Q2 2026 Syngene International Ltd Earnings Call

July 30, 2026

Operator: Ladies and gentlemen, good day and welcome to Syngene International's Q1 FY27 Earnings Conference Call. As a reminder, all participant 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 touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Ms. Nandini Agarwal. Thank you and over to you, ma'am.

Operator: Ladies and gentlemen, good day and welcome to Syngene International's Q1 FY2027 Earnings Conference Call. As a reminder, all participant 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 touchtone phone. Please note that this conference is being recorded. I now hand over the conference to Ms. Nandini Agarwal. Thank you and over to you, ma'am.

Speaker #1: 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.

Speaker #1: I now hand over the conference to Ms. Nandini Agarwal. Thank you, and over to you, ma'am.

Speaker #2: Good morning, everyone. Thank you for joining us on this call today to discuss Syngene's second quarter results for FY2026. To discuss the financial and business performance for the period, we have on this call today Ms. Kiran Mazumdar-Shaw, Syngene's Executive Chairperson; Mr. Siddharth Mittal, Managing Director and Chief Executive Officer; and Mr. Deepak Jain, Chief Financial Officer.

Nandini Agarwal: Good morning, everyone. Thank you for joining us on this call today to discuss Syngene's Q1 results for FY27. To discuss the financial and business performance for the period, we have on this call today, Ms. Kiran Mazumdar-Shaw, Syngene's Executive Chairperson; Mr. Siddharth Mittal, Managing Director and Chief Executive Officer; and Mr. Deepak Jain, Chief Financial Officer. After the opening remarks, we will be happy to answer any questions you might have. 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. 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 transcript will be made available.

Nandini Agarwal: Good morning, everyone. Thank you for joining us on this call today to discuss Syngene's Q1 results for FY2027. To discuss the financial and business performance for the period, we have on this call today, Ms. Kiran Mazumdar-Shaw, Syngene's Executive Chairperson; Mr. Siddharth Mittal, Managing Director and Chief Executive Officer; and Mr. Deepak Jain, Chief Financial Officer. After the opening remarks, we will be happy to answer any questions you might have. 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. 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 transcript will be made available.

Speaker #2: After the opening remarks, we will be happy to answer any questions you might have. 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 #2: 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 transcript will be made available.

Speaker #2: With this, I will now turn over the call to our Executive Chairperson, Ms. Kiran Mazumdar.

Nandini Agarwal: With this, I will now turn over the call to our Executive Chairperson, Ms. Kiran Mazumdar.

Speaker #3: Thank you, Nandini. Good morning, everyone, and thank you for joining us. Before I begin, I would like to welcome Siddharth Mittal to his new role as Managing Director and CEO of Syngene.

Kiran Mazumdar-Shaw: Thank you, Nandini. Good morning, everyone, thank you for joining us. Before I begin, I would like to welcome Siddharth Mittal to his new role as Managing Director and CEO of Syngene. During his 13 years at Biocon, Siddharth has played a key role in shaping the strategic direction of the company, helped transform its commercial and operational capabilities, position the company for sustainable growth. Having worked with him closely, I have every confidence that his business acumen, leadership experience, and execution-focused approach equips him well to lead Syngene, not only through the current transient period, also to set a strong foundation for the next phase of growth and value creation. Let me start by saying that FY27 is a year of transition for Syngene. It is a year of course correction, strategic renewal, and disciplined execution under a new leadership team.

Kiran Mazumdar-Shaw: Thank you, Nandini. Good morning, everyone, thank you for joining us. Before I begin, I would like to welcome Siddharth Mittal to his new role as Managing Director and CEO of Syngene. During his 13 years at Biocon, Siddharth has played a key role in shaping the strategic direction of the company, helped transform its commercial and operational capabilities, position the company for sustainable growth. Having worked with him closely, I have every confidence that his business acumen, leadership experience, and execution-focused approach equips him well to lead Syngene, not only through the current transient period, also to set a strong foundation for the next phase of growth and value creation. Let me start by saying that FY2027 is a year of transition for Syngene. It is a year of course correction, strategic renewal, and disciplined execution under a new leadership team.

Speaker #3: During his 13 years at BioCon, Siddharth has played a key role in shaping the strategic direction of the company, helped transform its commercial and operational capabilities, and positioned the company for sustainable growth.

Speaker #3: Having worked with him closely, I have every confidence that his business acumen, leadership experience, and execution-focused approach equip him well to lead Syngene not only through the current transient period but also to set a strong foundation for the next phase of growth and value creation.

Speaker #3: Let me start by saying that FY27 is a year of transition for Syngene. It is a year of course correction, strategic renewal, and disciplined execution under a new leadership team.

Speaker #3: While the environment remains challenging, we have used the last few months to take a hard look at our business, identify where we have lost momentum, and define a clear path to restoring sustainable, profitable growth.

Kiran Mazumdar-Shaw: While the environment remains challenging, we have used the last few months to take a hard look at our business. Identify where we have lost momentum define a clear path to restoring sustainable, profitable growth. Over the past few years, I believe we have drifted towards a larger share of commoditized research services where differentiation is limited pricing pressure is inevitable. At the same time, our biologics manufacturing business became disproportionately dependent on a single large customer. The loss of that business has had a significant impact on our near-term financial performance has reinforced the importance of building a more diversified and resilient commercial portfolio. These have been important learnings for us. They have sharpened our strategic focus have centered our resolve to reposition Syngene around areas where we can create sustainable competitive advantage.

Speaker #3: Over the past few years, I believe we have drifted towards a larger share of commoditized research services, where differentiation is limited and pricing pressure is inevitable.

Speaker #3: At the same time, our biologics manufacturing business became disproportionately dependent on a single large customer. The loss of that business has had a significant impact on our near-term financial performance.

Speaker #3: And as reinforced, the importance of building a more diversified and resilient commercial portfolio—these have been important learnings for us. They have sharpened our strategic focus and have strengthened our resolve to reposition Syngene around areas where we can create sustainable competitive advantage.

Speaker #3: And I'm pleased that I have now stepped in as Executive Chairperson to make this happen. Our first priority is to build a much stronger commercial engine.

Kiran Mazumdar-Shaw: I'm pleased that I am now stepping as the Executive Chairperson to make this happen. Our first priority is to build a much stronger commercial engine. Winning business, deepening customer relationships, expanding strategic partnerships across global biotech and pharmaceutical companies will be central to our growth agenda. We are strengthening our commercial organization under the leadership of Abhijit Zutshi, a former Chief Commercial Officer of Biocon Generics business, who has delivered very significant performance during his role. Abhijit will make sure that we have a sharper market segmentation, greater customer engagement, a more focused business development approach. Second, this is very important, we are reaffirming CDMO as the primary growth engine of long-term growth. We believe the industry continues to offer significant opportunities for high-quality partners with scientific depth, development expertise, and world-class manufacturing capabilities.

Speaker #3: Winning business, deepening customer relationships, and expanding strategic partnerships across global biotech and pharmaceutical companies will be central to our growth agenda. We are strengthening our commercial organization under the leadership of Abhijit Gucci, a former Chief Commercial Officer of Biocon Genetics Business, who delivered significant performance during this role.

Speaker #3: Abhijit will make sure that we have sharper market segmentation, greater customer engagement, and a more focused business development approach. Second, and this is very important, we are reaffirming CDMO as the primary growth engine for long-term growth.

Speaker #3: We believe the industry continues to offer significant opportunities for high-quality partners with scientific depth, development expertise, and world-class manufacturing capabilities. Our investments in discovery, development, and manufacturing position us well to capture this opportunity.

Kiran Mazumdar-Shaw: Our investment in discovery, development, and manufacturing positions us well to capture this opportunity. Third, we are moving decisively up the value chain by expanding our differentiated discovery capabilities. As you all know, artificial intelligence is transforming drug discovery, Syngene intends to be at the forefront of this evolution. We are integrating AI across the discovery workflow, combining computational biology, machine learning, and advanced data science with deep experimental expertise to accelerate and improve the quality of research outcomes. Alongside AI, we are investing in emerging scientific modalities and strengthening our capabilities in translational science and clinical research, enabling us to partner with customers from target identification to early clinical development. Finally, large molecule CDMO remains one of Syngene's strongest strategic differentiators.

Speaker #3: Third, we are moving decisively up the value chain by expanding our differentiated discovery capabilities. As you all know, artificial intelligence is transforming drug discovery, and Syngene intends to be at the forefront of this evolution.

Speaker #3: We are integrating AI across the discovery workflow, combining computational biology, machine learning, and advanced data science with deep experimental expertise to accelerate and improve the quality of research outcomes.

Speaker #3: Alongside AI, we are investing in emerging scientific modalities and strengthening our capabilities in translational science and clinical research, enabling us to partner with customers from target identification through early clinical development.

