Sai Life Sciences Limited (SAILIFE) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to SciLife Sciences Limited Q3 FY26 Earnings Call. As a reminder, all participants' lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Diwakar Pingli. Thank you, and over to you.

Thank you, Irina. Good evening to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our audience. It could cause future result performance. Our achievements differ significantly from what the assessor implied by which our students. Please note that we have made the results on the same. It's also available on the company's website. In case you have not received the same, please write to us and be happy to send the same over to you. To take us through the results and answer your questions today, we have the top management of Sialis Census Limited. Represented by Krishna Kannamuri, Managing Director and Chief Executive Officer, and Shiva Chito, Old-Term Director and Chief Financial Officer. We will start the call with a brief overview of the quarter gone past. Krishna will give a basic update about the business. Shiva will follow it up with a financial highlight and then will open it up to Q&A session. With that said, let me hand the floor over to Krishna. Over to you, Krishna.

Good afternoon, everyone, and thank you for joining the Psi Life Sciences earnings call. I'm happy to share with you my reflections on the quarter. The global microenvironment continues to be supportive of our industry, with India increasingly positioned as a preferred destination for pharmaceutical cloud sourcing. We are seeing a meaningful rise in strategic conversations with large global pharma innovators, driven by their focus on supply chain and resilience, access to specialized capabilities, the underlying growth environment for business remains healthy. Thank you. In parallel, we are strengthening our discovery engine through targeted industries and next-generation technologies. and partnerships with emerging technology innovation. Feeding more business continues to perform well, with over 90% of revenues coming from large pharma customers. During the year, we added seven molecules to our late phase and commercial pipeline, further broadening our portfolio. We continue to believe that a larger and more diverse pool of commercial molecules enhances business resilience. Thank you. The first phase of R&D expansion, the recent acquired site in Hyderabad, Unit 8, is scheduled to commission in Q4 FY26 with about two iron fume hoods for discovery chemistry. The civil infrastructure for R&D building for our process This facility is on track and will be commissioned by September 26th, doubling our total process early capacity. Our peptide process development and pilot switches is also targeted for September 26th. We'll significantly expand both our discovery and development peptide capabilities up to pilot scale. Initially, our OEB laboratories for process development are scheduled to be completed October 26th. This is in addition to what is already operational. Discovery and sensor supplies. View the manufacturing capacity expansion is also on track. We intend to add 225 KL by June. Phase 1 of Animal Health is started to be completed by March 27, enabling validation activities to commence our API production for veterinary products. Opportunities are able to execute will be anchored on three priorities. and driving efficiency through automation. We are actively augmenting our talent base to both near-term and long-term initiatives. Along this, we have launched a transformation program focused on improving productivity and operating efficiency. In parallel, we are working with an external consulting firm to define AI-first roadmap to fly life sciences. As an outcome of this program, we Our scientists do spend more time on high-value science while enhancing consistency and scale with debt-cost operations. Taken together, these efforts reinforce our confidence in the trajectory of the business, our ability to deliver sustainable growth, deepen customer-soft partnerships, and create long-term value for all stakeholders. This, I hand to Roshiva to walk you through our finances.

