Syngene International Limited (SYNGENE) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Sinjin International's Q2FY27 Earnings Conference Call. As a reminder, all 5-9s will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this meeting is being recorded. I now hand the conference over to Ms. Sothi P. Nidu and Sherry from Sinjin. Thank you, and over to you, ma'am.

Good morning, everyone. Thank you for joining us on this call to discuss Sinjin's second quarter reserve for FY2027. To discuss the financial and business performance for the period, we have on this call today Ms. Kiran Mazumdar-Shop, Sinjin's Executive Chairperson, Mr. Siddharth Mittal, Managing Director and Chief Executive Officer, and Mr. Deepak Chayam, Chief Financial Officer. After the opening remarks, they will be happy to answer any questions you may have. Before we begin, I would like to caution that comments made during the conference call today will contain certain forward-looking statements and must be viewed in relation to the risk pertaining to the business. The safe harbor clause indicated in the investor presentation also applies to this conference call. The recording and transcript of this call will be made available on the company website. With this, I will now turn the call over to our Executive Chairperson, Mr. Kiran Mazumdarshan.

Thank you, Saudadee. Good morning, everyone, and thank you for joining us. At the end of the quarter, last quarter, I described FY27 as a year of transition and transformation for SINJI, A year in which we could reset our growth priorities, sharpen our competitive positioning, and build a stronger foundation for sustainable, profitable growth. I outlined three strategic priorities, re-energizing our commercial engine, establishing CDMO as our principal growth driver, and transforming discovery services into a more differentiated, technology-enabled, and higher-value business. Our second quarter performance provides encouraging early evidence that this strategy is beginning to gain traction. The global pharmaceutical industry, as many of you know, is undergoing a significant transformation. Increasing scientific complexity, the emergence of new therapeutic modalities, growing cost pressures, Customers and the need for resilient global supply chains are reshaping how pharmaceutical and biotech companies approach research, development, and manufacturing. Customers are increasingly seeking strategic partners who can combine scientific excellence, technological sophistication, and manufacturing capabilities within an integrated operating model. This shift plays directly to Syngine's strength. Added to this is, of course, the geopolitics of our time, which is also favoring companies like Syngine in a China plus one model. CDMO is central to this ambition. We see CDMO as CENGINE's most significant long-term growth opportunity, particularly as the industry moves towards increasingly complex biologics, advanced modality, and diversified manufacturing networks. Our investments in biologics manufacturing in India and the United States, together with our expanding capabilities in peptides, oligonucleotides, and other specialized modalities, we believe position us well to participate in these emerging opportunities. An important milestone in this quarter was the signing of our first manufacturing agreement for the Bayview Biologics Facility in the United States. This is more than a commercial win. It is an important validation of our India-US integrated biologics manufacturing strategy, which combines India's scientific and operational strengths with a U.S. manufacturing presence to offer customers greater flexibility and supply chain resilience. While the full commercial potential of these investments will take time to materialize, we are encouraged by improving customer engagement and expanded opportunity pipeline. Our second strategic priority is to reposition discovery services for the next phase of innovation. The future of drug discovery will be shaped by the convergence of biology, chemistry, artificial intelligence, automation, and data-driven science. We believe that Syngine has the scientific depth, multidisciplinary expertise, and experimental infrastructure to participate meaningfully in this transformation. Our investments in peptides, antibody-drug conjugates, translational sciences, and other advanced capabilities are strengthening our ability to support increasingly complex discovery programs. At the same time, we are embedding AI, automation, and digital technologies into our scientific workflows to improve productivity, shorten development cycles, and enhance the quality and speed of decision-making. Our ambition is to evolve discovery services from a predominantly execution-led research model towards a more integrated, intelligence-driven, scientific solutions platform. This transformation will take time, but it is essential to building a more differentiated and competitive business operating model for the future. So, we are pursuing a more agile, efficient, and accountable operating model with a clear emphasis on cost competitiveness, capacity utilization, and, of course, returns on invested capital. The sequential improvement in revenue and profitability this quarter is encouraging and suggests that our collective actions are beginning to yield results. However, we do recognize that these are green shoes. We have more work to do to restore consistent growth, improve operating leverage, and fully realize the potential of our investments. Our immediate priority is to convert an improving commercial pipeline into sustainable revenue growth while maintaining strict execution and cost discipline. I'm confident that Siddharth and his leadership team have the right strategic focus and operational commitment to deliver this transformation. Sinjin, I believe, has built its reputation on scientific excellence, quality, and customer trust. Our task now is to leverage these strengths to build a more technology-driven, globally competitive, and profitable organization. We are not simply seeking to restore growth. We are repositioning Sinjin for the next generation of scientific innovation and global biopharmaceutical manufacturing. And with that, let me hand over to Siddharth for a detailed review of the quarter. Over to you, Siddharth.