Speaker #3: Finally, large molecule CDMO remains one of Syngene's strongest strategic differentiators. Few companies globally can offer the breadth of integrated biologics capabilities that we have built.

Kiran Mazumdar-Shaw: Few companies globally can offer the breadth of integrated biologics capabilities that we have built, from cell line development and process optimization to clinical and commercial scale manufacturing. Combined with our expertise in biopharmaceutical manufacturing and our expanding global manufacturing footprint, especially the Bayview facility in the US, positions Syngene as a trusted end-to-end partner for biologics innovators. While the recent setback in biologics manufacturing has been significant, it has not diminished the strength of our capabilities or the long-term opportunities before us. The current year is therefore one of rebuilding rather than maximizing growth. For the full financial year, we do expect a single-digit decline in revenue in INR terms and EBITDA margins in the mid-20s. Our focus is on restoring commercial momentum, improving asset utilization, driving operational efficiency, and creating a higher quality, more differentiated business.

Speaker #3: From cell line development and process optimization to clinical and commercial-scale manufacturing, combined with our expertise in biopharmaceutical manufacturing and our expanding global manufacturing footprint—especially the Bayview facility in the US—positions Syngene as a trusted end-to-end partner for biologics innovators.

Speaker #3: While the recent setback in biologics manufacturing has been significant, it has not diminished the strength of our capabilities or the long-term opportunity before us.

Speaker #3: The current year is, therefore, one of rebuilding rather than maximizing growth. For the full financial year, we do expect a single-digit decline in revenue, in rupee terms, and EBITDA margins in the mid-20s.

Speaker #3: Our focus is on restoring commercial momentum, improving asset utilization, driving operational efficiency, and creating a higher quality, more differentiated business. By the end of this fiscal year, we expect these actions to position Syngene for a return to profitable and sustainable growth, which will be delivered from FY28 onwards.

Kiran Mazumdar-Shaw: By the end of this fiscal, we expect these actions to position Syngene for a return to profitable and sustainable growth, which will be delivered from FY28 onwards. We are confident that the strategic choices we are making today will create a stronger, more resilient, and more differentiated Syngene for the future. With that, I'd like to hand over to Siddharth to take you through the quarter's performance and our strategic priorities in greater detail. Over to you, Siddharth.

Speaker #3: We are confident that the strategic choices we are making today will create a stronger, more resilient, and more differentiated Syngene for the future. Now, with that, I'd like to hand over to Siddharth to take you through the quarter's performance and our strategic priorities in greater detail.

Speaker #3: Over to you, Siddharth.

Speaker #2: Thank you, Kiran, and good morning, everyone. I appreciate the opportunity to lead Syngene at such an important point in its journey, and I would like to thank the Board of Directors for the confidence they've placed in me.

Siddharth Mittal: Thank you, Kiran. Good morning, everyone. I appreciate the opportunity to lead Syngene at such an important point in its journey. I would like to thank the board of directors for the confidence they've placed in me. The CDMO industry continues to present significant opportunities for long-term growth. I'm very confident that Syngene's strong scientific foundation, differentiated capability, and trusted customer relations position us well to capture these opportunities. My immediate focus will be on translating these priorities that Kiran outlined into a very disciplined execution and tangible business outcomes. This will entail sharpening our commercial execution, strengthening delivery across our businesses, and building a whole agile, cost-competitive organization. While we will continue to invest in our discovery and CDMO capabilities, AI and digital technologies and differentiated scientific expertise will definitely deliver greater value for our customers and strengthen our competitive position.

Speaker #2: The CDMO industry continues to present significant opportunities for long-term growth, and I'm very confident that Syngene's strong scientific foundation, differentiated capabilities, and trusted customer relations position us well to capture these opportunities.

Speaker #2: So my immediate focus will be on translating these priorities that Kiran outlined into very disciplined execution and tangible business outcomes. This will entail sharpening our commercial execution, strengthening delivery across our businesses, and building a more agile, cost-competitive organization.

Speaker #2: While we will continue to invest in our discovery and CDMO capabilities, AI and digital technologies, and differentiated scientific expertise will definitely deliver greater value for our customers and strengthen our competitive position.

Speaker #2: Let me now take you through key business highlights for the quarter. Syngene signed a memorandum of understanding with the Translational Health Science and Technology Institute, a premier institution under the Department of Biotechnology, Government of India. The collaboration establishes an operational partnership for early and late-phase clinical development, translational research, and bioanalytical sciences.

Siddharth Mittal: Let me now take you through key business highlights for the quarter. Syngene signed a memorandum of understanding with Translational Health Science and Technology Institute, a premier institution under Department of Biotechnology, Government of India. The collaboration establishes an operational partnership for early- and late-stage clinical development, translational research, and bioanalytical sciences. The collaboration will also enable the evaluation and execution of first-in-human and Phase I clinical programs, along with bioanalytical, biomarker, and patient-based clinical research programs. We also continue to strengthen SynAI, our AI-enabled scientific platform for accelerating drug discovery services. The company developed gigascale virtual screening capabilities, enabling larger libraries of molecules to be screened and prioritized, accelerating the identification of promising drug candidates. We also advanced our AI-driven de novo design capability, helping accelerate design and optimization of novel drug candidates.

Speaker #2: The collaboration will also enable the evaluation and execution of first-in-human and Phase 1 clinical programs, along with bioanalytical, biomarker, and patient-based clinical research programs.

Speaker #2: We also continue to strengthen SynAI, our AI-enabled scientific platform for accelerating drug discovery services. The company is developing gigascale virtual screening capabilities, enabling larger libraries of molecules to be screened and prioritized, thereby accelerating the identification of promising drug candidates.

Speaker #2: We also advance our AI-driven de novo design capabilities, helping accelerate the design and optimization of novel drug candidates. Now, these investments are helping us enhance productivity, improve speed to science, and hence, create greater value for our customers.

Siddharth Mittal: Now, these investments are helping us to enhance productivity, improve speed to science, and hence create a greater value for our customers. We are also pleased to be recognized for the second consecutive year in TIME magazine and Statista's World's Most Sustainable Companies 2026 ranking. Selected from more than 5,800 companies across 43 countries, this recognition reflects the strength of our sustainability agenda and reinforces our reputation as a trusted global partner for our customers. Now let me turn to the financial performance for the quarter. Revenue from the operations for the quarter was at INR 736 crores, a decline of 16% year-on-year, primarily reflecting the absence of Postech from Zoetis during this quarter. Additionally, we also experienced the attrition of few clients within our Research Services business.

Speaker #2: We are also pleased to be recognized for the second consecutive year in Time magazine and Status Stars World's Most Sustainable Companies 2026 ranking. Selected from more than 5,800 companies across 43 countries, this recognition reflects the strength of our sustainability agenda and reinforces our reputation as a trusted global partner for our customers.

Speaker #2: So, let me turn to the financial performance for the quarter. Revenue from operations for the quarter was at $736 million, a decline of 16% year on year.

Speaker #2: Primarily, this reflects the absence of offtake from Zoetis during this quarter. Additionally, we also experienced the attrition of a few clients in our research services business.

Siddharth Mittal: Research Services accounted for 78% of the sales, while CDMO accounted for the remaining 22% for the quarter. Operating EBITDA for the quarter stood at INR 91 crores with an EBITDA margin of 12%. The margin performance reflected the impact of lower revenues together with foreign exchange hedge loss of INR 50 crores during the quarter. This impact was partially offset by our ongoing cost optimization program, including employee-related costs and other expenses. Profit after tax, but before exceptional items, was at INR 1 crore. During the quarter, the company explained the exceptional charge of INR 10 crore in the form of taxes related to termination benefits extended to employees in accordance with the company-approved policy. Consequently, reported profit after tax was INR -9 crores.

Speaker #2: Research services accounted for 78% of the sales, while CDMO accounted for the remaining 22% for the quarter. Operating EBITDA for the quarter stood at $91 million, with an EBITDA margin of 12%.

Speaker #2: The margin performance reflected the impact of lower revenues, together with a foreign exchange hedge loss of ₹50 crore during the quarter. This impact was partially offset by our ongoing cost optimization program, including employee-related costs and other expenses.

Speaker #2: Profit after tax but before exceptional items was at ₹1 crore. During the quarter, the company recognized an exceptional charge of ₹10 crore, net of taxes, related to termination benefits extended to employees in accordance with the company-approved policy.

Speaker #2: Consequently, reported profit after tax was a negative ₹9 crore. Capital expenditure during the quarter was approximately ₹70 crore, primarily in our Bayview facility, and other investments across technology platforms, including automation and AI capabilities.