Thank you, Krishna, and good afternoon to everyone on the call. I will now walk you through the financial performance of the third quarter and nine months ended fiscal 26. SciLife Sciences delivered another quarter of strong financial performance with growth that outpaced broader industry trends. This was supported by a robust commercial pipeline, healthy volume growth across businesses, and continued focus on operational discipline. For the quarter-ended Q3 FY26, total revenue stood at 556 crores, representing a YOY increase of 27% compared to 440 crores in the same quarter last year. Growth was broad-based across the portfolio, with the CDMO business contributing approximately 65% of the revenues and the CRO business contributing the remaining 35%. On a year-on-year basis, CDMO revenues grew by around 31%, while the CRO revenues increased by approximately 19%. Ebitda for Q3 fiscal 26 was 191 crores, an increase of about 54% year-on-year, translating to an EBITDA margin of 34%. Profit after tax for the quarter was 100 crores, up 86% year-on-year. Turning to the nine-month performance, revenues for nine months fiscal 26 were 1,590 crores, representing the growth of around 43% year-on-year, compared to 1,115 crores in nine-month fiscal 25. Ebitda for the period stood at 472 crores, up 79% year-on-year, with margins expanding to around 30%, from approximately 24% in the prior year. This expansion is mainly due to operating leverage on employee costs of approximately 450 tips and material margin of 100 tips. With mine month fiscal 26 EBITDA at 30%, we are on course to achieving our stated goal of 28% to 30% EBITDA ahead of schedule. We expect to sustain this margin range of 28% to 30% to enable us to maximize growth while managing growth-related challenges and optimizing margin. Profit after tax for the nine-month period was 245 crores, reflecting a year-on-year increase of 199%. From an investment perspective, our capital expenditure continues to progress in line with the plan and remains closely aligned with long-term customer requirements. As of date, we have invested approximately 405 crores towards our fiscal 26th capital commitment. All expansion projects are progressing at schedules, positioning as well to meet future Capacity utilization stands at around 60%, providing adequate headroom for growth, even ahead of new capacities coming on stream. To conclude, the third quarter and nine-month results reflect healthy revenue growth, strong EBITDA expansion with meaningful margin equation, and robust improvement in profitability. Supported by solid demand, discipline, execution, and CAPEX programs progressing as planned, we remain confident in sustaining positive growth momentum and creating long-term value for all stakeholders. We can now open the floor for questions.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Binesh Singh from Morgan Stanley. Please go ahead.

Hi, team. Thanks for the opportunity. I just wanted to go back to this provision that you talked about. So last year in the March quarter, we had a 34 crore provision. Is it the same one that we've sort of done a reversal of 16 crores in this quarter? If so, then should we expect the remaining part to get reversed in the next quarter?

Yes, you're correct, Benite. So we will do this as we progress in our production on the commercial molecule.

And in the last call, you also talked about a double-digit consultancy charge in second quarter, which again will not repeat. So is this the reason that when you give the forward guidance, we are still in that 28% to 30% margin range because these provisions, benefit of this year, the consultancy project dropping this year, those benefits will not be there in OPEX next year, right?

Yes, but we are also working on additional things. I think if you look at the presentation we talked about. You know, working on another assignment to get AI enablement from a business perspective. So, that also will help us. You know, this is an investment we will make as we start this current quarter and head into the next financial year. So, you will have some bits of this, but I'm still with the – we are still with the 28% to 30%, after including all of this.

And in the opening remark, I think if I heard it correctly, you guys talked about seven new commercial molecules this quarter. Did I hear it correctly?

We talked about seven late-stage and commercial molecules this financial year. Nine months.

Okay. And earlier we talked about that the business will have 18-20% revenue CAGR over a three-year period or so. Now this year we'll end up being somewhere in the 30% CAGR or so. So should we look at the growth of some of the earlier future years is pulled forward into this year? How to think about it?

As we mentioned last quarter, Vinay, there is nothing that we have pulled forward from the, you know, in the prior quarter. This is a broad-based guidance of 15% to 20%, not specific to a specific year, but, you know, but we are very confident and bullish about where the business is today.

Great, great. Thanks, team. I'll come back in the queue.

Thank you. A reminder to all the participants that you may press star and want to ask a question. The next question comes from the line of Dr. Kartik Bane from Bajaj Life. Please go ahead.

Thank you for the opportunity, and congratulations on a good set of members. I just wanted to understand, as I see, CDMO part is increasing faster than the CRO part in terms of percentage of sales and revenue. So, do we have any specific target in mind that this would be our ideal percentage of revenue coming from CDMO and CRO?

Thank you. I'm sorry, what is the broad mix between the CDMO and the CRO business, the main around the 65, 35, 40, you know, in one particular, the CDMO can grow faster, in another year, the CRO could grow faster.

And my second question is on the molecules. Out of all the molecules we have, can you provide us the split between peptides, ADCs, or small molecules? How is it there? How many ADCs are there?

We don't provide breakdowns of molecules. I think all that we provide is the number of molecules.

Thank you.

A reminder to all the participants that you may press star and 1 to ask a question. A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Rahul Jeevani from IIFL Securities Limited. Please go ahead.

