Syngene International Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Karan Vora - Goldman Sachs - Analyst : Yeah. Thank you for taking my question. So my first question is with -- needed one clarity with respect a statement, which we have made in the press release saying the second quarter was underpinned by positive signs of recovery in discovery services business. So does that imply a growth on a YoY basis as well or is it only referring to a sequential recovery? So that is first my first question.

Question: Karan Vora - Goldman Sachs - Analyst : Okay. And on a full-year basis, is it fair to assume that our discovery services business growth will be faster than CDMO services or growth? So that's my questions.

Question: Karan Vora - Goldman Sachs - Analyst : Yeah, thanks. So just one clarification here. For Q2, have we seen discoveries -- so when we say we have seen positive signs of recovery for Q2, does it mean a recovery on a YoY basis as well or is it just sequential?

Question: Karan Vora - Goldman Sachs - Analyst : Yeah, I got it. Thank you.

Question: Shaleen kumar - UBS - Analyst : Let me try my luck. So two parts of the question. Is it fair to assume that momentum will build on from third quarter to fourth quarter, and it may continue in FY26, right? So like your comment on that. And second, do we need to build up, in terms of the capacity, CapEx, et cetera. This is more from a medium-term perspective, given we are excited about the long-term opportunity, which can move upon with the Biosecure Act, et cetera, right? So do you think that Syngene should start thinking about some CapEx plans because the opportunity can be so big that it could be overwhelming, and you may not be ready to capture that opportunity.

Question: Shaleen kumar - UBS - Analyst : Yes. In the near term, I understand that. If I can expand it a bit then, are there any areas that you're able to identify that you would like to build upon. Again, this is more of a long term seeing that how the opportunities will come.

Question: Shaleen kumar - UBS - Analyst : Let's say medium to long term. And when I say medium to long term, it's beyond what you have answered to me right now, right? So let's say --

Question: Shaleen kumar - UBS - Analyst : Yeah, let me clarify. So what I mean is, let's say, this and next year -- beyond this and next year, what are your answer?

Question: Shaleen kumar - UBS - Analyst : That's the reason I corrected myself.

Question: Shaleen kumar - UBS - Analyst : Okay. I didn't get a chance to complete the question. So let's leave aside the time line. So what I meant -- what I want to intend -- what I intended to ask you is are there any gaps in terms of the capability, which you probably need to build upon given this opportunity coming in and it could be organic/inorganic as well, right?

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : Yeah. Thank you for taking my question. Sir, my question is on a little bit more deeper in terms of the nature of the incremental inquiry that you're getting. I want to understand a little bit more on this primarily because if I look at last five year trajectory for us, we have done so much in terms of not only even bringing capacity but also capabilities, right, if you look at from peptides, oligonucleotides et cetera. So I would like to understand, today, when you are getting inbound requests from clients, whether it is Biosecure Act, which is moving the change or even a Europe Plus One story, whether that capabilities are something that is getting tested today? And how do you see traction moving, say, in the next two to three years?

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : Yeah, I would like to understand, I mean, the kind of -- if I'm looking at, say, the last five years or in the next five years, the investments that we have done towards the R&D capabilities and the nature of projects, which our client is giving us. So are we moving towards a much higher complexity chain in terms of the synthesis and the delivery with our clients. So in a way, what I'm trying to understand is are we becoming closer to the innovator in terms of partnering with them more and more?

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : Sure. And just taking things forward from your previous commentary. You have also built huge capacity in Mangalore and the biologics capacity that we have. Now that we are seeing a lot of products coming in, can you -- your capacity, coming on the capacities. I mean now that we are seeing a lot of one molecule REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30AM, SYNN.NS - Q2 2025 Syngene International Ltd Earnings Call

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : Yes. On the capacity side, I mean, now that you see a lot of business coming in and several molecules moving up the value chain. One, how do we see the utilization, say, in the next two to three years. And derivative of that, should we see a new high in the margin, say, in the next couple of years? One is complexity, the second driven by operating leverage.

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : I'm actually taking a little bit longer. If you can say about, say, FY '26, FY '27.

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : Sure. But I would assume that directionally we should be possibly surprised.