Siddharth Mittal: Capital expenditure during the quarter was approximately INR 70 crores, primarily in our Bayview facility and other investments across technology platforms, including automation and AI capabilities. Despite the near-term challenges, our balance sheet remains strong. We ended the quarter with a net cash balance of INR 1,541 crores. We will continue to make investments throughout the year, primarily in operationalizing our Bayview facility, expanding our capabilities, and advancing new modalities that will strengthen our long-term competitiveness and position Syngene for future growth. Let me conclude by reiterating that our priorities are clear and the focus of the management team is now on executing them consistently, enhancing operational performance, and delivering better outcomes for our customers and stakeholders. With that, let me open the line for questions and answers. Thank you.

Speaker #2: But despite the near-term challenges, our balance sheet remains strong. We ended the quarter with a net cash balance of ₹1,541 crore, and we will continue to make investments throughout the year, primarily in operationalizing our Bayview facility, expanding our capabilities, and advancing new modalities that will strengthen our long-term competitiveness and position Syngene for future growth.

Speaker #2: Let me conclude by reiterating that our priorities are clear, and the focus of the management team is now on executing and consistently enhancing operational performance, and delivering better outcomes for our customers and stakeholders.

Speaker #2: With that, let me open the line for questions and answers. Thank you.

Speaker #1: Thank you very much, Drew. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star and one on their touch-tone phone.

Operator: Thank you very much. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask questions, please press star and one on their touchtone phone. 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. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and one to ask questions. We'll take the first question from the line of Kunal Dhamesha from Macquarie. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use a handset while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may please press star and one to ask questions. We will take the first question from the line of Kunal Damesha from Macquarie.

Speaker #1: Please go ahead.

Speaker #3: Hi, good morning, and thank you for taking my question. First question, on our guidance revision—which I think earlier we had mentioned would be more or less flat revenue—and now we have revised down to a degrowth of low single digit.

Kunal Dhamesha: Hi, good morning, and thank you for taking my question. First question on our guidance revision, which I think earlier we had mentioned it will be more or less flat revenue and now we have revised down to de-growth of low single digits. What has changed? Between Q4 and Q1 leading to this revision, if you could provide some highlight here.

Speaker #3: So, what has changed between Q4 and Q1, leading to this revision? If you could provide some highlights here.

Kiran Mazumdar-Shaw: Let me start with answering that question and I'll then ask Siddharth to continue. Basically, as I mentioned earlier on, the big impact that we have felt this quarter is the loss or the absence of the Zoetis contribution to our numbers. We see a significant decline in this particular business over this fiscal. Therefore, we are, of course, working hard to fill this gap. By the time we start filling this gap with other customers, we believe it will be by the end of this fiscal, and therefore we are projecting or guiding for a slight decline in revenue.

Speaker #4: Let me start with that, answering that question and I'll then ask Siddharth to continue. Basically, as I mentioned earlier on, the big impact that we have felt this quarter is the loss of the absence of the Zoetis contribution to our numbers.

Speaker #4: We see a significant decline in this particular business over this fiscal, and therefore, we believe that, you know, we are of course working hard to fill this gap, but by the time we start filling this gap with other customers, we believe it will be by the end of this fiscal. And therefore, we are projecting or guiding for a slight decline in, you know, revenue.

Speaker #2: Yes, my name is Kunal. We've, of course, had a hard look at what the discussions are with our various customers and the pipeline.

Siddharth Mittal: If I may just add, Kunal, we've of course, had a hard look at what are the discussions going on with our various customers in the pipeline. I think Kiran made a little opening comment that we are looking at sharpening our focus on commercial execution and by focusing on CDMO as a prime growth driver and, of course, differentiated offerings in the discovery business. I think while we get the new commercial organization to fire, there will be a gestation time from the time we get the RFPs and then translate that business into revenue. What we have guided for is what we believe is the realistic view of where we will end up in the year. Of course, we have also said that H1 is where we will see a significant impact.

Speaker #2: I think Kevin did a little, you know, opening comments that we are looking at sharpening our focus on commercial execution by focusing on CDMO as a prime growth driver, and of course, differentiated offerings in the Discovery business.

Speaker #2: And I think while we get the new commercial organization to fire, we, of course, will—there will be a gestation time from the time we get the RFPs and then translate that business into revenue.

Speaker #2: So what we have guided for is what we believe is the realistic view of where we will end up in the year. But of course, we have also said that H1 is where we will see a significant impact and H2 we have better visibility on both CDMO as well as our discovery businesses.

Siddharth Mittal: In H2, we have a better visibility on both CDMO as well as our discovery businesses.

Speaker #3: And just to follow up on that, when we are saying that FY28 would be a better growth year for us, right? I mean, we are trying to fill this gap with newer products.

Kunal Dhamesha: Just a follow-up on that. When we are saying that FY28 would be a better growth year for us, right? We are trying to fill this gap with newer product. My understanding is, as you highlighted, that these RFPs take time to convert, and then there is a tech transfer involved. In certain cases, there is a requirement of plant inspection, et cetera. One question out of it is, this gap, which is coming from a commercial molecule, will it be filled with, let us say, clinical molecules or commercial molecule? If it is commercial molecule, do we have strong visibility here or we are still at the RFP stage?

Kunal Dhamesha: Just a follow-up on that. When we are saying that FY2028 would be a better growth year for us, right? We are trying to fill this gap with newer product. My understanding is, as you highlighted, that these RFPs take time to convert, and then there is a tech transfer involved. In certain cases, there is a requirement of plant inspection, et cetera. One question out of it is, this gap, which is coming from a commercial molecule, will it be filled with, let us say, clinical molecules or commercial molecule? If it is commercial molecule, do we have strong visibility here or we are still at the RFP stage?

Speaker #3: But my understanding is, as you highlighted, that these RFPs take time to convert, and then there is a tech transfer involved in certain cases.

Speaker #3: There's a requirement for plant inspection, et cetera. So, one question out of it is: this gap which is coming from a commercial molecule—will it be filled with, let's say, clinical molecules or commercial molecules?

Speaker #3: If it is a commercial molecule, do we have strong visibility here, or are we still at the RFP stage?

Siddharth Mittal: It's a combination of both. We do have certain commercial molecules, and I think I would like to also specifically mention Mangalore. We all are aware that Mangalore had a very low utilization in the past years. We have had very good discussions and few lock-ins for both commercial as well as clinical molecules from Mangalore. This fiscal year itself, we will see a significant ramp-up in utilization. The increase in utilization will continue in FY28, which will, of course, drive the revenue growth in our small molecule CDMO business. As far as the large molecule CDMO business is concerned, again, we are looking at operationalizing business. By end of this year, we have discussions going on with prospective customers who want to utilize this facility which will drive revenue growth in FY28.

Siddharth Mittal: It's a combination of both. We do have certain commercial molecules, and I think I would like to also specifically mention Mangalore. We all are aware that Mangalore had a very low utilization in the past years. We have had very good discussions and few lock-ins for both commercial as well as clinical molecules from Mangalore. This fiscal year itself, we will see a significant ramp-up in utilization. The increase in utilization will continue in FY2028, which will, of course, drive the revenue growth in our small molecule CDMO business. As far as the large molecule CDMO business is concerned, again, we are looking at operationalizing business. By end of this year, we have discussions going on with prospective customers who want to utilize this facility which will drive revenue growth in FY2028.

Speaker #2: It's a combination of both. We do have certain commercial molecules, and I think I would like to also specifically mention Mangalore. You know, we all are aware that Mangalore had a very low utilization in the past years.

Speaker #2: We have had very good discussions and few lock-ins. So both commercial as well as clinical molecules from Mangalore. And this this fiscal year itself, we will see a significant ramp up in utilization and that utilization the the increase in utilization will continue in FY28, which will of course drive the revenue growth in our small molecule CDMO business.

Speaker #2: And as far as the large molecule CDMO business is concerned, again, we are looking at operationalizing Bayview by the end of this year. We have discussions going on with prospective customers who want to utilize this facility, which will drive revenue growth in FY28.

Speaker #3: And what about the Stellis facility? You know, what are we seeing there in terms of traction?

Kunal Dhamesha: What about the Stelis facility? What are we seeing there in terms of traction?

Siddharth Mittal: The customers have already signed up, and we have taken batches for a few of our customers. Again, there also we see a ramp-up happening during this year and continuing to next year. Most of these molecules in Stelis are at clinical or development stage. At this stage, we do not have a large volume commercial molecule from unit 3.

Speaker #2: The customers have already signed up, and we have taken batches for a few of our customers. Again, we also see a ramp-up happening during this year and continuing into next year.

Speaker #2: But most of these molecules in Stellis are at the clinical or development stage. So, at this stage, we do not have a large-volume commercial molecule from Unit Three.

Speaker #3: Okay. And if I may ask—

Kunal Dhamesha: Okay. If I may ask.

Speaker #4: Kunal, to answer your question, I think we have to basically really have a sharp focus on the CDMO business, which I think, you know, Siddharth and Abhijit Duchi will really now, you know, double down on.

