Half Year 2026 Syngene International Ltd Earnings Call
Speaker #4: Ladies and gentlemen , good day and welcome to Syngene International second quarter and H1 FY 2026 Financial Results conference call . As a reminder , all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes .
Speaker #4: Should you need assistance during the conference call , please signal an operator by pressing star . Then zero on your touchtone phone . Please note that this conference is being recorded .
Speaker #4: I now hand the conference over to Miss Nandini Agarwal . Thank you and over to you .
Speaker #5: Thank you, and good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's second quarter and half-year results for FY 2026.
Speaker #5: To discuss the financial and business performance for the period we have on this call today . Mr. . Peter Baines , Syngene , Managing Director and Chief Executive Officer And Mr. Deepak Jain , Chief Financial Officer after the opening remarks , Peter and Deepak will be happy to answer any questions you may have .
Speaker #5: Before we begin , I would like to caution that comments made during this conference call today will contain certain forward looking statements and must be viewed in relation to the risks pertaining to the business .
Speaker #5: The safe Harbor clause indicated in the Investor presentation also applies to this conference call . The replay of this call will be available for the next few days , and the transcripts will be made available .
Speaker #5: With this, I would now turn the call to the Managing Director and CEO, Mr. Peter Baines.
Speaker #6: Thank you . Nandini . Good afternoon everybody , and thank you for joining us in this call today . Let me begin with a brief overview of our key financials for the quarter and the first half of the financial year .
Speaker #6: Before I move on to operational and strategic highlights , I'll then hand them over to Deepak , who will provide a more detailed breakdown of the financials .
Speaker #6: Revenue from operations for the quarter stood at four 911 , up 2% year on year and up 4% sequentially . Operating EBITDA was 200 crore , a decline of 18% , with an operating EBITDA margin of 22% .
Speaker #6: Reported profit after tax was ?67 crore, down 37% year on year, with a 7% PAT margin. The second quarter performance was characterized by two key dynamics.
Speaker #6: Firstly maintained momentum in research services and secondly , the anticipated inventory correction in biologics manufacturing . First , half revenue from operations was up 6% and at the midway stage of the year , our performance has been in line with our expectations .
Speaker #6: Historically, Syngene's performance in the second half has been stronger than the first half of the year, which we expect to be the case this year.
Speaker #6: And on that basis , we are maintaining our full year guidance . Deepak will provide more financial details in his remarks shortly . Let me now turn to some of the business highlights and start with research services , where we saw sustained growth momentum .
Speaker #6: I'm also pleased to share that, in this quarter, Syngene has been awarded our first global Phase 3 clinical trial by a U.S.-based biotechnology company.
Speaker #6: This trial will recruit patients across clinical sites , both in India and the United States . This is an important milestone and reflects our growing capabilities in managing large , complex , global trials .
Speaker #6: We see the clinical trial market opportunity as an important driver of Syngene's growth in the mid and longer term, and we are investing to strengthen our capabilities and reach accordingly. To that end, we have also expanded our clinical trial footprint across Australia and New Zealand.
Speaker #6: The UK and Eastern Europe through strategic partnerships with established CRO players . These collaborations will build on and strengthen our capabilities in early stage , healthy volunteer studies , first in human studies and patient based clinical trials .
Speaker #6: Along with our translational and clinical research platform in Bangalore . These partnerships will help us meet the increasing demand from global customers and regulators to include diverse patient populations in their phase two and phase three trials .
Speaker #6: In the CDMO market , we are continuing to invest in and build on our strengths in fast growing new modalities , including antibody drug conjugates and peptides .
Speaker #6: In this regard, and building on our experience in antibody and small molecule discovery and development, we are now expanding our biologics facility in Bengaluru with a GMP bioconjugation suite.
Speaker #6: This will allow us to offer fully integrated services for antibody drug conjugates from discovery through to GMP manufacturing . And this will place us amongst a select group of cdmos with with full service ADC capabilities .
Speaker #6: The suite will enable monoclonal antibody production and GMP bioconjugation at the same site, accelerating ADC development timelines. Importantly, the facility is capable of supporting a wide range of advanced conjugates and related modalities and is expected to be operational within this financial year.
Speaker #6: Turning to peptides in Q1, we had commissioned a dedicated peptide laboratory at our Bengaluru facility, expanding our discovery capabilities in this area.
Speaker #6: We are now planning to enhance this capability with a larger scale peptide facility in Mangalore . With this facility , we will be able to partner with our customers in peptides from discovery through to clinical and now commercial scale supplies , enhancing our ability to serve clients across the full development cycle .
Speaker #6: In this fast growing area . In our Bangalore Biologics facility Unit three , we are pleased to advise that we have now operationalized and are supplying GMP clinical material to a US biotechnology collaborator .
Speaker #6: And with our Bayview facility for monoclonal antibody manufacturer in the United States . We are on track with our preparations to commence operations in the second half of the year .
Speaker #6: With those highlights, I will now hand over to Deepak, who will take you through the financials in a little bit more detail before the Q&A.
Speaker #6: Thanks . Thank you .
Speaker #7: Peter . Very good afternoon to everyone . Let me let me begin by discussing the second quarter performance , and I will cover the first half and the guidance before I close my commentary .
Speaker #7: Revenue from operations remained in line with expectations for the second quarter . At 911 crores . This marks a 2% year on year growth in reported terms , down 3% in constant currency terms .