Thank you, Kiran, and very good morning to everyone. As Kiran outlined, FI27 is a year of transition for Syngin with a clear emphasis on restoring growth momentum, strengthening execution, and improving operating efficiency. At the beginning of the year, we identified three immediate priorities, which are accelerating commercial execution, improving operational performance, and building a leaner, more agile, and cost-competitive organization. Now, during the second quarter, we made tangible progress on all of these three fronts. Our revenue grew sequentially by 13%. Operating EBITDA margins improved by 6 percentage points, and we returned to profitability. While we remain below last year's performance, these results demonstrate that our corrective actions are beginning to translate into improved business outcomes. Let me highlight the key developments during the quarter. Our CPMO business continues to be a central focus of our commercial strategy, and we are encouraged by the improving quality and momentum of our opportunity pipeline. A significant milestone this quarter was the signing of our first manufacturing agreement for the Bayview Biologics facility in the United States with a large pharmaceutical customer. Under this agreement, process development activities are expected to commence in India during the current financial year, with drug substance manufacturing at Bayview scheduled to begin in F528. This contract represents an important first step in commercializing our U.S. Biologics manufacturing platform and demonstrates the strategic value of our integrated India-U.S. delivery model. We secured additional manufacturing business during the quarter, including a clinical supply agreement for our biologics manufacturing facility in Bangalore, Unit 3. This represents the latest in a series of contracts with an existing partner and reflects continued customer confidence in our scientific capabilities, manufacturing quality, and execution. We also successfully completed a technically complex oligonucleotide manufacturing program for a leading global pharmaceutical company. The program involved the development and manufacturing of challenging siRNA molecule, demonstrating our capabilities in process development, optimization, and scale-up for advanced therapeutic modalities. These developments reinforce our strategy of building a diversified CDMO platform capable of supporting increasingly complex molecules across clinical and commercial stages. Moving on to discovery services, our focus is on creating a more integrated, differentiated, and productivity-driven offering. Effective October 1, 2026, Dr. Jayshree Ahia, our Chief Scientific Officer, assumed additional responsibility for discovery services, bringing chemistry, biology, and biotherapeutics under unified scientific leadership. Now, this is an important organizational step. By integrating these disciplines, we aim to strengthen scientific collaborations, improve program execution, and offer customers a more seamless discovery experience. As drug discovery becomes increasingly multidisciplinary, our ability to integrate scientific capabilities across modalities will be an important competitive differentiator. Our discovery service's customer base remains stable during the quarter, providing a foundation as we strengthen our commercial engagement and work towards restoring growth. We are also accelerating the deployment of AI, automation, and digital technologies across research operations. During the quarter, we implemented ChemVoyager, an AI-enabled synthesis planning platform, alongside automated analytical systems and end-to-end sample tracking solutions. These initiatives are designed to create more connected, data-driven scientific workflows, reduce manual interventions, and improve research productivity. Over time, we expect these technologies to enhance our ability to deliver faster, more efficient, and higher-value research solutions to customers. We also commissioned a new clinical translational science laboratory in Bangalore, expanding our capabilities in biomarkers, precision medicine, biobanking, and bioanalysis. This investment strengthens our translational research capabilities and enhances our ability to connect early discovery with clinical development. And this also aligns with our objective to make discovery services more scientifically differentiated, technologically enabled, and commercially competitive. Before turning to our financial performance, I would also like to share an important leadership update. Today, Deepak Jain, our CFO, has decided to leave Senjin for personal reasons and will pose an opportunity outside the company. Deepak will continue in his current role at least until the close of third quarter's financial results to support a smooth transition of his responsibility and to ensure continuity. We thank Deepak for his contributions and wish him success in his future endeavors. Now, turning to financial performance, revenue from operations for the second quarter was at 833 crores, representing a 13% sequential increase, supported by improved traction in the CDMO business. On a year-on-year basis, revenue was 9% lower than quarter two of the previous fiscal year, primarily reflecting the absence of Zoetis revenue in the current quarter. Discovery services contributed 65% of quarterly revenue, while CDM accounted for the balance 35%. Operating EBITDA stood at 147 crores, with margins improving by 6 percentage points sequentially to 18%. This improvement was driven by higher revenues, improved operating leverage, and the initial benefits of our cost optimization initiatives. On a year-on-year basis, operating EBITDA margin was lower by 22% reported in Q2 of last year, reflecting, of course, lower revenues from Librella, and a foreign exchange hedge loss of 61 crore that we accounted during the quarter. Adjusted for this hedge loss, the operating EBITDA margin would be in the mid-20 range for the quarter. Profit after tax, but before exceptional item was at 38 crores, we recognized an exceptional charge of Rs. 6 crores net of tax relating to employee's termination benefits, resulting in a reported profit after tax of 32 crores. This compares with a reported loss of Rs. 9 crores in the previous quarter, marking an encouraging return to profitability. Now, alongside commercial recovery, we are implementing structural improvements to enhance our cost competitiveness and operating efficiency. Our manpower cost optimization measures have been completed, while initiatives targeting other operating expenses remain underway. We expect the benefit of these actions to become progressively more visible over the coming quarters. We are also increasing the use of AI automation and digital technologies across our operations to improve productivity, simplify workflows, and strengthen execution. Our emphasis is not simply on reducing cost, but on building a more efficient operating model that can deliver stronger margins and improve returns as revenue growth resumes. Thank you. Balance sheet remains strong with a net cash position of Rs. 1,392 crore at the end of the quarter, providing financial flexibility to support our transformation and growth priorities. The second quarter represents an encouraging step forward in Syngine's recovery. We have seen stronger commercial engagement, secured important manufacturing contracts, improved operating performance, and made tangible progress on our efficiency initiatives. However, we do recognize that one quarter of sequential improvement does not constitute a sustained recovery, so our focus for the second half remains clear, which is converting our commercial pipeline into business wins, delivering consistently on quality and timelines, improving capacity utilization, and embedding greater cost discipline across the organization. We will continue to prioritize growth, operational excellence, and disciplined capital deployment as we work towards building a more resilient and competitive business. The actions taken over the past two quarters are beginning to show results. Our task now is to sustain this momentum and translate into consistent performance. Thank you very much, Su.

Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions may click on the raise hand option. Kindly introduce yourself, providing your name and your organization name before proceeding with your questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question is from Dr. Kunal Dhammesha.

Kindly unmute yourself and proceed.

Hi, this is Kunal from Macquarie. Congratulations on a good set of numbers, and thank you for taking my question. First one, for the Kirin, ma'am, we have seen a fair bit of turnover in the senior management in this quarter as well. Would you say that the internal reorganization is now complete, Or we would continue to take these steps to make the organization more efficient?

Well, thank you, Kunal, for your question. I think most of the reorganization is now in a good place. I would say we will onboard some other capabilities which we believe are important to drive us to the future. But I think most of the reorganizations that we had anticipated and planned are complete.

Sure. And if I remember it correctly, last quarter we had some bit of attrition in our discovery segment client base, right? And so is it fair to assume that, you know, and we had suggested that we kind of discontinued the low-value services. Is it fair to assume that this reorganization effort is also, you know, in those directions, you know, where the business requirements are and where the business, you know, some of the business segments which we don't want to pursue?

Absolutely right. I think we are very, very focused on making sure that we have a differentiated services model. I think we are commoditizing services which are very, very low margin or low margin kind of services is something we want to kind of lean away from. And so I think we are really focusing on a very differentiated model. As you know, we are already very differentiated in the biologics model when it comes to CDMO business, And this is why we are beginning to see a good traction in signing up our capacities because no one else has such capacities, especially USFTA approved capacity.

And if I may add, Kunal, so we are not discontinuing any of the existing business on Discovery. So what we are doing is repositioning. And as we mentioned, that we are going to be using a lot of AI automation, digital technologies, and especially on the new modalities. And try and integrate our offerings across discovery services. So discovery will continue to be a very core part of our overall journey. But we will redo the way we have, I mean, traditionally, it's been more a hefty business. And what we are looking at is embedding AI to make it more fee-for-value-add business.

So, you know, that's an important distinction, right? Moving away from one business model to another or there is a mix-shape. What are some of the key, you know, monitorables that you would be tracking? So while I believe because there is a lumpiness in CMO business, the financial performance could be, you know, a little bit lumpy or volatile. But what are some of the metrics which you would think that would show continuous improvement on a quarter-on-quarter basis, given all these efforts that you are, you know, taking and reorganizing?