Kiran Mazumdar-Shaw: Kunal, to answer your question, I think we have to basically really have a sharp focus on the CDMO business, which I think Siddharth and Abhijit Zutshi will really now double down on. I think that's where we have found that we have not really taken advantage of our very differentiated position because we were just being very complacent about one big customer. I think that's where the real strategy is going to be focused and that's where we believe that the real opportunity lies.

Speaker #4: I think that's where we have found that we have not really taken advantage of our very differentiated position, because we were just being very complacent about one big customer.

Speaker #4: So, I think that's where the real strategy is going to be focused, and that's where we believe the real opportunity lies.

Speaker #3: Sure, man. And if I can just ask one more, let's say segment-wise, in Q1, between discovery and CDMO, if you could highlight how the discovery business has done? And it seems that the macro environment for the discovery business is improving.

Kunal Dhamesha: Sure, ma'am. If I can just ask one more. Let's say segment-wise in Q1 between Discovery and CDMO, if you could highlight how the Discovery business has done and it seems that the macro environment for Discovery business is improving with VC funding in US up by high single digits year to date. Are we seeing that momentum in the Discovery business? If you could provide Q1 growth number for Discovery business, that would be great.

Speaker #3: With VC funding in the US up by high single digits year to date, are we seeing that momentum in the discovery business? If you could provide the Q1 growth number for the discovery business, that would be great.

Speaker #4: So Kunal, to answer that question, let me just say that we have actually addressed that particular percentage in Siddharth's opening remarks.

Kiran Mazumdar-Shaw: Kunal, to answer that question, let me answer that by saying that actually we have answered that particular percentage in Siddharth's opening remarks, where really 78% of the business came from the discovery development services and 22% came from CDMO, okay. This quarter. To answer your second question about discovery services, we believe that we need to really differentiate our discovery services. Because I think the opportunity for Syngene, which has always been ahead of the curve, is to really look at new science, new technologies that will differentiate us further, and that's where we are really focused. Otherwise, it becomes a race to the bottom because it becomes commoditized and then you're just basically providing very low-margin services, which is what has happened to us.

Speaker #4: Really, 78% of the business came from the discovery development services and 22% came from CDMO this quarter. To answer your second question about discovery services, we believe that we need to really differentiate our discovery services, because I think the opportunity for Syngene, which has always been ahead of the curve, is to really look at new science and new technologies that will differentiate us further.

Speaker #4: And that's where we are really focused. Otherwise, it becomes a race to the bottom because it gets commoditized, and then you're just basically providing very low-margin services, which is what has happened to us.

Speaker #4: So, I think we need to double down on differentiated services, and you will see this big turnaround next year because that's what we are doing this year.

Kiran Mazumdar-Shaw: I think we need to double down on differentiated services, and you will see this big turnaround next year, because that's what we are doing this year. A lot of our focus is on AI-led differentiation, and we are very confident that this will happen during this fiscal, and we will see that turnaround by the end of this fiscal.

Speaker #4: A lot of our focus is on AI-led differentiation, and we are very confident that this will happen during this fiscal. We will see that turnaround by the end of this fiscal.

Speaker #3: Sure, man. Thank you, and all the best.

Kunal Dhamesha: Sure, ma'am. Thank you, and all the best.

Speaker #1: Thank you. We'll take the next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Operator: Thank you. We'll take the next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Speaker #5: Good morning. Thank you for taking my question. Just a comment around the Discovery business and the attrition of a few clinical-stage clients, right? If you could just provide some additional details around it.

Shyam Srinivasan: Good morning. Thank you for taking my question. Just a comment around the discovery business and attrition of a few clinical stage clients. If you could just provide some additional details around it. Is it just how the pipeline has evolved, or is there something more specific for this attrition?

Speaker #5: Is it just how the pipeline has evolved, or is there something more specific for this attrition?

Speaker #4: I think the attrition has happened really because of a focus on the cost of these services. Again, I go back to the fact that as we get more and more into commoditized services, there are going to be competitors who offer these services at a much lower cost.

Kiran Mazumdar-Shaw: I think the attrition has happened really because of a focus on the cost of these services. Again, I go back to the fact that as we get more and more into commoditized services, there are going to be competitors who offer these services at a much lower cost. Therefore, we have opt out of such opportunities and there is attrition seen of such customers. That is what I, again, want to emphasize the fact that we would like to start getting back to our old formula of having very value-added, differentiated services, where I think we have basically taken the eye off the ball, and that's where we want to focus. Therefore, I think by the end of this fiscal, you will see that turnaround.

Speaker #4: We do not wish to compete on such a level, and therefore, we all opt out of such opportunities, and we then join the attrition team of such customers.

Speaker #4: And that is what I again you know want to emphasize the fact that you know we would like to start getting back to our old formula of having very very value added differentiated services where I think we have basically you know taken the eye off the ball.

Speaker #4: And that's where we want to focus. Therefore, I think by the end of this fiscal, you will see that turnaround.

Speaker #5: Got it, man. That's helpful. I'm just looking for some illustrations—like, how would you classify the commoditized part, which you are de-emphasizing in discovery, as well as what are the new value-added parts?

Shyam Srinivasan: Got it, ma'am. That's helpful. Just, I'm looking for some illustrations, like how do you classify the commoditized part, which you're de-emphasizing in discovery, as well as what are the new value-added parts? Is there something that you could illustrate so that we just get a hang of which parts is where Syngene is trying to focus on?

Speaker #5: Is there something that you could illustrate so that we just get a hang of, you know, which parts are where Syngene is trying to focus on?

Speaker #4: So maybe we should take this offline, Shyam, and I think Siddharth will be very happy to discuss this.

Kiran Mazumdar-Shaw: Maybe we should take this offline, Shyam, and I think Sildas will be very happy to discuss this.

Speaker #5: Got it. Okay, thank you. Just my second question—I'll stop after that—is, since the focus is on CDMO and the fact that we know it's going to be the new growth engine, apart from the large molecule CDMO, which clearly has seen volatility, maybe you can confirm whether it has actually had zero revenues this quarter.

Shyam Srinivasan: Got it. Okay. Thank you. Just my second question, and I will stop after that is, since the focus on CDMO and the fact that now it is going to be the new growth engine. Apart from the large molecule CDMO, which clearly has seen volatility, and maybe you can confirm, probably it has got zero revenues this quarter. Is that something that I can imply? What happens to this particular We had a 10-year contract, how does this evolve? Or are we just waiting for them to give orders? Just on CDMO, the non-large molecule CDMO piece, what are some of the things that we are likely to do? Even on this large order, how is that going to evolve from a 10-year contract perspective? Thank you. Sorry.

Speaker #5: Is that something that I can imply? And what happens to this particular—you know, we had a 10-year contract. So how does this evolve? Or are we just waiting for them to give orders?

Speaker #5: So just on CDMO, the non-large molecule CDMO piece, how what are some of the things that we can we are likely to do? And even on this large order, how is that going to evolve from a 10-year contract perspective?

Speaker #5: Thank you. Sorry.

Operator: This meeting is being recorded. Mr. Batra?

Speaker #2: Hello.

Speaker #1: This meeting is being recorded. Mr. Batra?

Speaker #2: Yes. Yeah. Hello. Am I on it?

Kiran Mazumdar-Shaw: Yes. Hello. Am I audible?

Speaker #1: Yes, sir. Please proceed.

Operator: Yes, sir. Please proceed.

Speaker #2: Yeah.

Kiran Mazumdar-Shaw: Yeah.

Speaker #1: Yes, you are audible.

Operator: Yes, you're audible.

Speaker #2: My first question was asked about the CDMO biologic business opportunity map. See, in fact, we know that the anchor client for us for the large molecule biologic business was that large molecule CDMO business was that majorities.

[Analyst]: My first question was asked about the CDMO biologic business opportunity, ma'am. See, in fact, we know that the anchor client for us for the large molecule biologic CDMO business was Zoetis, and that was a kind of a starting point also for that business in a greater way. Which challenges that we are visualizing there. Any concrete progress in terms of the kind of a clientele addition or any visibility, anything that we can share that will provide some incremental visibility about the CDMO business, wherein larger investments are also gone from our side. That would be helpful, please.

[Unknown Speaker]: My first question was asked about the CDMO biologic business opportunity, ma'am. See, in fact, we know that the anchor client for us for the large molecule biologic CDMO business was Zoetis, and that was a kind of a starting point also for that business in a greater way. Which challenges that we are visualizing there. Any concrete progress in terms of the kind of a clientele addition or any visibility, anything that we can share that will provide some incremental visibility about the CDMO business, wherein larger investments are also gone from our side. That would be helpful, please.