Speaker #7: Sequential growth quarter on quarter was at 4% in reported terms . This quarter saw research services continuing its year on year growth trajectory , led by volume improvements in discovery business .
Speaker #7: CDMO business was impacted due to inventory adjustments in biologics manufacturing , which we explained during the start of the year . Our small molecule CDMO saw growth in the quarter , led by formulations .
Speaker #7: Now , turning to costs , raw materials accounted for 26.2% of the revenue from operations , largely in line with the second quarter of last year at 26.6 , supported by lower mix of CDMO business .
Speaker #7: We expect the full year material cost to be around 25% , employee costs increased by 13% in line with the increase and the investments in talent .
Speaker #7: Other costs, primarily comprising power and utility expenses, increased by 4% year on year due to the new facility at Bayview and the Biologics Facility in Bangalore.
Speaker #7: Other expenses increased by 8% year on year as we continue to invest in automation and digitization programs to deliver increased speed and productivity. Our company saw a hedge loss of ?11.8 crores against a hedge gain of ?4.3 crores in the quarter of the previous year, due to the difference between average and spot hedge rates.
Speaker #7: The movement in sorry , the movement in revenue and the cost resulted in 18% year on year decline in operating EBITDA with margins of about 22% in the quarter versus 27% in the last year .
Speaker #7: With FY 26 being a transient year . A full year margins are expected to be in the mid 20s as guided earlier . The increase in depreciation , primarily due to additions capacity at the biologics manufacturing in Bangalore , which became operational this year .
Speaker #7: EBIT from operations was at ?83 crores, down 38% year-on-year due to an increase in depreciation costs. Reported interest expense remained flat compared to the same quarter last year.
Speaker #7: Other income declined by 7% compared to Q2 last year , primarily due to interest income on income tax received last year , which was not there in the current year .
Speaker #7: Reported effective tax rate for the quarter was 21% , against a 23% same quarter of last year . Due to the change in mix in the units that we have , we expect the effective tax rate for the full year to be around the 21 to 23% .
Speaker #7: Overall profit after tax before exceptional items stood at 67 crores , down 37% year on year as the market evolves and new technologies emerge , we continue to invest in capabilities and capacities to drive the future growth .
Speaker #7: CapEx spend for the quarter stood at $10 million . Around 50% of CapEx was invested in research services , primarily across capability builds , including Dmpk automation , ADC labs , and contractual obligations , and dedicated centres .
Speaker #7: Nearly 30% of the CapEx was in the CDMO business for new formulation facilities and small molecules, as well as modifications of the manufacturing facility at Bangalore and the Bayview facility in the USA.
Speaker #7: The remaining of the CapEx was spent on digitization , automation and common infrastructure . We continue to maintain a strong balance sheet which enables us to effectively navigate through industry cycles .
Speaker #7: We , after meeting the CapEx for the quarter , we have a net cash balance of 1018 crores . As of 30th September 2025 .
Speaker #7: Our first half performance was also in line with our guidance reported revenue from operations increased by 6% year on year . Raw material cost was down by 3% , driven by revenue mix and staff cost increased by about 14% .
Speaker #7: Our direct cost , primarily comprising of power , increased by 3% and other operating costs increased by 15% . As we continue to invest into expansion of our facilities and capabilities , including automation and digitization , that I spoke of earlier , operating EBITDA margin stood at 23% for the first half , compared to 25% last year before exceptional Items was down by 4% year on year to 154 crores .
Speaker #7: Finally, let me say a few words about guidance. We advised in April about FY26 being a transient year on a reported basis and in constant currency.
Speaker #7: We guided to a mid-single digit growth on revenue . We also guided towards a mid 20s EBITDA margin and a declining Pat . We continue to hold our guidance for the full year .
Speaker #7: We continue to expand in new areas such as peptides , ADCs , augmenting our capabilities into the fast growing new modalities with our new biologics facilities at Bangalore and the Bayview facilities .
Speaker #7: Getting operational later in the year, our focus will be executing in line with our strategy, which we believe will position us for further growth in the medium and short term.
Speaker #7: With that, I would like to open it up for questions. Thank you.
Speaker #4: Thank you very much . We will now begin the question and answer session . Anyone who wishes to ask a question may press star and one on the touchstone telephone .
Speaker #4: If you wish to remove yourself from the question queue, you may press star, and two participants are requested to use handsets while asking a question.
Speaker #4: Ladies and gentlemen , we will wait for a moment while the question queue assembles . We'll take our first question from the line of Kunal Dhamija from Macquarie .
Speaker #4: Please go ahead .
Speaker #8: Hi . Thank you for the opportunity and congratulations on getting the clinical trial contract for the for the US market . So the first question pertains to the contract .
Speaker #8: I mean , what what type of capabilities have we set up in the US market for this . And how are we differentiating from the existing players in this space , such as Iqvia ?
Speaker #8: I believe provides a clinical trial solutions . And how does the economics of these kind of projects work ? That would be the first question .
Speaker #6: Thank you . Kunal . I'll start with with the reply . Deepak may want to add something . So again , let me step back and because this is an important milestone for Syngene , it's our first phase three global clinical trial and it builds on our pre-existing strengths and the clinical trial arena in India , which is becoming , I think , a greater focus for global clinical trials .
Speaker #6: And it builds on our collaborations with established Cros and other geographies , including the United States . And as I said in my opening remarks , we've now extended that into Europe and Australia and New Zealand .