Yeah. Hi, sir. Thanks for taking my question. Sir, can you talk about what led to such a strong gross margin expansion for us during the quarter? So both on a YOY and a quarter-on-quarter basis, we saw almost a 300-400 basis point gross margin expansion. So what led to this and what kind of a sustainable number you expect going forward?

So, I would, you know, you're an expert on the CDMO business, you know that this business kind of changes and becomes variable quarter on quarter, so it's very difficult to kind of, because the single answer that I will give you is business mix and product mix, that is not going to give you a lot of details, right? But if you look at the nine-month FY25 to 26, The biggest leverage, operating leverage, actually came from employee costs. We've mentioned this. I mean, we've been saying this consistently over the last four, five quarters, and even during the roadshows. What we have been communicating is that as our business grows, we have up-fronted certain R&D-related people costs, both here and outside of the country. And we said as business grows, this leverage will be very strong for us to kind of take advantage of. And that is something that has come through. So the nine-month number shows a 4.5% leverage. You've also seen a 1% improvement on the material margin. This is a product mix. This is also on account of, you know, the prospect that we've been talking about in the last couple of calls, something that kind of increases your margins and the material margin there is higher. So that then kind of contributes to... So, an average margin which then becomes, you know, increasingly good. That's what Krishnar also stated in his speech.

Sure, sir. So, on the employee side where you have seen an operating level is playing out this year. So, you expect the same will continue going into next year as well?

We would broadly think so. They could be periods where we will take decisions on adding employees likely ahead as we expand. But the broader trend is to get to the 28 to 30%. And I don't look at it the line by line, but what we would commit to the market is a sustainable 28 to 30%.

Sure, sir. And, sir, in your opening comments, you indicated that, obviously, you have been outperforming the broader trends in terms of the CDMO industry. So, many of your peers, let's say, have got impacted because of inventory destocking in some of their molecules. Now, this year has been very strong for PSY. And if I look at the presentation, the presentation talks about you sustaining growth momentum going into next year as well. So, can you provide some color in terms of how you are looking at growth for FY27? And is there something in the base business which worries you, which could see destalking maybe one or two years down the line?

So, I think the reason why we are confident as we get into the next year, Rafal, I think is setting the business at this point in time. What we are seeing is a fair bit of conversation that are strategic in nature, as we had mentioned both in this call and in the prior calls. We've mentioned this multiple times in our discussions. Our belief is that... CDMOs as an entity do not control stalking or de-talking. We probably get to know it at the time when it actually happens and kind of a lot of time it gets blindsided. And this is the nature of the business, and that's the fact of the CDMO business. The only way that we can kind of protect ourselves or minimize impacts against de-talking is to make sure that you have a slightly larger portfolio. And we have not concentrated on one, two products that then can impact our revenue. That's the whole objective. That's how, you know, our portfolio is slightly more broader. You know, if you look at this year, we became added, you know, we've added. The objective is to kind of mitigate the risk. I do not have a specific, today, if you ask me, we don't have any specific visibility of any product that I know is de-stocking as of today, but do I know can something de-stock two years or one and a half years later, as you asked? Honestly, we don't know. We don't get that kind of visibility all the time. So our best bet is to kind of protect ourselves. By adding more late phase and commercial, and also keep adding, you know, the early phase, you know, products from customers. That way, I have a steady inflow into my late phase.

Sure, sir. So, of the seven molecules which you have added, let's say, to late and commercial phase this year, you said three are commercial and four are phase three. Correct. Sure, sir. And just one question before I join back the queue. In the past, you have indicated the product concentration for the CDMO business. So, I think our top product was somewhere around 10-12% of the CDMO revenue. So, are we broadly on those or along those lines for nine months of FY26 has been?

So, our top customers... We will probably be around 12% or so of our total revenue.

Okay, so including both the CDMO and the CRO business, you mean? Correct, correct. Okay, sure, sir. Sure, I will join like this.

The meeting has not ended, so give or take a couple, you know, percent or two, right?

Sure, sir. Okay, thank you.

A reminder to all the participants that you may press star and want to ask a question. A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Alankar Garude from Kotak Institutional Equities. Please go ahead.

