Kiran Mazumdar's contract research and manufacturing firm Syngene International has been on a roller coaster ride on Dalal Street in the current calendar year. The firm's shares fell by nearly 12 per cent on a year-to-date YTD basis until September 28. The benchmark BSE Sensex dropped around 3 per cent during the same period.
Management and market watchers are positive despite the recent stake sale of 5.43 per cent by promoter Biocon Limited on September 6, 2022. As of June 30, the biopharmaceutical firm held a 69.99 per cent stake in Syngene.
Jonathan Hunt, MD and CEO, Syngene International sees positive momentum from clients. We are optimistic about the year ahead. He said that we are well established in the contract research market with a strong presence in development and manufacturing services.
According to an interview with Business Today, Hunt said that Syngene International works for 18 of the top 25 biopharma companies in the world and most of them are multi-year relationships.
Syngene's major clients include AMGEN, Bristol Myers Squibb, Johnson Johnson, Merck and Sanofi. The company works with players like Merck, Zoetis and Bayer in the animal health space.
We are benefitting from the investments 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 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, Librela, which is used for treating osteoarthritis in dogs. A $100 million CAPEX was earmarked by the company. The research side of the business will be funded by $50 million and $30 million for the biologics business to build capacity for deals such as Zoetis. The rest, which is about $20 million, is spread across different areas of the business, such as IT and building infrastructure.
He said that there is going to be a gradual rebalancing between our research businesses in the years to come.
Syngene International reported a 2.25 per cent drop in net profit at Rs 395.80 crore for the year ended March 31, 2022. A year ago, the figure was Rs 404.90 crore. The top line of the company increased by 19.22 per cent YoY to Rs 2,604. During the same period, there were 20 crore.
According to Market Watcher Rajesh Pherwani, Founder and Portfolio Manager, Valcreate Investment Managers said the company is a stable business with marquee clients and has a good track record over the years. The outlook for Indian companies that offer contract research as well as manufacturing services is big as a result of the huge opportunity in outsourcing and China cost increases. He said only companies with good execution skills and a non-compete approach will stand to gain. Syngene has capitalised on this growing business over the years. It could grow in size as long as it keeps it up with the current approach. Capex is driven by new business such as the one from Zoetis, which is a business that the company has detailed in its presentation. Pherwani said that the growth in this business is likely to be a result of additional one-off opportunities that are likely to be driven by sudden demand from innovators, such as during Covid.