Speaker #6: So we're building on existing capabilities , and we're leveraging our collaborator CRO in the United States in order to recruit patients and to undertake all the analytics , etc.
Speaker #6: required in this study , as you would expect , you know , the the very recently signed this , the the economics of this trial will be spread out over three years .
Speaker #6: And the bulk of that will come in FY 27 and 28 . As , as the trial recruits picks up and so forth .
Speaker #6: So, Kunal, does that answer your question?
Speaker #8: Yes , partially . I wanted to understand more about , you know , how does these kind of projects fare in terms of , you know , their potential ?
Speaker #8: Let's say revenue upside versus the typical research projects that we take , not just for this particular project , but how does clinical projects , you fare against , let's say , the commercial manufacturing or the services project that we take , you know , just just for the from the business angle perspective .
Speaker #7: So let me just try and help understand or let me help understand the answer to this . Actually , when we look at our clinical trials , right , it's actually a business that's growing for us .
Speaker #7: It's an industry segment that's growing . It's evolving as we speak . We got our first clinical trial batch right . And that's the first global clinical trial batch .
Speaker #7: I think at this stage, I would rather refrain from commenting upon how it compares to our business and our margins across each of the businesses, because we typically don't break down our businesses, right.
Speaker #7: In terms of margin structures . But it's an area that we believe is is got a lot of potential . There is a good traction in growth that we're seeing , and we look forward to seeing more information on this as we share with you all in the coming quarters .
Speaker #8: Okay . That's helpful . Second one on on the ADC and peptide where we are adding capacities . So what kind of visibility have we got there , you know , to kind of utilize the capacity that we are adding in , you know , that if you can provide some color , there .
Speaker #6: Yes . I mean , we we do have visibility here . And accustomed traction and very clearly in a , in a longer lens , the antibody drug conjugate market is expected to grow substantially .
Speaker #6: You know , over the coming decade and more as , as we look at the pipelines of our customer base and the and the and the utility of combining the targeted effectiveness of a monoclonal antibody with a directed payload and the requirement for conjugation .
Speaker #6: So , again , we are building from a position of strength in our historical expertise on monoclonal antibodies . Our historical expertise in small molecule chemistry for the payloads and our growing capability in Lincoln .
Speaker #6: Putting all of this in one site creates , you know , a differentiated capability for integrated antibody drug conjugates development , you know , and we we do have existing .
Speaker #6: Partners . And of course , we're looking to expand that and build on that going forward . It's a very important area of growth for us .
Speaker #8: Sure , sure . And lastly , if I may just squeeze in , I think our press release mentions recovery in biotech funding .
Speaker #8: You know, we have seen some green shoots there, and I researched the service anyway. It has done decently well in the first half.
Speaker #8: So, do you expect meaningful acceleration with the biotech funding coming back in the second half from here on?
Speaker #6: Sure . I mean I mean we are seeing the same picture . We're seeing an encouragement , encouraging improvement in VC funding into biotech .
Speaker #6: Syngene has a substantial early discovery capability, and biotechs are an important part of our customer mix. I will note that the underlying research services growth has remained robust, and there is a tailwind from the increasing venture capital flow into early-stage biotech.
Speaker #6: We'll just add another . Layer of growth opportunity on to our pre-existing momentum in research services . It's encouraging . We're obviously tracking it .
Speaker #6: And of course , we hope that that trend continues and we see something more like a full recovery in the VC biotech funding going forward .
Speaker #8: Great . Thank you . And all the best .
Speaker #7: Thanks .
Speaker #4: Thank you. We'll take our next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Speaker #9: Yeah . Good afternoon . Thank you for taking my question . Just the first one on the split of the revenues . I think in Q1 , you disclosed some either large molecule or if you're doing it , CRO versus CDMO , if you could kind of give us that for the quarter and for the year ago , please .
Speaker #7: So our research services has been about 67% . And 33% is the manufacturing or CDMO business for this year . Last year , same period was about 63 versus 37 .
Speaker #7: So, there's a higher growth in the research services than in the CDMO business for us.
Speaker #9: I there are some disturbance . So 67% of CRO versus 63 last year . Correct ?
Speaker #7: Yes . Yes yes .
Speaker #9: Yes okay . I'm just trying to get the numbers right . So and this is Q2 or Q2 right . Not H1 versus H1 , something like that .
Speaker #9: Is this Q2 Q2 .
Speaker #7: Q2 over Q2 Q2 over Q2 .
Speaker #9: Okay . So that clearly shows that , you know , I can do the math later because I am not able to see the number in front of me .
Speaker #9: But so Research Services has grown positive growth , I would imagine higher than whatever the quarterly growth is . Right . So how does this now pan into the second half per se ?
Speaker #9: Do we continue to see, you know, what are some of the leading indicators on the research services that give you the confidence that we can keep this momentum going?
Speaker #7: So , Shyam , we don't typically break down the forecast by these segments , but we maintaining our guidance for the quarter for the year .
Speaker #7: And and we'd want to stick to that . We won't break down the forecast by quarter . And by the business . .
Speaker #9: Right . Understood . Understood . No , not to worry . So let me then flip the question around . So we have seen again , I think the manufacturing services decline .
Speaker #9: And is it largely led by just the , the stock of , say , the biologic or is there maybe core business if you were to separate that out this quarter or last quarter , how do you think that is progressing .