Speaker #2: And that was a kind of a starting point also for that business. In a greater way. So with challenges that we are visualizing there, so any any concrete progress in terms of the kind of a clientele addition or any visibility anything that we can share that will provide the some incremental visibility about the CDMO business wherein larger investments are also gone from our side.

Speaker #2: So that would be helpful, please.

Speaker #4: Yeah. So let me answer that question by saying that you know we were over dependent on one large customer and obviously a lot of investments were made then to diversify that portfolio.

Kiran Mazumdar-Shaw: Yeah. Let me answer that question by saying that we were over-dependent on one large customer, and obviously a lot of investments were made then to diversify that portfolio. By the time that happened, we had a big drop in the opportunity with the large customer. We were left with fair capacity, and we had to fill in a lot of the new capacity that we had built in anticipation of diversifying that business. We also, as you know, invested in the Bayview facility in the US, which also offers us a very large opportunity to also have a diversified geographic footprint. Now we have already obtained quite a few projects from biologics manufacturing requirements in the new facilities that we have acquired as a result of the large dependence on that one customer.

Speaker #4: But by the time that happens, we have a big drop in the the opportunity with the large customer. So we then had then we were left with spare capacity and we had to fill in a lot of the new capacity that we had built in anticipation of diversifying that business.

Speaker #4: We've also as you know invested in the Bayview facility in the US which also offers us a very large opportunity to also have a diversified geographic footprint.

Speaker #4: Now we have already obtained a quite a few projects from biologics you know requirements in in the new facilities that we have acquired as a result of the large dependence on that one customer.

Speaker #4: And of course Bayview is in the state of being made into a state of readiness. And we have already had a lot of you know expressions of interest and many of that one or two have been converted.

Kiran Mazumdar-Shaw: Of course, Bayview is in the state of being made into a state of readiness. We have already had a lot of expressions of interest, and one or two have been converted into a project-based CDMO requirement in the US. The actual revenues of that will only start showing significantly from next year. In the meantime, we are really now doubling down on filling that big gap that has been created by the loss of the one big customer. I think we have a lot cut out for us, and I'm glad that we have a very focused commercial engine now that is going to double down on this very differentiated service that we offer. I think we'll be able to share more color and visibility by next quarter.

Speaker #4: Into a project-based CMO requirement in the US. But the actual revenues of that will only start showing by the you know by significantly from next year and in the meantime we're really now doubling down on filling that big gap that has been created by the loss of the one big customer.

Speaker #4: So I think we have a lot cut off for us and I'm glad that we have a very focused commercial engine now that is going to double down on this very differentiated service that we offer.

Speaker #4: And I think we'll be able to share more you know color and visibility by you know next quarter. Because I think right now we are seeing some very good green shoots and I think we will start giving you better clarity starting next quarter.

Kiran Mazumdar-Shaw: I think right now we are seeing some very good green shoots, and I think we will start giving you better clarity starting next quarter.

[Analyst]: Sure. One more thing about the clinical trial business activities that we have forwarded recently. We have talked about it at length, but so far there is no commercial sense to the analyst community. If you can add anything to that area.

[Unknown Speaker]: Sure. One more thing about the clinical trial business activities that we have forwarded recently. We have talked about it at length, but so far there is no commercial sense to the analyst community. If you can add anything to that area.

Speaker #2: Sure. One more thing about the clinical trial business activities that we have quoted recently. So we have talked about it at length but there is so far there is no commercial sense to the analyst community.

Speaker #2: So if you can add anything to that to that PDF as well.

Speaker #4: Yeah. I think the sense this is a very very attractive quarter for business that is emerging. It's a small base right now but it has grown significantly over the last year.

Kiran Mazumdar-Shaw: Yeah. I think this is a very attractive part of our business that is emerging. It's a small base right now, but it has grown significantly over the last year. Because the low base it's difficult to really sort of talk too much about it at the moment. I think we have seen a lot of progress. We have had new leadership. We are putting in some new capabilities in translational research, and we are very confident that starting this fiscal, we are likely to see a very strong growth in this business. This will start becoming a significant part of our business going forward.

Speaker #4: But because the low base you know it's it's it's difficult to really sort of talk too much about it at the moment. But I think you know we have seen a lot of progress.

Speaker #4: We have had new leadership. We have putting in some new capabilities in translational research and we are very confident that this starting this fiscal we are likely to see a very strong growth in this business.

Speaker #4: This will start becoming a significant part of our business going forward.

Speaker #2: That is also positioned company differentiates us from rest of the the clinical research companies because I mean in India you know that companies are more focused on BAB studies and a phase one or a global phase three or phase two where these are some of the differentiators for us and will definitely you know in the years to come will be a large contributor as a percentage of our overall revenues.

[Analyst]: There's a position our company differentiates us from rest of the clinical research companies. I mean, in India, you know that companies are more focused on BA/BE studies than a phase I or a global phase III or phase II. These are some of the differentiators for us, and will definitely in the years to come, will be a large contributor as a percentage of our overall revenues.

[Unknown Speaker]: There's a position our company differentiates us from rest of the clinical research companies. I mean, in India, you know that companies are more focused on BA/BE studies than a phase I or a global phase III or phase II. These are some of the differentiators for us, and will definitely in the years to come, will be a large contributor as a percentage of our overall revenues.

Speaker #4: Okay.

Kiran Mazumdar-Shaw: Okay. Is it fair to believe that, okay, let's say over a period of three-year time, this clinical trial revenue stream will be about at least 20% of the total company's revenue mix or something like that? Any sense on those lines?

Speaker #2: Is it fair to believe that okay let's say over a period of three year time this clinical trial revenue stream will be about at least 20% of the total company's revenue mix or something like that.

Speaker #2: Any sense on those lines?

[Analyst]: Soon we cannot quantify in terms of percentage because other businesses will also grow. Today it's a small base, as Kiran mentioned, it will become a larger part of our business, both in absolute terms as well as in percentage terms.

[Unknown Speaker]: Soon we cannot quantify in terms of percentage because other businesses will also grow. Today it's a small base, as Kiran mentioned, it will become a larger part of our business, both in absolute terms as well as in percentage terms.

Speaker #4: So yeah we cannot quantify in terms of percentage because other businesses will also grow but you know today it's a small base has given mention that it will become a larger part of our business.

Speaker #4: You can absolute terms as well as in percentage terms.

Speaker #2: Okay. Sure. Just last one question from my side sir. You mentioned in your opening remarks that there is some progress visible on the small molecules CDMO side.

Kiran Mazumdar-Shaw: Okay, sure. Just last one question from my side, sir. You mentioned in your opening remarks that there is some progress visible on the small molecule CDMO side from your Bangalore site. Whether it is a kind of a foreign project which is getting extended from your CRO activity, or it is a fresh commercial manufacturing opportunity that you are getting from some client.

Speaker #2: From your Mangalore side. Whether it is a kind of a for a project which is getting extended from your share of activity or it is a press commercial manufacturing opportunity that you are getting from some client.

[Analyst]: These are more direct manufacturing opportunities mostly. Again, one of the focus for Abhijit Zutshi and his team would be to look at integrated drug discovery and development. The molecule in discovery labs should move to development at various facilities. That's where we think we can capture a lot more value, which today we are not doing it from.

Speaker #4: So these are more direct manufacturing opportunities mostly. And again one of the focus for Abhijit and his team would be to look at integrated drug discovery and development.

[Unknown Speaker]: These are more direct manufacturing opportunities mostly. Again, one of the focus for Abhijit Zutshi and his team would be to look at integrated drug discovery and development. The molecule in discovery labs should move to development at various facilities. That's where we think we can capture a lot more value, which today we are not doing it from.

Speaker #4: So the molecule in discovery labs should move to development at various facilities and that's what that's where we think we can add a lot capture a lot more value which today we are not doing its own.

Speaker #2: Sure. Yeah. Thank you. Thanks a lot.

Kiran Mazumdar-Shaw: Sure. Yeah. Thank you. Thanks a lot, sir.

Speaker #1: Thank you. A reminder to all the participants that you may please press star and want to ask questions. The next question is from the line of Veenupati Parampil from Elara Capital.

Operator: Thank you. A reminder to all the participants that you may please press star and one to ask questions. The next question is from the line of Bino Pathiparampil from Elara Capital. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Hi. Good morning. Just a couple of follow up questions. So I was looking at your revenue run rate three years back before the surgeon's contract came in.

Bino Pathiparampil: Hi, good morning. Just a couple of follow-up questions. I was looking at your revenue run rate three years back, before the Librela contract came in. At that time, you used to do around $350 to $400 million. As we all know, this product, the Librela contract did not work well and we are seeing this dropping. Even if we annualize the current quarterly run rate, I still won't reach the revenue run rate three years back before the Librela contract. Why is it that? What has happened to the rest of the business?