Hi, good afternoon, everyone, and thank you for the opportunity. Congrats to the management on a strong set of numbers. Sir, more of a continuation of the previous question as well. Based on the visibility you have currently, will growth over the next couple of years be more led by new commercial molecules or do you expect the three new molecules that you have commercialized in Fi26 to continue to contribute to growth over the next couple of years?

We expect a new molecule that we have added to contribute to our commercial growth. We also believe that there are some molecules within our existing portfolio we are supplying that can probably increase in terms of revenue.

Any sense you can provide on, I mean, what would be the larger contributor, would it be the newer molecules, apart from the existing ones which you mentioned would grow, but will we see a slightly higher contribution to growth from the newer ones or the existing ones?

So, if I have to move on. Obviously, if a product has reached a certain level, the growth from there is just going to be incremental, whereas the new ones are zero and then starting to go from there. So it's obviously percentage-wise it's going to grow higher. But there is enough juice left within certain molecules in our existing portfolio too that can kind of grow.

Okay, I was looking at this more from an absolute standpoint, just trying to understand what should be the growth breakup between or revenue breakup, incremental revenue breakup between the newer molecules and the existing ones.

Alankar, we don't have that much detail at this point in time. Maybe we can give you a color, you know, at a later date as we've seen it. But at this point in time, some of them have just entered. We even started, you know, in certain cases, we've not even started the first commercial supply yet. So it's kind of very difficult. Also, you know, certain times first order can be higher, second order can be lower. So all of these nuances are there. Exactly, you know, because we don't have that much data from our partners at this time.

Fair enough, sir. The second question is, if I look at these three commercial projects and the four which are in the late stage, can you call out in how many of these we would be the primary supplier?

Um, I think probably two of the three will be the...

Understood. Okay, that's good to know, sir. The, I mean, the third question is, if you can list down the top three reasons helping us win more commercial contracts, the reason for asking this is the pace has significantly increased over the last couple of years of us winning commercial contracts and that two pretty meaningful ones. So, I mean, Krishna spoke about the outsourcing team, and you have been talking about it for some time now. But apart from that, anything else which you would like to highlight, which is helping us with more commercial contacts?

Look, I think, Avanca, if you look at the win grade here, it's not based on one thing, right? These are customers we've engaged for the last 15 years. We've made investments. with the same teams over a long period of time. They've tested us. So these are really coming from years of trust-building exercise, and when you're coming to India, you choose a partner. Obviously, you've got to pick one you have a longer history with. If you look at most other CDMOs you're competing with, they're relatively new in this space, but I think the fact is a long engagement. We've done over the years, which are fairly unique to us at this point, which is giving We gave up 20 years of hard work.

What it, Krishna. And one final follow-up. In view of the higher win rates, are you increasingly inclined to invest in CAPEX slightly ahead of time?

We are definitely looking at expansion in CAPEX, but we are also balancing out based on the visibility we're seeing. We are not building a...

It's helpful. Thank you and all the best.

Thank you. The next question comes from the line of Amir Chalki from GM Financial. Please go ahead.

Yeah, thank you for picking my questions. I have one question on, there is a line we have mentioned on the topic, so animal health phase one expansion, which is expected. Is this a block for one customer, or has the contract already signed, and how much we have spent for this unit?

To be very candid, this is a unit we had actually built for another purpose, but that product did not succeed, so we pivoted that to Animal Health facility, and we work with pretty much all the large companies right now, and so I think we will be working with multiple customers on that site. It's not just for one customer.

Good. And how much we have spent for this?

I think the current investment is less than 50 crores at this time on that site. We will have a phased expansion plan. There will be some additional capex. We will probably invest closer on 70, 75 crores.

Sure. And in last quarter, we had added, we had said that we had added one oligo product. Is it possible to give some color when the supply could start for this product?

We don't talk about products. All that we can tell you is it's under validation. Once the validation is completed, we will start commercial supply.

Sure, sure. And the last question I have on the CRO momentum, we continue to show like 20% plus growth is CRO, while the biotech funding still remain weak, and many of the peers are not showing this kind of a growth. So what is working in our favor here?