Speaker #9: And anything that you want to add on , what's happening at the Mangalore API plant .
Speaker #7: So let me answer the question for you . We we are we did call out a slowdown in our large molecules because of the inventory correction .
Speaker #7: And we're seeing that play out . Nothing beyond that as what we had anticipated should have happened for the year is happening . Right .
Speaker #7: So it's more or less the way I would take it is no surprises yet . And our and our CDMO business is impacted by the inventory correction , which is what was playing out .
Speaker #7: We saw that starting from this quarter , more than what we saw in the previous quarter . In terms of sorry , I missed the second part of your question .
Speaker #7: You had one more part to it, right?
Speaker #9: No, no. Mangalore API plant. So I'm talking about small molecules.
Speaker #7: Sorry . Yeah . Yes . So sorry . On the small molecules . You know , we we did mention of the fact that , you know , we're seeing the utilization levels and we don't call out the utilization level , but we're seeing the trend lines on the levels improve .
Speaker #7: We like the trend lines . Is there more to be done so that we get optimal ? I think yes , we continue to hold that point .
Speaker #7: But yes , we are seeing more and more traction . In fact , the peptide facility that we spoke of earlier in the conversation is something that we are putting up at the Mangalore plant .
Speaker #7: .
Speaker #9: Got it . Last question . Deepak and team just on the our overseas facilities , the acquisitions that we have done , how are they tracking either in terms of , you know , recruitments also in terms of the pre-op expenses , when do we think monetization starts ?
Speaker #7: So we had guided towards the second half of this year for us to start operations in the Bayview site. We are on track to do that.
Speaker #7: Things are going as planned. The recruitment is happening. We are going as per what we had planned it to be.
Speaker #7: The dates are periods of monetization . Obviously . You know , once we get the site operational , it will need to do some trial batches , etc.
Speaker #7: but we still continue to hold to our guidance around the second half of this year for the site to become operational and things going on as per track .
Speaker #9: Thank you. Thank you so much.
Speaker #7: Thanks .
Speaker #4: Thank you . We'll take our next question from the line of Harith Ahmed from Avengers Park . Please go ahead .
Speaker #10: Hey , good afternoon . Thanks for the opportunity . I see a write off of around 28 crores related to unrecoverable receivables in the footnotes .
Speaker #10: I'm trying to understand under which line item this is recorded in the P&L, and is this entirely a one-off? This is a non-recurring item.
Speaker #7: Yes, it's a one-off. It's a non-recurring expense, and it's categorized under other expenses.
Speaker #10: Okay . Got it . And on the Bay view facility , you noted your comment about commissioning this facility in the second half .
Speaker #10: And then , you know , we're also hearing about a lot of push from the US administration towards local manufacturing . So do we expect the ramp up in the order book to be faster than our initial expectations here ?
Speaker #10: And if you've had any conversations with clients , any , any takeaways from those ? Also , any update on the order book , how that's shaping up at unit three ?
Speaker #6: Okay , I'll take that one . Harriet , thanks for the question on the Bayview facility . You know what we're seeing in the United States .
Speaker #6: And of course , it moves around a bit . But but clearly , you know , there is a push from the administration to localize manufacturing for the US .
Speaker #6: In the US and that very much plays to , you know , our , our site being located in , in , in Baltimore .
Speaker #6: We have numerous discussions going on with , with potential clients and customers . But I think I'll revert to to to Deepak's guidance , which is everything that we've set out in terms of preparation , timelines remains very much on track .
Speaker #6: And , you know , we are looking forward to commence commercialization , but that will , as Deepak guided also , that will be initial batches , qualification batches and so forth .
Speaker #6: We're we're on track to do that before , you know , in the second half of this year . And then we would look to see the ramp up coming through later .
Speaker #6: But I think that's in good shape . And on the same timeline with regard to unit three , our Bangalore biologics facility , as I said in my remarks , we're very pleased that that is now operational and we are supplying GMP clinical supplies to a US biotech .
Speaker #6: Of course , that's just the start . We have more to do and we'll look to build on that going forward . And one of the implications of that , you know , Deepak spoke to in terms of that now operationalizing , you know , creates the depreciation that that Deepak spoke about in his remarks .
Speaker #10: Thanks . Just a quick one on the phase three clinical trial contract that we won . So given that this is a new foray and so far we've largely focused on bed studies and early stage trials , does this foray entail some investments from our side to to , you know , get into these large phase three trials ?
Speaker #6: So, the patient recruitment will be split between India, where we've already got a well-established platform and capability, with strong connections into the hospital networks and with the appropriate investigators in the United States.
Speaker #6: We'll work with a collaborator , you know , and operationally , of course , you know , we will we'll will work with them .
Speaker #6: So in terms of investment , incremental , nothing significant here . And we'll operationalize it . You know , I think before the end of this fiscal .
Speaker #6: But as I said in , in response to one of the earlier questions , you know , we see the the bigger economics of this global trial flowing through in fiscal 27 and 28 .
Speaker #6: It's a multi-year trial . And we would expect the economics to to flow and reflect that .
Speaker #10: Thanks , Peter . Thanks for taking my questions .
Speaker #4: Thank you . We'll take our next question from the line of Alan Carr , Garuda from Kotak Institutional Equities . Please go ahead .
Speaker #10: Hi . Good afternoon everyone .
