship with Zoetis goes back over a decade. They did early stage development for the drug substance for Librela as well. This is their first large scale commercial project. They have had other commercial projects in the past but they were much smaller in scale.
- They are seeing a trend where innovators are trying to make up for time lost during the pandemic. So they are trying to accelerate projects that had halted in the past 2 years. This is resulting in a good demand environment for Syngene.
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