Chemicals, Trending in the Economy

Syngene International Ltd – Bridging the Gap Between Science and Solutions

Syngene International beneficiary of the shift from Chemical drugs to biological drugs.

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(A) About

Syngene - logo

Syngene is one of India’s leading CRAMS organisations. The company offers research services in medicinal chemistry and biology in early stages of drug discovery, through process development and contract manufacturing of biotherapeutics for human trials. It also offers integrated discovery and development services across multiple technology platforms, including small and large molecules, antibody-drug conjugates and oligonucleotides.

What Syngene essentially does is mimics the entire value chain of its client; mirror the core capability replicate it in India and also offer them back as a service with a cost advantage. Meanwhile, this cost advantage ranges between 40-50% which is quite significant.

About Group:

Biocon Limited is an Indian biopharmaceutical company based in Bangalore. Founded by Kiran Mazumdar-Shaw in 1978. The company manufactures generic active pharmaceutical ingredients (APIs) that are sold in approximately 120 countries, including the United States and Europe.

Biocon Limited is also the India's largest and fully-integrated, innovation-led biopharmaceutical company. Further, the Company is engaged in the manufacture of biotechnology products and research services. Moreover, It also manufactures novel biologics as well as biosimilar insulins and antibodies, which are sold in India as branded formulations.

(B) Journey of Syngene International

Syngene - Journey

(C) Shareholding Pattern

Syngene - Shareholding Pattern
Syngene - Shareholding

(D) Board Members

(E) Business Divisions

Syngene - Business verticals

(i) Discovery Services

Company is Engaged in early stage research, from target identification to delivery of drug candidates for further development. Here company also provide dedicated centers.

(ii) Dedicated R&D Centers

Company has dedicated R&D facilities for strategic clients providing exclusive access to research teams, infrastructure, and project management to support the clients R&D requirements.

(iii) Development Services

Engaged in activities from preclinical to clinical trials, including drug substance and drug product development, and associated services to demonstrate the safety, tolerability and efficacy of the selected drug.

(iv) Manufacturing R&D Centers

Engaged in the manufacturing of small and large molecules for commercial supplies through cGMP compliant facilities, a state-of-art API manufacturing campus and also a biologics manufacturing facility.

(F) Collaboration Models

Syngene International offers a range of collaboration models that assist flexibility and customization to meet individual requirements. However, clients can select a single model or a combination to suit their R&D and Manufacturing requirements.

Syngene - Collaboration

(G) Revenue Segmentation

Syngene - Geographical wise revenue

(H) Cost Structure

Syngene - Cost Structure

(I) Financials of Syngene International

Syngene - Financial Trend

Company has grown its revenue at 17.54% in past 5 years, while PAT grew at a CAGR of 8.73%. Company’s operating and Profit margins decrease mainly due to wide fluctuation in raw material prices.

Moreover, company debt/equity decrease from 0.5 to 0.2.

Syngene - Du pont Analysis

Asset to Equity decrease from 1.9 to 1.6 while and Sales to total assets remain constant. PAT margins decrease due to change in business mix.

(J) Management Discussion & Concall

Growth Triggers

- Shift from chemical drugs to biological drugs. Out of top 10 selling drugs in the world 8 are biologics.

- However, pharmaceutical sectors growing dependence on CROs can be inferred from the fact that the latter was involved in 50% of the drug development work in 2018, up from 18% in 2006. Moreover, there is ample scope for growing the CRO services market as 70-75% of R&D spending by the global pharmaceutical industry can potentially be outsources.

- The emerging and virtual biotechnology companies often lack the internal infrastructure to run their research further entering into strategic collaborations with specialized CROs.

- Moreover, with extensive scientific expertise and regulatory knowledge, CROs help client companies efficiently navigate the complexities of the drug development process.

Competitive Advantages

- Trust, as company won't trade their IP and trusted relationship just to save some dollars.

- Higher switching costs, it lock in the customers and incentivize them to stay with Syngene throughout their life cycle. Once the customer is locked in, Syngene gains pricing power.

Further, company manages to roll forward 90-95% of the existing business into next. Every year, around 2/3rd of the new business comes from existing clients and the rest from new clients.

Q4FY23 Business Highlights

- Discovery services and dedicated centers delivered good performance.

- The growth in the discovery services was led by continuous uplift in demand of chemistry and a part of it came from the research facility in Hyderabad which expanded further in Q4 FY23 &currently accommodates ~900 scientists.

- Further, development services segment witnessed strong growth driven by orders from existing clients.

- The development & manufacturing services grew by 42% YoY, on account of repeat orders from the existing clients of small molecule development.

- Meanwhile, during the year, the campus in Hyderabad added 400 scientists. The company also commissioned a dedicated PROTACs facility for clients involved in cancer and other treatments.

Future Outlook

- Management foresee contract research, development and manufacturing market to witness steady growth in the coming period.

- Company witnessing healthy demand of services on the back of global pharma and biopharma companies, that are also continuously diversifying their supply chain in FY24.

- Moreover, company has guided for revenue growth for high teens constant currency sales growth and ~30% EBITDA margins for FY24.

- Further, PAT growth is anticipated to be in mid-teens for the coming period.

(K) SWOT Analysis

Syngene - SWOT Analysis

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry Publications.

Disclaimer: The report only represents the personal opinions and views of the author. No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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