Speaker #11: So just a follow up on the clinical trials as well . Wanted to understand what prompted the decision to get into this . And we have had a minimal presence in this for the last many years .
Speaker #11: But just in terms of timing , what exactly was the factor which prompted this decision to get into a larger presence within clinical trials ?
Speaker #11: Now ? And maybe a second question there is from a regulatory standpoint , particularly in India , do you think the the overall environment is now more conducive to conduct global clinical trials ?
Speaker #6: So let me start . I'll do the first question . First . I may ask you to repeat the second half on the first one .
Speaker #6: What's prompted us Syngenes had clinical trial capabilities for well over a decade . In all . But those have been largely focused on human volunteers .
Speaker #6: And early stage trials . The Indian hospital capability and quality is dramatically improved over the last 10 to 15 years , and now provides a substantial platform to access patients for clinical trials .
Speaker #6: And the investigators and the investigator network in India , has also , I believe , significantly advanced . And the capability and quality is now , you know , really strong and a lot of companies are looking and indeed are so are the regulators is in including diverse patient population bases in their later stage trials toward approval .
Speaker #6: So, I think there have been sort of fundamental dynamics that have underpinned the emergence of the Indian clinical trial platform and access to patients.
Speaker #6: Syngene has been evolving in that regard and has now established very strong networks and collaborations, both with hospital groups and with investigators across a wide range of therapeutic areas. There is clearly a strong interest in engaging and accessing Indian capabilities.
Speaker #6: And the Indian patient population is increasing . So we're looking to move with that dynamic in India . And , and and we believe that with the capabilities and platform strengths that we've developed in India and working in collaboration with select Cros and other geographies , as I described in my remarks , that that is a natural expansion for us into a very large market opportunity .
Speaker #6: So the fundamentals are right . Syngene is very well placed to capitalize on this . You know , as as an Indian based CRO , both to access the Indian hospital and patient populations and through partnerships to expand into global clinical trials .
Speaker #6: I'd like to please , please repeat your second , second part of the question .
Speaker #11: So the second one , Peter , was on from a regulatory standpoint in India , do you think the environment is now more conducive because there have been challenges in the past ?
Speaker #11: Has anything changed as far as the regulatory environment for clinical trials in India is concerned?
Speaker #6: I think the answer is directionally , yes . And clearly yes . And , you know , there have and I think there are there are also encouraging signs that , you know , the regulatory environment in India will continue to sort of improve in terms of ease of doing business and speed of doing business .
Speaker #6: And again , I think those are dynamics that are the wider global customer base sees and are important in playing into decisions to increase .
Speaker #6: You know, their engagement of the Indian hospital investigator and patient access to complement their global capabilities. So definitely, I think the answer is yes.
Speaker #6: And we look forward to more , you know , regulatory improvements to , you know , to help accelerate that opportunity .
Speaker #11: That's helpful . Peter , the second one is can you comment on the peptide facility you spoke about in Mangalore ? More details in terms of the investment entailed , how much capacity you are looking to create , is this more of restructuring of your existing facility or it's more brownfield possible to share any such details ?
Speaker #6: Yes . I can expand a little bit . It'll build on what I said earlier , and I think some of Deepak's comments , you know , as you know , we we have been in into peptides in early discovery for some time and we strengthened that , you know , with a with a very contemporary facility installation earlier this year in , in Bangalore , a discovery peptide laboratory which enhanced our capabilities in peptide synthesis in purification and characterization with multiple synthesizers , you know , very , very obviously , again , the peptide global market opportunity , which is of course , led by GLP , has been explosive in the nature of its growth .
Speaker #6: But behind the front end of that , with Glps into Diabesity . And so into diabetes and obesity , there is a very wide and deep range of clinical programs exploring the utility of peptides well beyond diabetes and obesity .
Speaker #6: And that provides , I think , for us , a very attractive opportunity . And in order to enhance our capability to engage and to grow into that and building on the discovery capability , when I'm going to establish a facility and this will be in Mangalore , which increases our scale and enables us to go into clinical scale and into commercial scale .
Speaker #6: I mean , this is not commercial scale at the GLP level , but it will be commercial scale on in other areas . And it takes us from a toehold to a foothold .
Speaker #6: And then from there , you know , I think we'd be looking to build on that as well . It's a it's a it's a very good example of an area of opportunity , a very fast growing modality with , with , with peptides , where we're building on our pre-existing capabilities and enhancing them to enable us to access and grow into this fast growing market opportunity .
Speaker #11: I impossible to share details , sir Peter investment entailed how much capacity you're looking to create timelines as well ?
Speaker #6: No , I mean like I think I mean , I can give a little bit on that timelines . I think this is , you know , this will we'll build it this year and it'll come into operations next year .
Speaker #6: You know , in terms of scale , I'm , you know , this will enable us to move into clinical and into commercial and it will complement our preclinical and discovery capacities that exist in , in Bangalore .
Speaker #6: But but we're not going to sort of disclose any more details on that at this stage .
Speaker #11: Yeah . That's it from my side . Thank you .
Speaker #4: Thank you . We'll take our next question from the line of Madhav Mada from Phil . Please go ahead .
Speaker #11: Yeah . Hi . Good afternoon . I had a very basic question . This global phase .
Speaker #12: Three clinical trials, which we're doing. Could you just, like, just very basic help me understand what is the source of revenue for Syngene?