So, I mean, I think it's one factor that has kind of helped us, I think. With the large pharma that has happened over the last four, five years, you know, our pharma component of our PRO business was probably negligible, maybe if I would look at five years ago. And that number, that increase is what is kind of helping us grow from, you know, over the last two weeks.

Sir, and you expect this main growth to be in despite the funding remaining weak?

Look, I think if you look at this, I think you also, right, you have to understand that we have gone through a significant investment cycle to discover businesses here. A lot of the work we do in the integrated program as well. It's just not pure chemistry. So I think a lot of our businesses come from biology, D, etc. Plus, the pharma pipeline is big enough, which is coming to India. It will probably give you enough cover for the next couple of years. I don't think any meaningful new company formation in biotech is going to start at least for the next 18, 24 months, but I think there's enough growth in this space.

Sure, that's quite helpful. Just last thing, if I can say, we have said the 28-30% margin guidance we have achieved already, but is there any scope further to improve these margins and also what will drive it? What are the areas which can help us to improve margins going ahead?

I think the way we look at it, and we've actually put this in our presentation too, I mean, I think our objective is to sustain the 28% to 30% while maximizing growth. I would probably use that as the model because growth in large pharma comes with open book and transparent pricing, but that can also give us a larger volume and a faster growth trajectory. We would optimize margins. Can there be additional? Yes, there will be. Our internal targets are generally higher than the street targets, and there is always a push to kind of do this on a day-in, day-out basis. But I would leave the 28% to 30% as the margin from a street perspective while we internally work to do higher, you know, work at the moment.

Look, I think I guess one thing I also want to put in perspective, I know everybody talks about margin, but the reality is you have to understand that pretty much almost every CDMO player, CRO player is upscale compared to China. We're operating at 28% to 30% margin, and at the end of the day, you'll have to compete with companies at that scale. I'm sure we'll never be able to scale and compete in the long term. So I think... I think right now, India should be working on getting... Optimizing your costs, not to ineption.

So what I understand, so that we have optimized margin, so there is no hanging fruits in terms of where we can get the incremental cost.

I'm not saying there's no... Thank you for your market share. So I'm just trying to kind of be pragmatic about giving an approach.

I'm just saying that there's no scope for cost improvement. to operate with the financial discipline, both in terms of operating expenditure. If you ask me, would you maximize margin or optimize your growth overall? I maximize my growth potential and optimize my margin. Let's grow faster. That is not touched. We are not saying that... But what we are saying is that we will... You will see periods where you will have growth-related challenges, which is, you know, utilization, you know, in upfront investments in people's technology, which will also need to get factor into your operating car. That's why we are saying we'll sustain the 28th century.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit yourselves to two questions. The next question comes from the line of Dhavalkut from Jefferies. Please go ahead.

Hi, sir. I wanted to get your comments on the oligonucleotide space. How do you view this space? Is it like a niche capability to build new relationships and then continue to get, you know, typical small molecule contracts? Or you think it can become meaningful space in itself on manufacturing side? I ask this question as most of the indication for oligodrugs are for rare ultralight disease and the volumes are extremely low. So, happy to know your thoughts. How do you view this space?

I think your point is very valid. So, if you look at the oligo space right now, there are very few molecules which are a large volume indication, but interestingly, if you look at the pipeline, early development pipeline, there's a lot of early development going on in terms of new programs in early development. So, it's a very old field with few hubs. First, they've gone commercial, but what we look at pipeline-wise right now is a number of molecules in development always have gone a basic. Thank you very much.

Yeah, very helpful. And secondly, you know, you're given a sales contribution from new modalities. So any hierarchy among the four modalities that you have mentioned and specifically any area that you believe is most promising from next two, three years perspective based on, you know, customer demand and customer conversations that you are having?

To be honest, if you have to go back in history, you always will have four or five things that are hot. Which two will make it, two won't make it. But today, if you have to say which two are going to get very hot, it's very hard to say. But if you look at the history of the discovery sector, it's very hard to pinpoint and say this is definitely going to be the hottest thing four years on the road. It might be out of these four, only one or two might be hot. Other two might just kind of go on the back burner. So it's very hard to create it at this point of what it looked like four years on the road.