Speaker #2: At that time it you used to do around 350 to 400 million dollars. As you we all know this product of surgeon's contract did not work well and it's we are seeing these stopping.

Speaker #2: But even if the annualized the current quarterly run rate still won't reach the revenue run rate three years back before the surgeon's contract. Why is it that?

Speaker #2: What has happened to the rest of the business?

Speaker #4: I think you know if you look at our business of course we are expecting the second half to be much stronger than the first half.

Kiran Mazumdar-Shaw: I think, if you look at our results, of course, we are expecting the H2 to be much stronger than the H1. I don't think we should look at the current run rate based on this quarter's numbers. Having said that, I think we should understand that the input of the one client was nearly $50 million. I think if you look at that particular impact alone, it's significant, which we are now trying to fill. If you look at the fact that we have seen attrition in some of our commoditized service offerings, which we deliberately did not focus on because we felt that the low-margin business was a race to the bottom. We are rebuilding that business.

Speaker #4: So I don't think we should look at the current run rate based on on on today's on this quarter's numbers. But having said that I think we should understand that the impact of the one client was was nearly 50 million dollars so I think if you look at that particular impact alone is significant which we are now trying to fill and if you look at the fact that we have seen attrition in some of our you know commoditized you know service offerings which we deliberately did not you know focus on because we felt that the low margin business was a race to the bottom we are rebuilding that business.

Speaker #4: So to answer your question yes we were at a good run rate in the last over the last few years but it had started declining as you know even you know starting last year.

Kiran Mazumdar-Shaw: To answer your question, yes, we were at a good run rate over the last few years, but it had started declining, as you know, even starting last year. What we are basically now doing is really rebuilding the business, re-digging the business, and making sure that we get back to this very robust growth because our aim is to really get back to a double-digit sustainable growth, which we think we will be able to do starting next fiscal.

Speaker #4: And what we are basically now doing is really rebuilding the business re-digging the business and making sure that we get back to this very robust growth because our aim is to really get back to a double digit sustainable growth which we think we will be able to do starting next fiscal.

Speaker #2: Yeah understood. Just to follow up can I assume that now our rate is revenues are zero so that it's completely out of the base?

Bino Pathiparampil: Understood. Just to follow up, can I assume that now our Librela revenues are zero, that it's completely out of the base?

Speaker #4: Well it's not completely zero but a very small percentage of that.

Kiran Mazumdar-Shaw: No, not completely zero, but a very small percentage of that.

Siddharth Mittal: Librela does have inventory for the next couple of years, and they've also seen a decline in their sales. This fiscal year and more on the H2, we do have certain delivery obligations to them. We do not expect the molecule to be zero even in FY28. We do definitely expect them, and Librela will come back by end of the year with their forecast for FY28, but we do not expect that it'll be zero.

Speaker #2: Zero does have inventory for next couple of years as they've also seen a decline in their sales but this fiscal year and more on the second half we do have certain delivery obligations to them and we do not expect the molecule to be zero even in FY28.

Speaker #2: We do definitely expect that and Zoetis will come back by end of the year with their forecast for FY28 but we do not expect that will be zero.

Speaker #2: Understood. And the last question on margin. So first quarter you have done 12 12 or 19% water depending on the way you look at it including the hedging losses etc.

Bino Pathiparampil: Understood. Last question on margin. First quarter you have done 12% or 19%, whatever, depending on the way you look at it, including the hedging losses, et cetera. Your guidance of mid-20s EBITDA margin assumes a very strong H2, which should be in the line of 27% to 30% to achieve that annual guidance. What gives you such a strong visibility in H2 of margin pickup?

Speaker #2: Your guidance of mid 20s EBITDA margin assumes the very strong second half which is it should be in the line of 207 to 30%.

Speaker #2: To achieve that annual guidance you know what gives you such a strong stability in second half of margin pickup?

Speaker #4: Deepak do you want to take that?

Kiran Mazumdar-Shaw: Deepak, do you want to take that?

Siddharth Mittal: Vinod, if you look at it, as we said, this quarter is impacted by the revenue decline and we are calling out a mid-single-digit revenue decline across there. There will be some revenue uptake that will happen in the H2. Which is called out by both Sid and Kiran as well. Margin improvement of all the cost-saving activities that we've spoken of earlier, that we did in last year, FY26, and the continued cost-saving initiatives that we're taking this year will definitely help us improve margins. If you look at a couple of years back, our steady-state margins were definitely a little higher than the mid-20s, and we've also seen the seasonality of the business. Q4 has always been the highest quarter for us, and that also helps appreciate the margin as well.

Speaker #3: So so because you look at it as we said this quarter is impacted by the revenue decline right and we are calling out a mid single digit revenue decline across the year.

Speaker #3: So there will be some revenue update that will happen in the second half right which is called out by folks within within and Kiran as well.

Speaker #3: Margin improvement of all the cost saving activities that we've spoken of earlier that we did in last year FY26 and the continued cost saving in initiatives that we've taken this year will definitely help us improve margins.

Speaker #3: If you look at a couple of years back our steady state margins were definitely little higher than the mid 20s and we've also seen the seasonality of the business.

Speaker #3: Quarter four is always been the highest quarter for us and that also helps appreciate the margins as well. It's a combination of these multiple factors where we feel that we should be able to hold on to the guidance of mid 20s.

Siddharth Mittal: It's a combination of these multiple factors where we feel that we should be able to hold on to the guidance of mid-20s.

Speaker #2: Understood. Thank you.

Bino Pathiparampil: Understood. Thank you.

Speaker #1: Thank you. The next question is from the line of Sanjay Kohli from Goldstone Capital. Please go ahead.

Operator: Thank you. The next question is from the line of Sanjay Kohli from Goldstone Capital. Please go ahead.

Speaker #2: Hi. Yes. Thank you for the opportunity. Good morning everyone. On on your clinical molecule side.

Sanjay Kohli: Yes. Thank you for the opportunity. Good morning, everyone. On your clinical molecule side-

Speaker #1: Deepak Kohli Mr. Kohli.

Operator: Mr. Kohli.

Sanjay Kohli: Yeah.

Speaker #2: Yeah.

Speaker #1: Your audio is not clear sir. Please use your handset.

Operator: Your audio is not clear, sir. Please use your headset.

Kiran Mazumdar-Shaw: Yeah, we can hear.

Speaker #4: Yeah we can hear.

Speaker #1: Okay ma'am.

Operator: Okay, ma'am.

Sanjay Kohli: Is it better now? Can you hear me?

Speaker #2: Is it better now? Can you hear me?

Speaker #4: Yeah.

Kiran Mazumdar-Shaw: Yeah.

Speaker #2: Hello. Is it better?

Sanjay Kohli: Hello. Is it better?

Speaker #4: Yes I can hear you. Please go ahead.

Kiran Mazumdar-Shaw: Yes, I can hear you.

Sanjay Kohli: On the clinical molecule side, could you give us a breakup between small and large? Over the years, has this been sort of, does it move around a lot or stays fairly steady, the variability in your small and large molecule business on the clinical side, not the commercial?

Speaker #2: So so on the clinical molecule side could you give us a break up between small and large and you know over the over the years has this been sort of does it move around a lot or stays fairly steady you know the variability and you know your small and large molecules business on on the clinical side not not the commercial.

Speaker #4: You know what do you mean by clinical side? You mean on the research side?

Kiran Mazumdar-Shaw: No, what do you mean by clinical side? You mean on the research side?

Speaker #2: The research the research side when you initially get the you know the contracts so basically on the on the pharmacy and on the and large molecules I'm assuming is all you know basically they become biologics or biosimilars.

Sanjay Kohli: The research side, when you initially get the contracts.

Kiran Mazumdar-Shaw: Correct

Sanjay Kohli: chemistry and large molecules, I'm assuming is all, basically they become biologics or biosimilars.

Speaker #4: So let me answer that by saying that you know when we look at discovery services obviously we do not you know try to differentiate between small molecule and large molecule opportunities because both are very large.

Kiran Mazumdar-Shaw: Let me answer that by saying that when we look at discovery services, obviously we do not try to differentiate between small molecule and large molecule opportunities because both are very large. Having said that, Syngene is very differentiated based on its capabilities in large molecules, and therefore, as a share of our molecules that are given to us, we have, in the country, perhaps one of the largest share of large molecules under discovery. Having said that, it doesn't mean that our small molecule discovery platforms and requirements are small by any sense. When we look at our overall pile, we see we are very distributed between large molecules and small molecules. I think that is the way we look at our business. We are not focusing on one or the other because both are very important for us.

Speaker #4: Having said that bio I mean synthine is very differentiated based on its capabilities in large molecules. And therefore we as a share of our you know molecules that are given to us we have in the country perhaps one of the largest share of large molecules under discovery.