Speaker #12: Like, will we be generating revenue from helping recruit for the trial itself and also supplying sort of the trial quantities from a facility?
Speaker #12: Or how does it work ? Sorry . Maybe very basic question .
Speaker #7: It's it's a it's a nature of a service contract as well . Right . So we we would do the trials on patients and and generate revenue through the , through the client that asks us to do the trials .
Speaker #12: Okay . And we are paid on both .
Speaker #6: Let me build on that a little bit . I mean it's Deepak said this is a service contract that will enter with , with a with a client customer .
Speaker #6: And of course it will be built around the patient numbers and the analytics that we will do in terms of the samples and , and the follow up and the reporting and so forth .
Speaker #6: But it's basically a , you know , a contract service around the scale and the scope of the clinical trial being conducted . Very standard format .
Speaker #12: Okay . So this is not linked to the new biologics facilities that you are setting up . It's not linked to supplying some quantity from there .
Speaker #12: And it gets linked to that . This is a separate business altogether .
Speaker #13: It .
Speaker #7: Yes .
Speaker #6: It's a separate business altogether. Then they're not linked.
Speaker #12: Okay . Understood . Thank you for that . And just want to understand that on the the Stellis unit as well , which we required sometime back any comments on the ramp up timelines there .
Speaker #12: That was part one . And secondly on the Zoetis sort of the , the contract as well that we have , when do we expect the like , do we .
Speaker #12: When does the destocking end? Like, when do we expect the supplies to restart for that project? Thanks.
Speaker #7: So Madhav , on the first question on unit three ramp up , we just said we commissioned the site in May . It became operational with all the regulatory licenses .
Speaker #7: In May . We started doing clinical batches now and we've supplied one GMP clinical batch to us , to a client in US .
Speaker #7: And we are now starting to see the ramp-up of that shape up, right? In terms of, sorry, the second part of your question was.
Speaker #12: The large .
Speaker #7: Product .
Speaker #12: The large molecule. Destocking. Yeah.
Speaker #13: So .
Speaker #7: Yes . So we did we did speak about the destocking happening in this year . And that's what gave us the guidance of what we've done , what we've got for FY 26 .
Speaker #7: We continue to hold on to the guidance . We saw the impact of destocking happening in the quarter . Two , that was in line with our anticipation or our expectations as well .
Speaker #7: And we're working with the with the client to ensure that , you know , it's going as what we had anticipated it to be .
Speaker #12: Would it be fair to understand that this can come back in fiscal year 27 , or that's yet to be discussed and confirmed ?
Speaker #7: I won't be able to comment much upon that because , you know , it's a little for us . We are we are providers of the of the services and the products that the clients ask for to receive an order .
Speaker #7: We fulfill the order basis . The forecast that we get . And we've got a forecast which allowed us to give you the guidance that we've given and we're holding on to the guidance right now for the years beyond .
Speaker #7: We will come at the right time . And when we talk about FY 27 , we'll guide on to that as well .
Speaker #12: Okay , perfect . Great . Thank you .
Speaker #7: Thank you .
Speaker #4: Thank you . Before we take the next question , we'd like to remind participants to ask a question . Please press star and one on your phone .
Speaker #4: We'll take our next question from the line of Chirag Dagli from DSP Investment Managers . Please go ahead .
Speaker #14: Yes . Good afternoon . Thank you for the opportunity . Sir . Is there a expansion of your role with the innovator on the animal health biologic ?
Speaker #14: You know , product ? Are there more such products because at that time you had also talked about more products for the same clients .
Speaker #14: So just how should we think about that opportunity even while this destocking sort of continues ?
Speaker #6: So let me address that question . So I mean , we are , as Deepak said , we're obviously an ongoing discussions with the client , with regard to the commercial product that we're supplying .
Speaker #6: And we do have , you know , additional discussions with them on potential additional opportunities . And in the wider lens , in animal health .
Speaker #6: We have a number of ongoing dialogues , you know , which could , you know , which could come to fruition . There as well , to complement our clear focus on , on , on , on human health .
Speaker #6: So we continue to explore all all opportunities in that regard . And that includes the existing clients and future opportunities .
Speaker #14: Is this like a near-term event ? Peter , as in , you know , next 12 months , kind of an event ? The expansion of the product portfolio for the client .
Speaker #6: Can't really guide at that level . You know , we we feel as and when you know , these things mature and materialize , we'll we'll update accordingly .
Speaker #6: But we have a wide range of discussions ongoing, and as and when they mature, we'll update.
Speaker #14: Understood . Thank you so much for that . And the second one was on the while I understand you won't give an FY 27 outlook , but when I look at history , you know , typically you've never had more than two years of single digit growth in FY 26 will be the third year of single digit growth .
Speaker #14: Typically, you know that has been followed by a very strong following year. Is this the kind of expectation you want investors to go back with?
Speaker #14: Just looking at history last , you know , 15 , 20 years , it looks like , you know , after a couple of years of single digit growth , you come back fairly strongly in context of the last three years , which have had soft growth .
Speaker #14: But you've continued to invest in capacities as well as capabilities . So just in that context , some color around , without getting into numbers , some color around FY 27 , outlook should be helpful , because if I look at history clearly looks like FY 27 and 28 should be very strong years .
Speaker #7: Let me answer the question a little differently . When we came at the beginning of the year , we said we have a single digit mid-single digit growth that we are guiding towards , and we did also call out that that mid-single digit growth was driven by a one off inventory correction by one of our clients .
