My notes from various annual reports for 2020 – Syngene International Limited – Factsbeyondnumbers

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Notes from AR 2020

Key business updates:

  • Integrated research, development and manufacturing organization providing scientific services from early discovery to commercial supply for pharma, biotech, nutrition, animal health, consumer goods and specialty chemical companies
  • Company provides discovery services, development services, manufacturing services and dedicated R&D centers for clients
  • Laboratories in Bangalore and Hyderabad and manufacturing in Bangalore and Mangalore
  • More than 360 active clients
  • 8 collaborations with top 10 pharma companies
  • Rs 2094 crore revenue and Rs 366 crore PAT
  • More than 4200 scientists with 400+ patents held with clients with 5000+ employee base
  • Rs 3154 crore capex investment done
  • 9 million square feet of R&D and manufacturing infrastructure
  • Trend of external partnerships to drive innovation and R&D using single service provider. Helps to transform fixed cost of R&D operations into variable cost and helps small scale startups to avoid huge capex

Business Segment:

Discovery Services:

  • Conducts early stage research, from target identification to delivery of drug candidate for further development
  • 32% of revenue
  • Engagement model is based on FTE
  • Have built capabilities in CAR-T therapy
  • Have also developed and validated a human papilloma virus assay, a test system increasingly being used for cervical cancer screening

Development Services:

  • Pre-clinical to clinical trials including drug substance development, drug product development and associated services to demonstrate safety, tolerability and efficacy of selected drug candidate
  • Fee for service-based engagement model

Manufacturing Services:

  • Manufacturing services for small and large molecules including Cgmp compliant facilities, for clinical supplies and registration batches as well as commercial volumes through a new state of the art API manufacturing plant and a disposable biologics manufacturing facility
  • Customized engagement model to deliver clinical and commercial supplies


Dedicated R&D:

  • Dedicated multi-disciplinary scientific teams, support personnel and ring-fenced infrastructure as per client specification to support client’s R&D requirement
  • Long term partnership, usually 5 years or more based on FTE model
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Financial Performance:

  • 10% revenue growth at Rs 2094 crore and 14% EBITDA growth and 10% PAT growth
  • 5% PAT margin and 33% EBITDA margin
  • One-time pass-through billing adjusted revenue growth YoY was 13%
  • Employee cost has increased due to strengthening of leadership and mid-level management teams
  • Client base increased from 331 to 360, 25% of these customers are 5+ years old
  • 76% revenue from USA, 12% from Europe, 5% from Japan,4% from India and 3% from rest of the world
  • 32% revenue from discovery services, 31% revenue from dedicated R&D and rest of revenue from development services and manufacturing services
  • 40% of capex was in API, 26% in discovery services and 23% in R&D services. All capex was self-funded
  • Total debt is down from Rs 797 crore to Rs 686 crore despite of major capex plan execution, long term debt is cleared
  • PPE up from Rs 1322 crore to Rs 1877 crore
  • Rs 1100 crore approximate cash on books
  • Almost Rs 100 crore of repair and maintenance cost

 Annual Review of Management:

  • Made 4 key appointments to leadership team
  • Mangalore API facility is ready and undergoing qualification testing
  • Several FFS based collaborations converted into FTE based models
  • Installed 47 SQDECC dashboards
  • Set up time for experiments reduced from 30 minutes to 10 minutes
  • 10% improvement in lab productivity
  • 2nd phase of QMS and DMS were launched
  • LMIS is another project taken
  • FDA21 CFR Part 11 compliance received
  • University tie-up for PhD program for employees


Market Trends:

  • Global contract research outsourcing (CRO) market is expected to grow at 7.6% from 2019-25 and reach $61 Billion by 2025.
  • 54% of above is shared by pharma and bio-pharma companies and rest by medical devices, consumer products, cosmetics, chemical etc
  • Out of $61 Billion, 12% id drug discovery, 12% is pre-clinical and 76% is clinical expected to grow at 7.4%, 8.3% and 6.7% CAGR respectively
  • By segment, oncology is highest contributor to CRO and expected to grow at 7.5% CAGR
  • A full service CMO makes manufacturing seamless and reduces client dependence on multiple contract providers
  • CMO contract in 2018 was $21.4 billion representing YoY growth of 6.4%
  • In 2018, only 2 of top 10 selling drugs were small molecules and biologics drove 80% of sales. Looking ahead, as biologics lose their patent protection, biosimilars are taking their place. The complexity of biologics, both in development and manufacturing stages, and the specialized skills and equipment required to do that, has led CROs and CMOs become an integral part of the biologics industry. Global bio-pharma CRO and CMO market size is expected to reach $37.8 billion by 2025 at 7.7% CAGR
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  • Company has opportunity to garner greater share of global contract research business
  • This year will not be normal and will exercise prudence in spending and investment even though no fund-based challenges
  • Expected to see some impact of covid and Q1 will show partial impact of shutdown

 Other Points:

  • MD and Chairman role has been separated for better corporate governance
  • Not to declare any dividend considering current year situation
  • Enjoys 100% exemption in income tax for 1st 5 years of operations, 50% for next 5 years and further 50% for next 5 years subjected to fulfillment of criteria
  • Board looks very professional with mix of industry and academic experience
  • Employee median remuneration is Rs 7 L+ with 14% increase in median salary
  • 40% jump in CEO remuneration though salary within ceiling range
  • 71% shares held by promoter and 21% held by FII and MFs. FII reduced by 3% and MFs increased by 3% in absolute change terms. Retail holding YoY down by 10% in growth terms on holding %
  • Mirae increased its holding from 0.75% to 2.41%. MIT,Cams, Kotak, Vantage etc. are other institutional investors
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Risks and Open Questions:

  • 96% of revenues are in foreign currency. Hedge 100% of exposure for next 12 months and 50-70% of position over further 12 months. Long term fixed price contracts are 100% hedged
  • 20% increase in receivables and 20% jump in employee cost
  • Rs 71 crore of exceptional item in cashflow
  • Rs 12 crore of current investment is in one of Nippon India fund
  • Rs 72 crore of unquoted ICDs with financial institutions, which institution is this?
  • Short term loans are in the form of ECBs




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Saurabh Kumar
Saurabh is a finance and analytics enthusiast with professional experience in both fields. He is an avid investor in the Indian stock market and academically interested in the application of analytics in the value investment field.
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