Okay, if I were to force you to make a guesstimate, which one of these would be?

I'm not going to make a guesstimate.

Okay, okay. This is one last one. You know, how are pharma intermediates categorized right now? Are they part of pharma industry or will they be categorized as chemical inputs and, you know, there could be U.S. tariffs of 18% on them? Or is it part of Section 232? And whatever is the outcome of 232, that will be applicable for various intermediates that many of the CDMOs provide. So, where is the categorization?

I wouldn't worry about categorization because pretty much all farmers have exemptions from tariffs right now. Almost every farmer has negotiated with the government for reduced, actually no tariffs on imports. Majority of them, and majority will, so I don't think that will be a factor.

This is very helpful. Thank you.

The next question comes from the line of Manish Podar from Invesco AMC. Please go ahead.

Hello.

Yes, Manish.

Yeah, hi. I just have two questions. One is, you know, if you could talk about, you know, the healthcare platform which you are wanting to do versus the earlier approach of, you know, working by products. If you could probably spend a couple of minutes to help us understand, you know, this platform approach, which, let's say, global players adopt, you know, where are we in the journey and what is the thought process we are getting?

Sorry to interject you. We are not able to hear you clearly. Can you answer your question, please?

Yeah, so I'm just trying to understand, let's say, you know, I understand you all are incrementally working on a platform approach. On the healthcare side versus, let's say, earlier having products as a product suit. I'm just trying to, and this is the approach which a lot of global players adopt. So, probably if you can help me understand, you know, what is the broader thought process and where are we in the, let's say, journey to better appreciate, you know, how is the development for this vertical looking, let's say, from, let's say, medium-term perspective, that would be helpful. Thanks.

Oh, back to it. We don't do any platform. If you're a discovery player or a pharma, you can actually create a platform technology against which you can screen multiple different compounds or trying to get to different therapeutic areas. We don't do that. Our focus is to create... Ability in, let's say, 80% of the total, you know, in broad chemistry ranges, that kind of gives us that ability to kind of look at a wide spectrum of molecules that you can work with customers. There will always be one or two niche things, let's say fermentation or whatever, that we probably will not have. But the objective is to create capability across a wide spectrum. And that's really what we're focused on. That would be our chemistry platform, that really, and then we add, you know, engineering capabilities along that to kind of make sure that we can take it up to the plant.

Okay. And, you know, just another one. Hello?

Yes.

Yeah, sorry. So, just another one, I'm sharing the, you know, journey of Sai over the years. There would have been years when you would have done significantly well and there would have been this inventory stocking, de-stocking, which we see in other players this fiscal year. You would have seen that in some of the years in the last 20-25 years of existence. What are the measures which the company would have adopted? In order to offset that, let's say, you know, from our earlier experiences, if you can help us understand, let's say, two, three variables, that'll be useful. Thank you. And congrats for the comments.

We have definitely seen years where we have seen the stalking, and I'm not going to say this was... You know, a few years ago, we have seen products that have undergone deep stocking, and we've been hit by in those years. And I think the lesson that we picked up from that scar was that try and keep your portfolio as broad as possible. You know, we don't tend to get excited only if a molecule is $20 million or $50 million. We tend to get excited if a molecule is $5-10 million. Because that's a reasonable price for, on average, the kind of workforce that also helps you or gives you an ability to quickly add additional molecules within the pipeline to kind of take care of ups and downs. Because there is no way a pharma services company like us controls the destalking. We get impacted by destalking when it gets announced. So that's the only thing that we can do, and that's what has been our focus.

Okay, got it. No, because you simply mentioned that the top customer is 12% and product diversification is at play and there are new venues of growth coming into play. So, I hear you. So, got it. Thanks.

Thank you. Thank you. A reminder to all the participants that you may press star and 1 to ask a question. The next question comes from the line of Nirvana. Laha from Badrinath Holdings. Please go ahead.

Hi, thanks for the opportunity. I have a couple of questions. The first question is on your revenue recognition. Is it always the case that you recognize revenues after dispatch or do you also have some take or pay kind of contracts where as per the contract you recognize revenues even if there are no dispatches?