Speaker #7: And we said underlying growth still continues to remain robust and strong, which is what we hold because we are holding our guidance in terms of your absolutely right.
Speaker #7: We continue to be on a strategic path of investing into the right capacities and capabilities . As we see right , and we continue to do that , we continue to follow the path .
Speaker #7: Now , I will not be able to comment upon how 27 and 28 will pan out to be . We've always come and given a guidance at the right time and at the right time .
Speaker #7: We'll come and talk about 27 to you .
Speaker #14: Is there just a follow up on that , Deepak ? Is there any reason to believe this time around ? It is different ?
Speaker #7: This time around for the history.
Speaker #14: Different history ? Yes yes yes yes .
Speaker #12: Well .
Speaker #7: Well , all I can say I can comment only upon this year and this year's guidance and what we've told you how it shapes up .
Speaker #7: I do not want to correlate a history and then do a forward projection on that . Chirag . Apologies for that . I'd like to just stick to this year and the guidance that I've given to it .
Speaker #14: Understood . Thank you so much . Best of luck .
Speaker #13: Thank you .
Speaker #4: Thank you . Next question is from the line of Suryanarayan Patra from Philip Capital , India . Please go ahead .
Speaker #15: Yeah . Thanks for this opportunity . Most of already been answered , but I will try to understand it more on the clinical opportunity .
Speaker #15: So is it the re-activation of our old ?
Speaker #13: Yeah .
Speaker #4: Mr. Patra , your voice is , you know , sounding muffled .
Speaker #15: Yeah . Now is it okay ?
Speaker #13: Please .
Speaker #15: Yeah . I'm already .
Speaker #13: Go ahead .
Speaker #15: Can you? Is it possible? Hello?
Speaker #6: Yes . It's better . Thank you .
Speaker #4: Yes. Please go ahead.
Speaker #15: Yeah . So I was just wanted to have some more information about clinical trial opportunity . Sorry .
Speaker #13: Yeah .
Speaker #15: Hello ?
Speaker #4: Hello, ma'am. Try now.
Speaker #13: Please .
Speaker #15: So my .
Speaker #4: Question .
Speaker #13: Is not .
Speaker #4: Yeah, it is better now. Please go ahead.
Speaker #13: Yes .
Speaker #15: So the only question was about the clinical trial operation, whether it is a reactivation of the old clinical business that we used to have, and if it is.
Speaker #15: Yes . So how extensive this business will be , whether it will be like all studies , toxicity studies also along with the human clinical trial material supply , along with .
Speaker #15: the the real trials .
Speaker #6: Sorry . So , Soraya , again , I'm not I'm not sure I got the whole question , but a part of it was , is this benign of old ?
Speaker #6: And in that if that was the question , you know , I think this is a substantial evolution of the clinical platform of many years ago .
Speaker #6: And it's been , you know , built around a platform on translation and clinical research where we think , you know , putting translational capabilities along with clinical , you know , affords us the opportunity for a differentiated service in an area of extreme importance to our customers as they seek to take their drug candidates and de-risk them .
Speaker #6: You know , through translational science now , which is a very wide ranging suite of capabilities and tools that will enable , for example , biomarker studies to identify suitable patient populations for the clinical phase .
Speaker #6: So this bridge between pre-clinical drug candidates and clinical candidates inside patients is a is a is a bridge of extreme importance to our customers .
Speaker #6: And we are building a platform of capabilities to support them across that bridge . And you know , as I said , translational capabilities will be very important in a in a sort of integrated joined up and end to end capability to then enhance the clinical trials output .
Speaker #6: It's a very exciting area for us . It's an it's an area of extreme importance to our customers as they look to bridge their drug candidates into human studies and ensure that , you know , those studies , protocols , designs and patient populations are optimized against the the biological target and the diseases that these drug candidates are designed for .
Speaker #6: So it's a very much enhanced , elevated and advanced platform capability than maybe you're talking about of old with the clinic where it was centered around a human pharmacology unit doing studies for generic companies .
Speaker #6: It's transformatively shifted from that , and we will continue to build on it .
Speaker #13: Okay .
Speaker #15: So what resources that we would have created to attract this kind of business opportunity and let's say over a longer period of time , let's say if you consider three year period how big this opportunity can be for the entire company , like Syngene .
Speaker #6: Sir , I mean , I think I said in my opening remarks and to the answer to 1 or 2 other questions , we we see the translation and clinical research part of our business , which today is a relatively small business as an area of strategic growth opportunity , you know , and we're very excited with the award of our first global clinical trial .
Speaker #6: As I described earlier . And we're looking to build on that . And I think the the outlook is very positive for this .
Speaker #6: I mean , we are not in a position to give any quantitative forward guidance or outlook . I mean , what is very , very clear is that the translational and the clinical trial space on the global CRO landscape is a is a large part of the market opportunity , and it remains , you know , a fast growing part of that opportunity .
Speaker #6: And we believe that we're we've built and will continue to enhance a platform capability that will enable Syngene to engage in that market opportunity in a differentiated way .
Speaker #6: You know , and with the opportunity to access the market opportunity and create a strong growth driver for our business in in many years to come .
Speaker #6: That's the nature of the opportunity . So I at this stage , but we're not going to give any more characterization on on quantification .
