Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Positive quarter of new capital flowing into the US biotech sector, indicating an improving demand environment.
- Increased client visits and audits from large biopharma clients seeking alternatives to China.
- Requests for proposals (RFPs) were up almost 50% year over year in terms of value.
- Multiple pilot projects in discovery services with potential to scale to larger contracts.
- Strong balance sheet with net cash of $108 million as of June 2024.
Negative Points
- Revenue from operations was down 2% over the corresponding quarter last year.
- Operating EBITDA was down 20% to INR170 crores.
- Reported profit after tax was down 19% to INR76 crores.
- Employee expenses increased by 10% year on year.
- Operating EBITDA margins decreased to 22% in the first quarter versus 26% in the same period last year.
Q & A Highlights
Q: My first question is on the margins. Is the decline in gross margin this quarter linked to the Mangalore facility utilization? What is the current utilization rate for the Mangalore facility?
A: No, the decline in gross margin is not related to the Mangalore facility. We do not provide facility-level utilization rates. The margin decline is due to a shift in revenue mix, particularly in biologics, which inherently carries higher material costs.
Q: Regarding the facility acquired from Stelis, what is the gestation period for it to impact Syngene's financials post-commercialization?
A: The facility will undergo operational changes and validation by the end of the financial year. The sales cycle for new plant capacity will follow, but predicting exact timelines for financial impact is challenging.
Q: Have you faced any challenges with export trends due to container availability?
A: No, we have not faced any challenges related to container availability. Our business primarily exports work products digitally, and physical goods are usually airfreighted.
Q: Can you provide context around the dedicated centers and their growth, especially in light of Bristol's recent announcements?
A: Bristol-Myers Squibb (BMS) continues to globalize and seek innovation. Our partnership remains strong, and we help them drive cost efficiencies. The dedicated center business is performing well, and we have already expanded capacity and headcount as planned.
Q: Is the growth in bio manufacturing driven solely by Librela, or are there other contributing factors?
A: While Librela is a significant contributor, we also have other clients and products in both clinical and commercial scales. Operational efficiencies have allowed us to create additional capacity, contributing to growth.
Q: What has been the client response to the new protein production platform?
A: It's too early to provide detailed feedback, but the platform offers competitive advantages by reducing time to market for biotech clients. We will update on its progress in future quarters.
Q: How have partnerships like those with ERS Genomics helped in attracting more biotech companies or winning more share with Big Pharma?
A: These partnerships enhance our capabilities and offerings, making us more attractive to both biotech companies and Big Pharma. However, the core of our business remains human and animal health.
Q: Can you clarify the EBITDA margin guidance and its relation to research aspects going down?
A: The full-year EBITDA margin is expected to be similar to the previous year, with improvements expected quarter by quarter. There is no change in our guidance from what was provided at the beginning of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