So, our revenue recognition is based on completion, not based on best practice. A detailed revenue recognition policy is actually in our financial statements, and you would actually see how we recognize revenue. And this is fairly in sync with, you know, the global practices and in consequence of the IFRS and India's regulation.

Sure. So, just to sort of clarify, that means that there would be certain commitments or contracts from customers where revenue recognition would happen as part of the contract and not depending on dispatch, right?

Yes.

And typically, if you're comfortable sharing, what would the mix be out of 100% of these kind of arrangements?

We don't have, you know, we would not share those details, but any contract that becomes eligible, there are certain regulations under India that allows you to recognize revenue on a completion basis. And as long as a particular contract satisfies that criteria, then we will be able to recognize revenue. If a contract does not satisfy that criteria, then we will recognize revenue based on that.

Sure, sure. Understood. And the payment would definitely be linked to dispatch in either case, or would the payment from the customer also sometimes get triggered upon the revenue recognition?

In certain cases, it gets triggered by a different milestone other than, you know, dispatch. In certain cases, it gets triggered based upon the transaction.

Okay, that's helpful. Second of the seven molecules, the late stage ones that you've added this year, could you highlight if you see blockbuster potential in any or are all of them small? Just curious to understand.

We don't look at blockbusters, you know, technically from a customer perspective. As long as the API is complex, even if a product is, let's say, $500 million, I may make more money than a $5 billion molecule where I'm going two steps. So honestly, it does not matter whether any product is a blockbuster, but broadly... We see at least a couple of products could have decent boot up on from a style area perspective.

At least that is our need based on what we are hearing from,

you know, industry sources.

Mr. Nirvana, you may rejoin the queue for the follow-up question. The next question comes from the line of years, Doshi, from Unify Capital Private Limited. Please go ahead.

Am I already going?

Yes, sir, you are.

Congratulations, sir. I just have a question. Without this BioSecure Act and for the past one month, are you sure any customers are used for the existing commercialized molecules, like shifting from China to India as second source?

So we've seen molecules shifting from China to India. We saw fairly Large strands around the 23-minute time frame. If you actually look at RT-RHP, we actually mentioned the number of molecules being transferred. A significant portion of the molecules that we take transferred during that phase was primarily a supply source diversification. Outside of that, we see tactical movements. Even outside of just a biosecure worry, I think customers always go for a couple of sources. If a customer already has a China source, they would probably look at an India or a European source to kind of complement that. Or if it's an India source, the first supplier, then they would probably look at a Chinese-European source. So there will always be a supply chain, tactical, and we continue to get opportunities on the tactical side, too. But we did a fair bit of movement around the 23-24 timeframe when there was this first chance that moved.

Thank you. Regarding our facilities, which will be coming out by next year, so do we see a ramp-up of those facilities in real-time, or it will basically depend on any customer's demand? I was asking this question. Yeah, I was asking this question in relation to your margins as well, because I think in 2022-2023 series also, I think we commercialized the facility then for the initial period as the demand was also for small goods, the margins taper off a bit. So in that first year, we are adding segment capacity next year. So I was just asking, how will the ramp up be?

So, the statement that I made with respect to sustaining the 28% to 30% without saying it will grow, I had also, you know, suffixed it by saying that this will also take care of growth-related challenges, which could be, you know, costs, inefficiencies that could get built on account of fronting people investments or, you know, operating expenditure investments. And our long-term goal continues to remain the 28% to 30%. While you were right in pointing out the fact that in 2022 or 2023, the margin profile had dropped, the fact is that post-23, we've grown faster, or probably had one of the fastest growths in the sector, primarily because we had up-fronted certain investments. And our decision to invest or take an up-front expenditure on R&D or operating expenditure or even CapEx. We'll be guided or will continue to be guided by longer-term factors and also, you know, visibility from our customers. So it will not be a one-year decision, and that's something that we are willing to take.

Yeah, just last minute. Thank you. Let's see if you get some of that, maybe in 28.