The new client additions, the number of new projects we onboard, the number of molecules that we progress from our discovery to development, these will be important. And finally, it should all translate into revenue growth. I mean, we have seen discovery business degrow over the previous year as well as previous quarter because of some client additions that we had at the beginning of the first half. I think which we had alluded to in our first quarter earnings call. And of course, we will look at building back the base, but in a differentiated way. As I mentioned, in an integrated way, because today, Discovery Biology and Discovery Chemistry were running as two separate OUs. And today, I mean, we are going to integrate that into a single offering. And that's what our customers are looking at. When you really look at what our customers' needs are, we have to be agile enough to address those needs. As we mentioned, it's not going to be an overnight turnaround. We have started to see encouraging client, pipeline, client discussions, but to translate into revenue growth, we will need some more time.

So, when you move from, let's say, FTE to FFS basis, structurally, how does that impact productivity and profitability in the discovery business?

I think it should be very positive because we believe that it will add value. And I think it will basically allow us to capture much better programs from clients.

And we would have seen this, right, historically?

No, we are seeing it already because of the differentiated services that we also have. And I think embedding a bit of technology into it and then greater technology into it will clearly give us a leading advantage.

Sure. My last question on this Bayview facility contract that we have gotten. So with this contract, what's the kind of utilization that we are looking at for this facility? And when do you think that the peak utilization in terms of duct substance manufacturing could happen? And also, the Unit 3 contract with the existing partner, is it the same partner with whom we had the CMO arrangement earlier?

So, Kunal, let me first give you my views on this. First and foremost, we are focused, as you know, on capacity utilization of all our facilities. But Bayview is a facility that needs to be basically brought up to scale because we have basically identified certain gaps which we need to fix before we get full utilization. What is encouraging is that we have signed up this first contract, which obviously then has to be based upon. I think this is, as we mentioned very clearly in Gota's statement, this is just not about, you know, indicating that, you know, we've actually arrived and we've done everything that is required. It's just an indication that this is a win that actually signals the importance of having a U.S. presence and the confidence of customers to sign up. I would go so far as to say that the capacity demand for biologic manufacturing is huge. And I think right now, the ones who are capturing that opportunity are the Koreans. We would like to be the Indian company of choice, the Indian CRDMO of choice to really basically, you know, take advantage of this demand. So, give us a little bit of time. I think the fact that we have started focusing on identifying what is it that we need to do to really sort of make sure that we have optimal capacity and, you know, a very strong business growth driver from CRDMO is what we are really addressing.

Sure, ma'am. And on Unit 3, contract with existing partners?

So, we've got multiple customers signed up for Unit 3, and some are doing clinical batches, some are doing development batches, some are doing filing batches, and of course, it will again take time to ramp up, which is based on when they get the approval from the regulators, but at least Unit 3, you know, has got a good set of clients signed up.

Sure, thank you, and all the best. Thank you.

Thank you.

We'll take the next question from Harith Ahmet. Please unmute yourself and proceed.

Hi. Good morning. Thank you for the opportunity. This is Harith from Arundas. So, my first question is on your FI27 margin guidance. I think you had maintained it at mid-20s last quarter. But when I look at the implied margins for the second half, that's a sharp improvement from what we've done in the first half. So first question is whether we're maintaining the same mid-20s EBITDA margin guidance. And the related question, if I may add, there's also a fairly significant forex loss that we've seen in the last couple of quarters. So, if rupee stays at current level, are we expecting similar forex loss in third quarter and fourth quarter?

Harit, no change in the EBITDA guidance. I think, as you rightly said, we have done better. We are excluding the forex loss at mid-20 EBITDAs. We continue to work on cost optimization benefits. We are going to see some more benefits coming in in the second half, but at this stage, we will like to maintain our EBITDA guidance. As far as the forex loss is concerned, we do have contracts, forward contracts, on one of our large dedicated customer contracts, which goes on until FY28. So we will see similar level of hedge losses in the second half as well.

Okay. My second question is on the baby facility. Sudharth, if you could confirm the contract that we have announced, and then you also mentioned that we'll commence drug substance supplies from next year. Will this be commercial-scale supplies, and is this a product that's already in the market?