Speaker #4: Having said that it doesn't mean that our small molecule discovery platforms and requirements are small by any any sense. So when we look at our overall you know pie we feel we are very well distributed between large molecules and small molecules.

Speaker #4: So I think that is the way we look at our business. We are not focusing on one or the other because both are very very important for us.

Speaker #4: But as a company in India that really has a differentiation in biologics at a country level I think we get a much higher share of large molecules for under the discovery umbrella compared to other companies.

Kiran Mazumdar-Shaw: As a company in India that really has a differentiation in biologics, at a country level, I think we get a much higher share of large molecules under the discovery umbrella compared to other companies.

Speaker #2: Okay. So for for us it's about let's say even students about 50/50. Between the would be equally distributed.

Sanjay Kohli: Okay. For us, it's about even seasons, about 50/50.

Kiran Mazumdar-Shaw: Let me explain it a little more. I think Siddharth mentioned that some of these new areas like oligos, ADCs, and bispecifics and many of those kind of molecules are coming our way. I think that's why we are really able to offer high-value services, and we are doubling down on those opportunities because we believe that getting more of that will give us a much better revenue and margin mix.

Speaker #4: Let me explain it a little. Let me explain it a little more. I think Siddharth mentioned that one of you know some of these new areas like oligos ADCs and bispecifics and many many of those kind of molecules are coming our way.

Speaker #4: And I think that's where we are really really able to offer high value services and we are doubling down on those opportunities because we believe that getting more of that will give us a much better revenue and margin mix.

Speaker #2: Okay. Now on the this new the focus area of the trials you know this could be a great opportunity of the company to put out a presentation to you know this explain the landscape to us because there's a lot of variability within the analyst community of how you know we understand this.

Sanjay Kohli: Okay. Now on the focus area of the trials, this could be a great opportunity of the company to put out a presentation to just explain the landscape to us because there's a lot of variability within the analyst community of how we understand this, and this being relatively new over here, the landscape in the sense, are you going to be enrolling over here, overseas, how large the pie is, and how difficult is it to enroll in the various geographies, those kind of things. We really want to understand this so the company can put out a presentation explaining this, because it's going to be a focus area for us going forward.

Speaker #2: And this being relatively new over here the landscape in the sense is it going to be are you going to be enrolling over here overseas how how large the pie is and you know how difficult is it to enroll in the various geographies you know those those kind of things.

Speaker #2: We really want to understand this so the company can put out a presentation explaining this because it's going to be a focus area for us going forward.

Speaker #4: Yeah I think it's a very good suggestion and I think this is a request not just be possible ma'am. So that's a very good suggestion and I think the new leadership will definitely work on that and in the in the coming quarters we'll see what we can do to address your suggestion.

Kiran Mazumdar-Shaw: Yeah. I think it's a very good suggestion.

Sanjay Kohli: Is this request reasonably possible, Tom?

Kiran Mazumdar-Shaw: That's a very good suggestion, and I think the new leadership will definitely work on that. In the coming quarters, we'll see what we can do to address your suggestion.

Speaker #2: And just add that you know of course clinical success and opportunity is huge but of course there are a lot of government support regulatory changes that are required and we have of course working with various departments to see how India can become a leader in this space.

Siddharth Mittal: May I just add that, of course, clinical success and opportunity is huge, but of course, there are a lot of government support regulatory changes that are required, and we are, of course, working with various departments to see how India can become a leader in this space. There is some bit of dependency on that factor.

Speaker #2: There is some bit of dependency on that factor.

Speaker #4: Yeah.

Kiran Mazumdar-Shaw: Yeah.

Speaker #2: Sorry if I may add that kind of we have done a webinar with Dr. Mrinal as well last year around. November December and what we could do is even provide you.

Deepak Jain: Sorry, sir. May I add?

Kiran Mazumdar-Shaw: Yeah.

Deepak Jain: We had done a webinar talk from Bernard as well last year, probably around November, December. What we could do is even provide you, of course, Scotty, with a reserved webinar link so you can look at it. As Kiran said, we were trying to probably do one more later on in the year.

Speaker #2: Ms. Kohli with with a webinar link that you can look at it. And as Kiran said we will try and probably do one more later on in the year.

Speaker #2: Oh that would be most helpful. That would be helpful. Yeah. Yeah because we want to you know what it's changed in the regulation also overseas that we we can do trials and even from the the scientific point of view of you know different how to put it people from different countries and then you know that becoming a homogenous result throughout you know in terms of you know how much of that is allowed how much of that is useful so that would be very helpful.

Sanjay Kohli: Oh, that would be most helpful actually. Yeah. What has changed in the regulation also overseas that we can do trials and even from the scientific point of view of different, how to put it, people from different countries, and then that becoming a homogenous result throughout in terms of how much of that is allowed, how much of that is useful. That would be very helpful.

Speaker #4: No let let me answer that question. Let me answer that question. The Indian regulatory landscape has to completely change to really heighten this particular opportunity in India.

Kiran Mazumdar-Shaw: No, let me answer that question. The Indian regulatory landscape has to completely change to really hasten this particular opportunity in India. In the meantime, Syngene already has some very good partnerships in other parts of the world so that we can actually take these into the clinic faster than we can do in India. We do have partnerships in countries like Australia and Europe so that we can actually get over these kind of impediments that we are facing in India because in India it takes a very long time to obtain any approvals to do first-in-human clinicals. Even the approvals that are required to do phase I and phase II take much, much longer than other parts of the world. We are working on those issues.

Speaker #4: In the meantime synthine already had some very good partnerships in other parts of the world so that we can actually take these into the clinic faster than we can do in India.

Speaker #4: So we do have partnerships in countries like Australia and Europe so that we can actually get over these kind of impediments that we are facing in India because in India it takes a very long time to obtain any approvals to be first in human for instance.

Speaker #4: Even the approvals that are required to do phase one phase two take much much longer than other parts of the world. So we are working on those issues.

Speaker #4: We hope that they will be resolved because the whole industry is working on this issue. And I think it's about ensuring that you know the regulatory system will enable an accelerated approach in many of these clinical trials.

Kiran Mazumdar-Shaw: We hope that they will be resolved because the whole industry is working on this issue, and I think it's about ensuring that the regulatory system will enable an accelerated approach to many of these clinical trials. Until then, we are actually having other arrangements in other parts of the world, so that we don't lose the momentum. Just to answer that question, obviously, it is a big opportunity for India, I think the regulatory pathways have to be in sync with those opportunities.

Speaker #4: But until then we are actually having other arrangements in other parts of the world so that we don't lose the momentum. So just to answer that question obviously it is a big opportunity for India but I think the regulatory pathways have to be in sync with those opportunities.

Speaker #2: Right. Right. Thanks.

Siddharth Mittal: Right. Thank you.

Sanjay Kohli: Right. Thank you.

Operator: Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Speaker #1: Thank you. The next question is from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.

Speaker #2: Thank you for taking my question. I I guess I got dropped off at my second question. So I think Siddharth just back on the CBMO so can non-liberal I think you clarified about the liberal question I also had.

Shyam Srinivasan: Thank you for taking my question. I guess I got dropped off at my second question. Siddharth, just back on the CDMO. Can non-Librela, I think you clarified about the Librela question I also had. Non-Librela, like Deview/Stelis or Unit 3, how should we look at demand for this particular segment, and what gives us the confidence that you seem to be making a small pivot towards saying that CDMO is the more growth engine. Just want to understand what are some of the early indicators you are picking up. It is now 20% of revenues. I do not know whether you split it out as small versus large.

Speaker #2: But non-liberal like debut/stellis or unit three you know how should we look at demand for this particular segment and what gives us the confidence that we seem to be making a small growth engine?

Speaker #2: So just want to understand what are some of the early indicators we're picking up. It's now 20% of revenue. So I don't know whether you split it out as small versus large.

Kiran Mazumdar-Shaw: Let me

Speaker #4: So let me so Shyam what synthine offers you know in the context of large molecule CBMO very few can offer other than if you look at the Chinese and Korean companies.

Kiran Mazumdar-Shaw: Let me

Shyam Srinivasan: Yeah.

Kiran Mazumdar-Shaw: Shyam, what Syngene offers in the context of large molecule CDMO, very few can offer other than if you look at the Chinese and Korean companies. In Indian context, at the scale and the quality and the capabilities, we are definitely differentiating. Having a facility in the US, of course, given the whole tariffs and Make in US rhetoric, we have discussions going on both on the human health and animal health side. That's where we are having discussions with many of our current customers who are at early stages in the, let's say, product development stages to see how we can migrate those molecules from the lab to commercial level infrastructure. We definitely have a very robust pipeline. I think the real thing is now to convert that pipeline into business.

Speaker #4: So in the Indian Indian context you know the at the scale and the quality and the capabilities we are definitely differentiated. And having a facility in the US of course given the whole tariffs and making US rhetoric you know we we have discussions going on both on the human health and animal health side and that's where we are having discussions with many of our current customers who are at early stages or in the let's say product development stages to see how we can migrate those molecules from lab to commercial level infrastructure.