I think the facility, so it's a little bit of slightly more technical and slightly long-winded, but I will say that we currently do certain products in that, in the bucket. We've also mentioned, and I think Krishna mentioned in the speech, that somewhere in 27, we would start, we intend to validate a product as we complete the phase one expansion. We work with three out of the top five annual health companies, and we believe there are significant opportunities, particularly in the companion health space, which is what we are focused on.

Thank you.

Thank you. The next question comes from the line of Rahul Jeevani from IISF Securities Limited. Please go ahead.

Yes, sir. Thanks for the follow-up. So, sir, second half of this calendar year would be quite busy for us in terms of commercialization of several facilities. So, we will have the process R&D lab, the peptide lab, and then this 450 KL incremental capacity also coming in. So can you talk about in terms of how the discussions have been ongoing with customers in terms of ensuring that we hit, let's say, a steady state kind of utilization for all this infrastructure which we are putting up? And particularly if you can also talk about in terms of the discussions with the customers as far as the peptide space is concerned.

I think as far as the capacity we have, let's say we're talking about ADCs, I think we have several pharma customers right now, which we are doing a lot of discovery work with, who want to expand with us. There are companies that are doing development work with optimization of peptides, which we need capacity for. So I think we have there, we have a reasonable visibility in terms of both peptide expansion as well as the ADC expansion. The plant expansion also is based on the fact that we have several new molecules. A quarter year, a quarter day, when the product comes, it's there, but it's not the best we're building with, let's say, a three-year visibility up front. These are shorter windows. It's based on relative visibility. Potentially going to phase 3, and we see that heating capacity. We can't make it. Educated guests based on.

Sure, sir. And beyond this 450 KL, which we will add in FY27, do you think that for a year or two, we might go slightly slow in terms of ramping up this utilization before adding incremental capacity? Or with the visibility which you have right now, do you think that we might need to embark on another capacity expansion in FY28 itself?

We had, if we had mentioned, we already are starting expansion to a new site in either, about the other side of Hyderabad, where we also are going to start implementing and hopefully have that up and running the next 18, 24 months, and we will need that capacity also coming online.

Okay, so this is beyond the 450 KL, which you are already adding? Correct. Okay, and have we drawn up plans in terms of what kind of capacity would we be putting up at this new plant?

I'll give you very broad guidelines. There will be a non-GMP capacity because a lot of customers want us to have passed to the early stage, so we will be setting up non-GMP capacity for accurate development. There will be significant peptide capacity based on forecasts from our pipeline and also GMP capacity. It's going to be a mixed use that's already coming up. So, it will give us much more diversity of platforms than we have at this point.

Okay, sure, sir. And, sir, just one bookkeeping question. You said that the remaining part of the 34 crore write-off which you had taken last year, so 18 crore, then you would reverse in fourth quarter of this fiscal year.

So, what I said is we will reverse as we kind of, you know, get the recognition and ability to reverse, we will do that.

Okay, but not specifically in the fourth quarter. So, as you go ahead, you will do that?

Yes, actually go ahead and do that.

Okay, sure, sir. Thank you. Thanks for answering my questions.

Thank you. Ladies and gentlemen, due to time constraint, we will take the last question from Dhaval Kud from Jeffries. Please go ahead.

Hi, sir. Just one question. Wanted to know your comments on GLP-based product in our pipeline. Are they peptide-based, non-peptide-based? Are any of them in the clinical stage like phase 1, phase 2? That would be very helpful.

Dawal, you know, we don't comment on specific product pipeline. Other than two products that are launched, everything is in clinical pipeline only. So, you know, who are the two players who are commercial at this time on the product. Who's working today on it is right now working on a product that's not commercial yet.

Yeah, yeah. So, can I, you know, interpret that, that some of them, the products that you are working are in commercial, beyond the discovery stage. So, will that be the right interpretation?

I will leave you to interpret, I will not comment further.

Okay, okay. No problem. That's it from myself. Thank you.

Thanks, Aval.

Thank you. I would now like to hand the conference over to management for closing remarks.

Thanks, everyone, you know, for the presence and taking time on the call. I hope we were able to provide you, you know, the right answers, and if you have any specific questions that we have not answered, please reach out to us at investorrelation.com.

Thank you. On behalf of SciLife Sciences Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.