So it will be for commercial supplies as well. As I mentioned earlier, the development of the product will be done in Indian process development lab, and it will be tech-transferred to Bayview in F528, and once the regulators approve it, we will be the commercial manufacturing partner. And it would, of course, I mean, the product currently is not commercially approved. So that's why we'll have to wait for the regulators to approve the product and commence the commercial supplies in a couple of years.

And just to follow up on Bayview, the pre-op expenses that we're currently capitalizing, I think you've disclosed a 66 crore number for the first half. So by when should we expect this to start reflecting in the P&M?

Once we, I mean, as per our accounting policy, we capitalize on the expenses until we receive the first regulatory approvals, which we expect somewhere, maybe second half of calendar 28. Best case.

Got it. Thanks for taking my questions. I'll get back to the queue.

Thank you.

A request to all the participants to kindly limit their questions to only two per participant. Should you have a follow-up question, please rejoin the queue. We'll take the next question from Shyam Sreenivasan. Please unmute yourself and proceed.

Hi, good morning. This is Shyam from Goldman Sachs. Just the first question on the mix, if I calculated, when you mentioned 65% discovery and 35% CDMO rates, if I do that, and I think you alluded to this as well, And the discovery business, the ERO business, has declined now for two quarters. And it looks like at least the CDMO business, when you mentioned in the opening remarks, the absence of Librela, but that's not declined. It's like 4-3% only down Y-O-Y. Right? So it's more a function of discovery being weaker is the reason for the Y-O-Y change. Am I getting that right? Right?

Well, it's a combination of both, Shyam, because we did have a significant number in quarter two last year for supplies to Zoetis. Now, this quarter has been zero, so that did have an impact, which was made up by the growth in the rest of the CDMO business. But yes, the discovery business did de-grow.

Got it. And you would largely attribute that to the plant actuation that started at the start. What type of customers are these? And is it like we have de-emphasized some of these commoditized parts of the segment, and that's the reason why there is a decline? And you foresee this to be in the second half as a service, is it, Siddharth?

So as I think we have mentioned even in the previous quarter and today's call as well, Some of these services are becoming more commoditized, and there is a pressure from competition from large CROs in China as well as some of the emerging CROs in India. And we are not playing a prize game or the prize per FTE game. And I think that's where we are trying to move to a more integrated AI technology-led business and shift from FTE to FFS, which, of course, will take some time to transition out and move into the newer model.

But I would also like to add to what Siddharth is saying, Shyam, But some of the business attrition is actually attributed to large cuts that the companies themselves are announcing in terms of downsizing their R&D spends. So we are seeing some of that effect.

And I think that if you look at traditionally large biotech pharma companies in the West, they have done a lot of discovery work in-house, either in their own labs or through CROs. And now if you look at one third of total number of drugs under trial at different stages of trial are from China in licensed models. So, of course, that's changing the need for discovery services, which is, of course, going to impact all this CRO.

Okay, that's helpful. Second question is on the financial side. Gross margins actually improved, right, despite the decline in discovery, you know, CDMO also declined. So I'm just trying to understand, is it the removal of the commoditized part that is leading to the margin improvement on the gross margin side? That is one. And two, when you now maintain your EBITDA margin guidance, is it excluding all the FX losses? Because if you add the FX losses, we may not end up at mid-20, right? Is that fair?

The gross margin is calculated, I think, as revenue less the material cost. And the material cost, of course, is only applicable in manufacturing business.

CDMO business, okay.

The CDMO business, the research has more people cost and lease and other things, which are more fixed in nature. So that's why I shouldn't, I don't think you should really compare gross margin movement, because it's a shift of revenues from discovery to development. efforts on cost optimization. We have already done enough in the last two quarters. We have started seeing benefits coming in. We are also looking at where the growth comes from. And of course, discovery and development business comes at different margins. But at this stage, I wouldn't necessarily say that there is a significant change in our EBITDA guidance.

Thank you.

Thank you for that. Very important.

All right. Thank you. All the best. Thank you.

Thank you. The next question is from Surya Patra.

Please unmute yourself and proceed. Mr. Patra, you are not audible.

Is it audible now, ma'am?

Yes. Please proceed.

So, thanks for the opportunity, sir. My first question is on the kind of the IGNC caused improvement what we have seen in this quarter. So, it seems that okay, we have reached to a kind of a level which used to be normalized kind of a spend prior to possibly the difficult period of the last one and half year or so.

So, how sustainable is the

kind of a cost, SDNA cost run rate going ahead and are we really kind of seeing the benefit of the cost optimization initiative what we have taken? And hence, it is likely to sustain even going ahead, and that will support the margin profile going ahead, anything on that side.