Speaker #4: robust pipeline. I think the the real thing is now to convert that pipeline into business and as far as debut is concerned as we mentioned that we are looking at operationalizing that facility later this year and at that point in time of course customers are already visiting the facility looking at the facility but we'll be able to lock in customers only after the operationalization is done because that's what will give the confidence to customers when the facility is operationalized.

Kiran Mazumdar-Shaw: As far as Bayview is concerned, as we mentioned, that we are looking at operationalizing that facility later this year. At that point in time, of course, customers are already visiting the facility, looking at the facility. We'll be able to lock in customers only after the operationalization is done, because that's what will give the confidence to customers when the facility is operationalized.

Shyam Srinivasan: Got it. Thank you, all the best.

Speaker #2: Got it. Thank you and all the best.

Speaker #4: Thank you. Yeah I think once one factor which I forgot to mention is of course the biosecure act and inclusion of some of the Chinese companies specifically in that list there definitely offers a great advantage for for us to shift those molecules from China to India.

Kiran Mazumdar-Shaw: Thank you. I think one factor which I forgot to mention is, of course, the BIOSECURE Act and the inclusion of some of the Chinese companies specifically in that list. That definitely offers a great advantage for us to ship those molecules from China to India.

Speaker #1: Thank you sir. Please then Jonathan we'll be taking the last question for today from the line of Neelam Punjabi from Perpetuity. Please go ahead.

Operator: Thank you, sir. Please, Janam, we'll be taking the last question for today from the line of Neelam Punjabi from Perpetuity Ventures. Please go ahead.

Speaker #3: Thank you for the opportunity. My first question is that since we are guiding for single digit INR terms revenue decline and we are also having the debut facility operationalization in the later part of the year guiding for a mid 20s EBITDA margin which would mean that we are you know doing a very strict cost control.

Neelam Punjabi: Thank you for the opportunity. My first question is that since we are guiding for a single-digit INR terms revenue decline, and we are also having the Bayview facility operationalization in the later part of the year, guiding for a mid-20s EBITDA margin, which would mean that we are doing a very strict cost control. Could you please talk a bit about that cost measures that we are taking this year?

Speaker #3: So could you please talk about talk a bit about our cost measures that we are taking this year?

Kiran Mazumdar-Shaw: Two aspects. One, the facility itself will not be capitalized during this fiscal year. It will be capitalized. This is our accounting policy. There will be very minimal expenses on behalf of Bayview in the P&L. Coming to cost optimization, that's independent of Bayview getting capitalized or not. I think we also mentioned that even during the quarter, while we did have impact on margin because of lower revenues and Forex, but a part of it was offset by cost optimization, including people costs that started sometime last fiscal. This year again, we are going to continue looking at all our operating expenses and our people cost to align with what we are doing. Of course, technology is going to play a very important role in that cost optimization.

Speaker #4: The two aspects one the facility itself will not be capitalized during this fiscal year and it will be capitalized this is our accounting policy.

Speaker #4: So there will be very minimal expenses on behalf of debut in the PMO. But coming to cost optimization that's independent of debut getting capitalized or not.

Speaker #4: I I think we all mentioned that even during the quarter while we did have impact on margin because of lower revenues and forex but a part of it was offset by cost optimization including people cost that started sometime last fiscal.

Speaker #4: And this year again we are going to continue looking at all our operating expenses and people cost. To align with what we are doing and of course technology is going to play and it's very important role in that cost optimization.

Speaker #3: Got it. So that means that since debut would be commercialized or capitalized next year we would most likely see a flattish margins next year itself as well.

Neelam Punjabi: Got it. That means that since Bayview would be commercialized or capitalized next year, we would most likely see a flattish margins next year itself as well. Is that fair to assume?

Speaker #3: Is that fair to assume?

Kiran Mazumdar-Shaw: I think it's too early to comment on the margins for next year. Of course, in a difficult year like FY27, if we are having flattish margin, and in a year, next year, when we are expecting a good growth, the margin should improve. We do not expect a flattish margin to continue next year.

Speaker #4: I think it's too early to comment on the margins for next year. Of course in a difficult year like FY27 if we are having flattish margin and in a year next year when we are expecting a good growth the margins should improve.

Speaker #4: So we do not expect a flattish margin to continue next year.

Speaker #3: Got it. On a base of FY27 could you could you all give a medium to long term outlook what's the kind of revenue growth that we are looking at with with these new facilities stellis debut coming in under utilized Manglor also currently under utilized some long term growth outlook would be very helpful.

Neelam Punjabi: Got it. On the base of FY27, could you all give a medium to long-term outlook? What's the kind of revenue growth that we're looking at with these new facilities, Stelis, Bayview coming in underutilized, Mangalore also currently underutilized. Some long-term growth outlook would be very helpful.

Kiran Mazumdar-Shaw: At this stage, I don't think we'll be able to quantify or give a quantitative guidance as such.

Speaker #4: I at this stage I don't think we'll be able to quantify or give a quantitative guidance as well.

Speaker #3: Okay. Lastly on the you know I would like Neelam I would like to say that this is a new leadership team. Please kindly give them a quarter and they can be much more accurate about answering your questions once they have had an opportunity to really do a deep diagnosis of all the financial numbers that you're basically addressing.

Neelam Punjabi: Okay. Lastly, on the-

Kiran Mazumdar-Shaw: Neelam, I would like to say that this is a new leadership team. Please kindly give them a quarter, they can be much more accurate about answering your questions once they have had an opportunity to really do a deep diagnosis of all the financial numbers that you are basically addressing. Suffice to say that there is a huge focus on financial discipline, on cost-cutting, and on ensuring that we go after all the businesses that I talked about. I think from next quarter, you should have better visibility and clarity on the questions that you are asking.

Speaker #3: But suffice to say that there is a huge focus on financial discipline on cost cutting and on ensuring that we go after the very the the all the businesses that I talked about.

Speaker #3: So I think from next quarter you should have better visibility and clarity on the questions that you're asking. Sure. Thank you ma'am. And one last question is on the cash balance 1540 crores net cash that we have.

Neelam Punjabi: Sure. Thank you, Nand. One last question is on the cash balance, INR 1,540 crore net cash that we have. Firstly, if I remember correctly, last year we had INR 1,800 crore of cash. What was the Q1 utilization, if you can help us understand where did we invest? Secondly, what are our cash utilization strategy going forward? If you can just help me with that.

Speaker #3: Firstly I if I remember correctly last year we had 1800 crores of cash. So what was the you know first quarter utilization if you can help us understand where did we invest and secondly what are our cash utilization strategy going forward if you can just help me with that.

Kiran Mazumdar-Shaw: This is Deepak. You might want to answer.

Speaker #4: We talked about long term. Thanks. So if you look at it we've always maintained the fact that you know our cash balance has a I will call it similarity because structure to it where first quarter of the calendar year is where we receive a lot of accounts from our customers and through the year we utilize those accounts right.

Deepak Jain: Thanks. If you look at it, we've always maintained the fact that our cash balance has, I won't call it seasonality because structure to it where Q1 of the calendar year is where we receive a lot of advances from our customers and through the year we utilize those advances. You will naturally see a trajectory of a decline in cash balance and then start picking up towards the end of the year and the beginning of the next year, and that cycle continues. It's no different and nothing unique has happened. On the cash utilization, we are committed to speak about our investment. As Kiran mentioned, we're talking about it. We will commit to invest into our business and utilize the cash as a channel.

Speaker #4: So we will naturally see a trajectory of a declining cash balance and then start picking up towards the end of the year and the beginning of the next year and that cycle continues.

Speaker #4: So it's no different than nothing unique has happened. On the cash utilization we've continued to speak about our investment as we as Kieran mentioned we're talking about it.

Speaker #4: We've continued to invest into our business and utilize the cash as well.

Speaker #3: Got it. That helps. Thank you so much.

Neelam Punjabi: Got it. That helps. Thank you so much.

Speaker #1: Thank you. Please then Jonathan that was the last question for today. Thank you members of the management. You can get in touch with the Syngene team for any further questions.

Kiran Mazumdar-Shaw: Thank you.

Neelam Punjabi: Ladies and gentlemen, that was the last question for today. Thank you, members of the management. You can get in touch with the Syngene team for any further questions. On behalf of Syngene International, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you. Goodbye.

Operator: Ladies and gentlemen, that was the last question for today. Thank you, members of the management. You can get in touch with the Syngene team for any further questions. On behalf of Syngene International, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you. Goodbye.

Speaker #1: On behalf of Syngene International that concludes this conference. We thank you for joining us and you may now disconnect your line. Thank you. Goodbye.

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