Fortune Scrip     

Published: August 15, 2024
Updated: August 15, 2024

Syngene International

Force Behind Pharma Innovators

This fortnight we have picked Syngene International, a Bengaluru-headquartered integrated research, development and manufacturing services organisation, serving the global pharmaceutical, biotechnology, nutrition, animal health, consumer goods, speciality chemical and Biocon sectors. The company manages a pool of over 5,000 scientists, including 500 Ph.Ds and 2,750 scientists with a Master’s degree.

The company owns state-of-the-art research facilities spread over 9,00,000 sq ft, certified by major regulatory bodies. It serves mainly global innovator pharma/chemical companies, offering integrated scientific services from early discovery to commercial supply. The company is known for establishing long-lasting relationships with its customers and this has emerged as its key strength. Some of the strategic collaborations are with Bristol Myers Squibb, Baxter, Endo Pharmaceuticals and Abbott Nutrition.

Syngene serves leading players in pharma, biotechnology and other related fields which outsource some or a substantial part of their business in the product development lifecycle, and operates via ‘full time equipment’ (FTE) and ‘fee for services’ (FFS) models.

IN THE PINK

The company is steadily growing in its financial performance. During the last seven years, its sales turnover has expanded from Rs 1,423 crore in fiscal 2018 to Rs 3,489 crore in fiscal 2024, with operating profit advancing from Rs 474 crore to Rs 1,047 crore and the profit at net level inching up from Rs 305 crore to Rs 510 crore. Its financial position is very strong, with reserves at the end of March 2024 standing at Rs 3,856 crore – over nine times its equity capital of Rs 402 crore. During this 7-year period, the company’s EPS has steadily moved up from Rs 7.64 to Rs 12.69. This clearly suggests efficient cost management and enhanced operational efficiency.

But we have not picked Syngene as the Fortune Scrip for its past laurels. We are of the strong opinion that future prospects for the company are all the more promising. Consider:

• Besides its CRO and CCRDMO divisions, the company plans to launch its biologics facility unit no. 3 in Bengaluru by December 2024. According to Jonathan Hunt, Managing Director, this advanced facility will triple Syngene’s bio-manufacturing services for drug substances and products to biotech and pharma clients. Little wonder, the growth guidance by Syngene during fiscal 2025 stands at high single-digit to low double-digit terms, as compared to around 6 per cent in fiscal 2024. According to Mr Hunt, the pace of growth will pick up from second half of fiscal 2025.
• The company has recently acquired a manufacturing site from Stelis Biopharma – a division of Strides Pharma. The site is conveniently located between Syngene’s two existing Bengaluru sites. This site will be converted into a state-of-the-art biologics manufacturing facility.

LARGE CAPEX

• Visualising growth prospects, going ahead, the company which had spent around Rs 2,700 crore during the five-year period from 2017 to 2022, earmarked $ 100 million for fiscal 2023 and $ 55 million for 2024, and will be investing $ 50 million in fiscal 2025. Almost half of this amount will be invested in research services and the balance in automation and digitisation of manufacturing facilities to aid growth.

GROWING DEMAND

• The Indian pharmaceutical industry, as a whole, has seen a significant rise in enquiries, site visits, etc., from global pharmaceutical companies that are looking at reducing their dependence on China. According to Mr Hunt, green shoots are visible at Syngene International and, over time, the benefits will be reaped in terms of growth by the industry and Syngene from the 'China rotation' that has started to take place.
• The company's client base is on the rise. It has grown from 256 to over 500 over fiscal years 16-24, and multiple-year extensions of the Amgen, BMS and Baxer contracts makes it well poised to capitalise on growing opportunities globally, enhancing Syngene's integrated drug discovery (IDD) platform's ability to expand and attract business from existing and new clients.
• Another trigger for growth is expansion of the biopharma manufacturing business by commissioning the eGMP microbial facility and expanding the mammalian cell manufacturing facil
• Experts feel that business diversification will drive value growth. The company has shifted from CRO to CMO (contract research to contract manufacturing) of novel molecules. Six of its partners' molecules are in advanced stages of clinical testing. Sullivan estimates that R&D spend in the global pharma space was $ 139 billion in 2014 whereas the CRO pie was $ 44 billion (32 per cent).

KEY TIE-UPS

The company's future prospects are all the more exciting as it has recently undertaken several initiatives to expand its business through expanding existing relationships, developing new partnerships and making investments in manufacturing capacity. Key among them has been the extension of Syngene's research collaboration with leading biotech company Amgen Inc until 2026. Its scope includes Syngene providing integrated drug chemistry and biology, peptide chemistry, antibody and protein reagents, pharmacokinetics, and drug metabolism and pharmaceutical development, in addition to operating the existing Syngene-Amgen R&D centre. Under the new contract, Syngene will also build and operate a dedicated laboratory which will enable R&D project deceleration.

Another notable contract the company signed recently was with leading animal health company Zoetis. The contract signed in July 2022 is for a period of 10 years and is for manufacturing the drug substance for Librela (bedinwetmab), a first-in-class monoclonal antibody used for treating osteoarthritis in dogs. Initially centred on Librela, this agreement paves the way for developing and manufacturing other molecules in the coming years. Thanks to this contract, Syngene will be able to move from a CRO to a CRAMS (Contract Research and Manufacturing Services) company. It has got an advantage of scale as it has already an established relationship with clients from research to, now, manufacturing, and this transition may prove to be the next trigger of growth. The partnership aims to provide innovative research and development services to Zoetis, focusing on the animal health market. Working with Zoetis enables Syngene to gain access to Zoetis's domain expertise in animal health research.

NEW FACILITY

• In addition to these contract wins, the company has been expanding its manufacturing capacity at its Biocon Park campus in Bengaluru. The company set up and commissioned a new microbial cGMP facility and expanded its mammalian cell manufacturing facility to offer end-toend chemistry, manufacturing and control (CMC) development solutions. With this, Syngene can now manufacture an array of biologics across mammalian and microbial platforms. These include antibodies, bispecific antibodies, fab fragments, fusion proteins, therapeutic proteins, pDNA, mRNA and live biotherapeutic products. Recently, the facility received regulatory approval for commercial biologics operations from the European Union's EMA and the UK's MHRA. The FDA certificate is awaited. Realising bright prospects for the company going ahead, knowledgeable investors have rushed to buy the scrip, and the share price as a result has moved up to cross Rs 800. But we strongly feel that a lot of steam has been left in the scrip as yet and discerning investors can certainly include this scrip in their portfolio. We see the scrip crossing the Rs 1,000 mark in the coming days.