Thank you, Rendeva, Surya, that to sustain the expenses at these levels, and as we mentioned, some of the cost initiatives that we have undertaken, we will see, in fact, additional benefits coming in in the second half.

Yes, sir. Second question was on the discovery services front. So, sir, if you can share something on the kind of capacity utilization there or what is the kind of a headroom that is there we are having on the discovery research side because that is been the kind of a growth driver in all the difficult times. So, hence, just trying to understand why the investments have gone towards the CDMO front, but how sustainable growth momentum that we can have on the discovery front and what investment, if that is planned for that, if we can talk about it.

See, we have our labs already, and the client attrition we have seen, we have enough capacity to add more customers. We have bench strength to cater to the growth, but we'll be investing, as I said earlier, on two fronts. One is infrastructure upgrades to align with what our customers are looking at, and also AI automation and digitalization. I mean, some of the investments on automation, digitization are going to be high, and we are evaluating what are the best possible solutions and what scale should we add up, and we will be making those investments in the coming quarters.

Okay. Just an extension point, sir, to that point, this new clinical translation science lab, what you have mentioned. So, how should one read this development as a kind of or what significance that we can see from this development into our the revenue streams and what investment that you would have made here?

See, basically, this investment strengthens translational research capabilities and enhances our ability to connect early discovery with clinical development. I think today, I mean, Syngine is one of the few to development, to clinical, to commercial organization across modalities on both small molecule and large molecule side. And I think, as I mentioned, that during clinical development, there's a lot of translational data that is required, and this lab will, of course, be important. It will, of course, be scientifically differentiated. It is technologically enabled, and a very good lab, and a lot of customers are interested in going to one CRO or CRDMO instead of fragmenting various services to different partners, and I think that's what Syngine will be able to offer to customers. And in terms of investment, I mean, I don't have the number readily available, but it's not a very, very large investment.

Thank you.

We'll take the next question from Sajal Kapoor. Please unmute yourself and proceed.

Yeah, hi. This is Sajal Kapoor from Antifragile Thinking. Thank you for taking my questions. Kiran Mayim and Siddharth on the organic pipeline, what needs to be different for programs that enter through discovery or early development to then stay with Syngine beyond a successful phase?

So there are different customers, Sajal, that, I mean, there are customers who are looking at CROs or CRDMOs only for a certain need of theirs or where there's a gap, and these are typically the large biotech companies. And now we are also seeing some of the large biotech companies, at least, who are willing to move from discovery to development stage. And some companies where they start the development work with us and then want us to do the commercial manufacturing might not be into it. But there is a large segment of customers, especially the small and mid-biotech customers, who don't want to go to different partners, service providers, and they want to have one integrated partner, because that is the only way they'll get faster speed, skin in the game, better ownership and outcomes, because they also understand CRDM was fully vested in their success. And these are the customers we'll be chasing, where the molecule or the program enters at the discovery stage, and we advance them through the different phases of developmental commercial manufacturing. And we are seeing some of these customers already where we've signed up, and we are making a good progress with them. But we, of course, a commercial team will have to showcase this, the capabilities, end-to-end capabilities along with our scientific team. And we are very confident that over a period of time, we'll be able to add many more such programs in our portfolio.

See, I'd also like to add one very important point, Sajal, and that is that anybody looking at CRDMO services wants scale. They do not want small players offering a lower price and having only small facilities. Everyone wants large capacity, large facilities, because we realize that the CRDMO business is about having multiple clients and multiple production sites and slots, which they can actually then track into. So, I think that is where I think Syngine is highly differentiated from others when it comes to biological capacity. And now, of course, we are looking at strengthening even our small molecule capacity. But I just want you to understand that this is where we are very differentiated as a CRDMO out of India, because as you know, the demand is for biologic capabilities. And the fact that we have biologics capabilities right from discovery to manufacturing, I think, positions us in a very strong, differentiated category. So, even when it comes to biologic capabilities, I think we have a lot of proprietary platforms that are now being positioned to customers because of now a strong effort on creating a very robust commercial engine, which was actually, I would say, had many gaps in the past. And with all that, I think you will start seeing some good traction in the coming quarters and coming years.

No, absolutely, Kiran. I'm not sure if any other Indian bio CDMO company can today claim 50K ready capacity, and that's what makes India so different.

And most Indian companies in playing in this field will only have microbial fermentation, but not biologics fermentation.