Speaker #15: So just last one bit on here . So whether this China plus one is also a kind of a trigger here in the CTO because China was the biggest market for the CTOs .
Speaker #15: So the China plus one is a kind of big driver for a clinical opportunities for Indian players . And hence that we are seeing for engine .
Speaker #6: So I'm the questions breaking up . So I don't think I'm hearing it properly . .
Speaker #7: It's China . And for us to see the growth . So .
Speaker #6: For clinical trials . If the question was is China plus one a driver for us on clinical trials ? The answer is no .
Speaker #6: You know , that's not a factor in our consideration at this stage . And we clearly look at the global market opportunity more broadly than that .
Speaker #6: And it's not a driver in any of our decision making . The decision making around consolidating a capability , bridging pre-clinical and clinical to include translation sciences in the suite of capabilities that I've just described was taken on the basis of the global market opportunities .
Speaker #6: It stands , and there was no consideration of a China plus one component to that the global market opportunity is very significant . We're a you know , we're we're starting our play in that market .
Speaker #6: And and we're very excited about the opportunity .
Speaker #15: Definitely sir . Thank you . Wish you all the best .
Speaker #4: Thank you . We'll take our next question from the line of Aditya Chheda from Incred Asset Management . Please go ahead .
Speaker #15: Hi . Afternoon . A couple of questions . First .
Speaker #12: On .
Speaker #15: The overall return on equity profile for the .
Speaker #12: Company .
Speaker #15: Directionally has .
Speaker #12: Seen a double .
Speaker #15: Whammy of lower asset .
Speaker #12: Turns and .
Speaker #15: Even .
Speaker #12: Lower part margins . If you can .
Speaker #15: Sort of share your outlook .
Speaker #12: Considering you have .
Speaker #15: Invested roughly $200 million .
Speaker #12: Over the .
Speaker #15: Last two years , how do you sort of place your .
Speaker #12: Incremental capital allocation to improve this and if you can .
Speaker #15: Share what kind .
Speaker #12: Of investments are you looking over FY 26 and 27 .
Speaker #15: These were the first questions .
Speaker #13: Thanks .
Speaker #7: So completely with you in terms of , you know , us going ahead and investing and that having an impact on the return on capital .
Speaker #7: But our investments that we've made has been conscious decisions of building capacity in businesses that we are seeing growth in . We if in my previous conversations , I've always mentioned that we look at investments in twofold , one is capacity and capability , and we continue to strategically invest as we deem right into into areas , into modalities , into capacities .
Speaker #7: Right . And the last few years , we've invested into our biologics capacities , we we would always appreciate the fact that these capacities have a gestation before they ramp up .
Speaker #7: And even in the guidances that we've given for both our biologics facility in Bangalore and the Bayview facility , we said we will get to an asset turnover in a 3 to 5 year time horizon , and we did call that in this transition .
Speaker #7: There will be an impact that will come to our margins and our and our returns , but we believe the the investments that we are making is , is strategically the right investments to , to to make and helps us look at opportunities to , to capitalize on in the near and the long term horizon in terms of the impact on margin that you just mentioned .
Speaker #7: I think , as I said , we continue to hold the guidance for this year . We continue to rationale the fact that the guidance of this year , of the mid 20s on EBITDA and a declining Pat for this year was also transient in nature and more importantly , it was also driven by the one offs that we are seeing in the business .
Speaker #7: So, I think if I were to zoom out and look at this situation, our returns on capital right now seem a little muted.
Speaker #7: But but the fact remains is that it is an investment into the future , which always will have a gestation to it . I'll pause and check if Peter has any comments .
Speaker #15: Got it. Can you call it the capital?
Speaker #12: Investments that you are looking to do over the next two years in absolute number ? So .
Speaker #7: So I will . As I said , we typically guide for a year at a time , and right now we've not guided for anything beyond 26 .
Speaker #7: For 26 , we've guided to a $45 million of CapEx investments with an incremental $10 million of CapEx investment going into our Bayview facility , as well .
Speaker #7: So, we are holding on to that for the moment. Any incremental changes to the guidance for the future period, we'll come to you at the appropriate point in time when we guide for the years forward.
Speaker #15: Got it. And the last question is.
Speaker #12: You can correct me if I'm wrong . The human clinical trial business margins are typically lower than the general drug discovery business . Is that true or it should be .
Speaker #12: It would . be unfair to make . that inference , etc. . .
Speaker #7: The way I look at this is I we do not break down our margins and we do not call out our margins by business .
Speaker #7: Yet. And therefore, I do not want to speculate for this moment. As I said, we are very pleased with the first global trial that we've got.
Speaker #7: We want to capitalize on a market that's growing , and we'll focus right now in growing that part of the business , which Peter alluded to .
Speaker #7: The fact that it has gone through a significant evolution, and we see great potential as the ecosystem in the country is also building up and supporting the growth that we have.
Speaker #4: Thank you . Ladies and gentlemen . Due to time constraints , we'll take that as a last question for today . I now hand the conference over to Miss Nandini Agarwal for closing comments .
Speaker #4: Over to you .
Speaker #5: Well , thank you all for joining us on the call today . In any further questions you have , you can get in touch with the team .
Speaker #5: Thank you and have a good day . Bye .
Speaker #4: Thank you . On behalf of Sinjin International Limited , that concludes this conference . Thank you for joining us . And you may now disconnect your lines .