Question: Sudarshan Padmanabhan - JM Financial Services Ltd - Analyst : Sure. Thanks a lot.

Question: Tarang Agrawal - Old Bridge Asset Management - Analyst : Hi, good afternoon. A couple of questions. One, Jonathan, in your opening comments, you said that the inquiry pickup that's coming your way at the current point of time, it's for pilot processes. And you're not the only partner that your customer is working with. There are multiple pilots that the customer is running. And hopefully, you should be able to convert this. So the underlying question is, what is it that the partner really looks into? And how does the partner compare? Or I mean, what are the drivers for the partner to finally swear the decision in your favor of in favor of one of your peers? So that's one. The second is on your -- on your large molecules business. As you see utilization is ramping up for this business, say, two years out or three years out, do you believe that this facility will be utilized only by multiple contracts of small value? Or do you think more likely case of a single or a couple of customers really taking away the entire capacity. Just to try to get a sense on how this biocontract manufacturing business will emerge two to three years from now? Thank you.

Question: Tarang Agrawal - Old Bridge Asset Management - Analyst : Sure, Jonathan. Just to follow up. I mean, to my first question, all things equal, but say, at a slightly elevated price point, do you believe that customers in pursuit of wanting to have a more sustainable supply chain, are willing to go ahead with that proposition? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30AM, SYNN.NS - Q2 2025 Syngene International Ltd Earnings Call

Question: Tarang Agrawal - Old Bridge Asset Management - Analyst : No. sustainable in the sense a derisked supply chain, if you may call it. I mean, are the customers willing to pay a little more to ensure that it's a more robust derisked supply chain?

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : Okay. Sir, with respect to the Stelis facility, just would like to understand post-acquisition, like where are we in terms of, say, in terms of the product development phase, are we into the stage where we exhibit batches for the customers or we are still some away?

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : Got you. So effectively, the exhibit batch level, the commercial benefit would be like a quarter or two away. Is that the assumption?

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : But by the time -- I mean the facility would have been already showcased to the potential customers, right? So any RFPs on that facility while we sort of reengineer and make the facility ready for the customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30AM, SYNN.NS - Q2 2025 Syngene International Ltd Earnings Call

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : Got it. This helps. And lastly, on the second half FY25 guidance, while the guidance as far as revenue growth is sort of maintained, just would like to understand what will drive this. Whether it is discovery development or commercial? And it's not in terms of quantifying it, but if you could at least help in the pecking order?

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : So which effectively means that the the profitability growth will be much better compared to the revenue growth, right?

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : Sure. And lastly, just one more, if I may. This related to Stelis facility, is that already capture in the P&L? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30AM, SYNN.NS - Q2 2025 Syngene International Ltd Earnings Call

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : Operational cost related to Stelis facility, is that already captured in the P&L?

Question: Tushar Manudhane - Motilal Oswal Financial Services Ltd. - Analyst : Okay, so basically the employees and all are already onboarded and so that that cost is already paid.

Question: Deval Shah - RBSA Investment Managers - Analyst : So Jonathan, I have two questions. So one is surrounding -- so both are strategic. So I was reading a report, and it said that your international larger peers or competition, I would say. They -- when they were in the growth phase, they gained immensely by establishing the labs and the smaller operations, proximity to their innovation hubs in US and Europe and they retain the larger delivery operations in China and their domestic place. So just wanted to know your thoughts in -- with regards to this, with respect to Syngene how we would like to develop 10 years from now. Or I would say, so whether having a lab in US or Europe would have us in getting more business. So your thoughts on that?

Question: Deval Shah - RBSA Investment Managers - Analyst : And yeah, the second question is with respect to the -- your domestic -- so it is now the open thing that, yes, there is a China Plus One BIOSECURE Act, and many innovative companies are looking in India to have a partner. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 8:30AM, SYNN.NS - Q2 2025 Syngene International Ltd Earnings Call So what is the evolving landscape in India? How your competition -- so have we, as a Syngene are standing vis-a-vis the competition within India? And what is our right to win in gaining the incremental business or the RFPs we are getting. So that's the two questions.