Yeah, not mammalian. Absolutely. Absolutely.

And the Biosecure Act really adds a lot of advantage.

Yeah.

We are seeing a lot of growing demand, I can tell you that. And we offer dual manufacturing strategy, which many CMOs cannot do. Like even Samsung does not have a facility in the U.S. Today, there are a lot of customers because of geopolitical reasons, tariffs, MSNs, want to manufacture in the U.S. for U.S. and manufacture outside U.S. for the rest of the world. And we offer that dual flexibility, dual-side flexibility with a single tech transfer effort. That's a very competitive price. I think I should also mention that our pricing is very, very competitive compared to either CMOs in the West or CMOs in the Far East.

And, you know, there's another one more added advantage where companies want to come to India, do the work in India, and then take transfer to the U.S. in our Bayview facility. So that's also another model that's emerging.

No, absolutely, Kiran. And Siddharth, I look forward to some exciting times going ahead. And my second question is on the capacity itself. You know, on the Biocon Park biologic facility that supported the Zoetis program, what kind of programs are we targeting to fill that capacity? Because that should be ready to take fresh work now. And, you know, how should we think about the timing of those commercial shipments replacing the Earth while Librella manufacturing?

Sajal, this second half of this year, that facility is going to be occupied because we are going to be manufacturing batches for Zoetis and deliver to them in the fourth quarter. So we are talking to customers, and we are showcasing them, all the three biologics facilities. Of course, this facility is USFD approved, so it has an advantage, but here we cannot manufacture for any other customer until next fiscal year. So, depending on customers' needs and timelines, they will choose which facility they want to go for, and we will provide more information on how the facility utilization ramps up across the three sites in a due course.

So, Siddharth, just to clarify, it seems that we have still got some tail left for the Librella contract to first complete, and then the capacity becomes available for a new customer, correct?

That's right. So, we had said that there is an obligation to supply to Zoetis during this fiscal as well, and that will be back-end loaded in fourth quarter.

Okay. Excellent. Okay. I've got more questions, but in the interest of the time, I'll rejoin the queue. Thank you.

Thank you.

Thank you. The next question is from Proline Nandu. Please unmute yourself and proceed.

Hi, team. This is Prolin from Edelweiss Public Alternative. Kiran, I just have one question for you, right? You know, there are lots of the senior level changes which has happened, even some at scientific and clinical level. So when you look at, you know, the morale within the organization with so many changes, what is, how do you, how will you rate that morale versus, let's say, a few years back when things were going right for us or when we started CG, right, as a subsidy of Biocon? Given the fact that, you know, most of our assets are more people assets, right, and scientists. So, when all these transitions happen, there is a fear among these people as well about their future. So, how are we managing, you know, the morale and the culture within the organization with so many changes happening at the top level, including the, you know, clinical and the scientific level as well?

Well, let me answer that by saying that every organization has to, you know, bite the bullet and do what is right for the organization. Fortunately, we have a very deep pipeline of talent in Syngine, and we have very, very good scientific talent at that. Now, obviously, there is going to be a little bit of a shakeout when you take such, you know, drastic measures, Because there was a right sizing needed for the organization, which was actually making us very inefficient. So when you take these kind of surgical decisions, there is bound to be a little bit of concern, rumor mongering, and actually people who exit also start creating some fear mongering, which we are addressing through a very strong communications approach, where we are basically saying, everyone who is here is now, You need not be worried. This is all about now rebuilding the organization. But I can tell you that we have had to deal with a lot of, shall I say, extra costs because of people who did not have any roles or work cut out for them. So we had to take these decisions. And I think now onwards, you're going to see a much more cohesive and integrated model, which was not happening. You know, when you have too many people, you tend to get into silos. You tend to get into turf protection. And that's what we're trying to now recreate in terms of making it into a cohesive organization. So, we are dealing with it, and I think it will work very well. You will see the results in the next two quarters. So, I don't think it's much of a concern for us. Viacom and the Viacom group and Sinjin, which is part of it, has always been a very fair company, and we always value our people, and we make sure that people are respected and empowered and given the best opportunity.

Sure, that's good to hear, ma'am. The second question would be on this, the CDMO model that we are changing, right, from FTE to FTS, right? So, I know the CDMO model is different.

The services model is FTE to FTS.

Yeah, I'm sorry, the services model. So, and you also mentioned that this move will take more time, right, for it to, you know, show the results. So, is this time taken from more of our capability end or is it more from the client, you know, testing us and, you know, doing their own checks? Where, what is it that is leading to more time for this changing model or the service part?

So I think we have to reposition ourselves to our customers who have always treated us as an FTE model. And we are now trying to say, don't look at us as an FTE model. We are an effortless model because of our very deep scientific capabilities. It's beginning to actually deliver results, but as I said, it's very early days, so I don't want to get ahead of ourselves. And what we are saying is, I think this is the way we will project SynGene. This is the way we will grow our business. And I think we're really focusing on some of these high-end capabilities, because SynGene has always excelled in leading-edge capabilities ahead of others. We have identified some of these very strong capabilities ahead of others, and we will now reposition ourselves as the go-to CRO for these kind of initiatives, and we are seeing that there is a huge demand for it.

And also to add technology, enhancements and upgrades in AI and automation will take time. So that's where we see a differentiation. Yeah.

Yeah.

Thank you so much and all the very best.

Thank you.

The next question is from Kunal Randevio. Please unmute yourself and proceed.

Hello. Good morning, and thank you for the opportunity. At the beginning of the year, you had announced the expansion of the Digital Miles Agreement, which I guess validates the end-to-end offerings that you have. So, if you could perhaps tell us what additional work you are doing with them, which you weren't doing previously, and has it already started to flow into your revenue?

All we can say is that we are doing some interesting additional work for them, but we cannot share it for confidentiality,

including the development and the clinical work.

Right. But, I mean, it includes manufacturing also? Right, right, right. Okay, perfect. Secondly, you know, I'm sorry, but I didn't quite understand this, you know, move from FTE to FFS. So is that because, let's say, you know, let's say a certain scientist, let's say, is paid, what, you billed at $100,000 a year. I wish. No, I mean, I'm just giving an example. So let's say, you know, you do it, but now perhaps with better investments, your productivity has gone up, and to reap that benefit, you're moving to FFS. Is that the primary reason to move?

So let me answer that question, and Siddharth can add to it. You know, the problem is when you go down an FTE model, what happens is whatever you quote, a competitor will quote lower and get the business because it is a commodity offering. We don't want to go down that path. We want to go down the path of value-added services, which means that we would like to go down the fee for service, Just to your point, if you can get $100,000 per scientist because of doing that, rather than go to an FTE model which is much lower than that, it helps you because then obviously you do more for less and you get more for less.

And if I may add, I mean, today customers, I mean, if you look at Indian CROs, they are 30 to 40% cheaper in FT charge-out rate compared to China and maybe half of Europe or U.S. CROs. And I think customers are not really looking at FT per rate as a real measure. I think what's most important for customers is the time it takes to bring a drug from discovery to an IND filing or clinic, and how much is the overall budget they are going to spend on that molecule till the IND filing. So while you might have a lower FTE rate or a higher FTE rate, how many FTEs you're deploying is the real science because if you use technology, AI, automation, and reduce the number of FTEs, then customers are willing to pay you premium, and that's the change in the model that we are talking about.

Understood. And then one more, if I can squeeze in. Siddharth, you had mentioned that your prices are extremely competitive to Western companies as well as Eastern companies. But how does it compare to some of the Indian players?

Well, on the large molecule CMO, we hardly have any Indian credible player. I'm not talking about small molecules, but our emphasis is, of course, a lot on biologic manufacturing. I mean, beyond Syngine, which other Indian CMOs is there on biologic side?

Sure, sure. Okay, so you mentioned on the biologic front and not on the small molecule front.

In all molecules, there are many other Indian CMOs who are more cost-competitive or have much larger capacities, so that's why our focus, there is a new modality such as peptides and oligonucleotides. I think I've mentioned that we've done a very, very complex oligonucleotide manufacturing for one of our customers at a GMP level. The ADC conjugation, we are the only company which is integrated from the biologic to linker to payload and conjugation at commercial scale.

Right, right. This is great. Thank you.

And I think, you know, one of the comments I do want to make is I think when you look at CROs and CRDMOs, I think you need to do some due diligence on the investments made, the scale created, the capability base, because I think everyone is just looking at a quarter-on-quarter performance of, you know, small-based businesses, and you have to look at whether they have invested in building scale.

That's their point. Thank you.

Thank you. Ladies and gentlemen, we will take that as the last question for today. Thank you, members of the management. On behalf of Cinchin International, that concludes this conference. We thank you for joining us, and you may exit the meeting now. Thank you.