Jayckieed’s Column     

Published: June 15, 2023
Updated: June 15, 2023

SYNGENE INTERNATIONAL

Smorgasbord of speciality chem

Incorporated in 1987, Himadri Speciality Chemicals Ltd is an undistputed market leader and a prominent player in multiple speciality carbon product segments like Coal Tar Pitch, Carbon Black, Naphthalene and Refined Naphthalene, SNF and Specialty Oils. As one of the most integrated specialty carbon corporations globally, HSCL has built and introduced several innovative products during the 30+ years of its industry presence – catering a diverse range of new-age industries like steel, aluminium, plastic, infrastructure development, automotive and many more.

Bangalore-headquartered Syngene International Ltd. is an integrated research, development and manufacturing services company serving the global pharmaceutical, biotechnology, nutrition, animal health, consumer goods and speciality chemical sectors. Syngene’s more than 5,200 scientists offer both skills and the capacity to deliver great science and robust data management, as well as IP security and quality manufacturing at speed to improve time-to-market and lower the cost of innovation. With a combination of dedicated research facilities for Amgen, Baxter and Bristol-Myers Squibb as well as two million sq ft of specialist discovery, development and manufacturing facilities, Syngene works with biotech companies pursuing leading-edge science as well as with multinationals, including GSK, Zoetis and Merck KGaA

The company has made rapid strides in its financial performance. During the last six years, its sales turnover has more than doubled from Rs 1,423 crore in fiscal 2018 to Rs 3,193 crore in fiscal 2023, with the operating profit also getting doubled from Rs 474 crore to Rs 934 crore and the profit at net level inching up from Rs 305 crore to Rs 464 crore. The company’s EPS has steadily moved up from Rs 7.64 to Rs 11.57. This indicates efficient cost management and enhanced operational efficiency.

Overall, the financial performance of the company highlights Syngene’s strong growth trajectory and also its ability to deliver consistent profitability.

The company’s robust performance during Q4 of fiscal 2023 (with a 31 per cent spurt in revenues and a 23 per cent rise in net profit over the corresponding quarter last year) prompted Jonathan Hunt, managing director and CEO, to expect that the operating margin trajectory will not only be maintained going ahead but may also improve. Mr Hunt’s confidence and optimism around the company’s growth prospects was well-reflected in its $ 100 million planned capex for fiscal 2024.

The company’s future prospects are all the more exciting as it has recently undertaken several initiatives to expand its business through expansion of existing relationships, new partnerships and investment in manufacturing capacity. The key among them has been the extension of Syngene’s research collaboration with leading biotech company Amzen Inc. until 2026. Its scope includes Syngene providing integrated drug chemistry and biology, peptide chemistry, antibody and protein reagents, pharmacokinetics and drug metabolism and pharmaceutical development, in addition to operating the existing Syngene-Amgen R&D centre. Under the new contract, Syngene will also build and operate a dedicated laboratory which will enable R&D project deceleration.

It’s a ‘Buy’
Buying range: 680-720
Target: 860-950+
Time Frame: 18 Months
Long Term Target: 1,200-1,400

DRUG FOR DOGS

Another notable contract the company signed recently was with leading animal health company Zoetis. The contract signed in July 2022 is for a period of 10 years and is for manufacturing the drug substance for Librela (bedinwetmab), a first-in-class monoclonal antibody used for treating osteoarthritis in dogs. Initially centred on Librela, this agreement paves the way for developing and manufacturing other molecules in the coming years. Thanks to this contract, Syngene will be able to move from a CRO to a CRAMS (Contract Research and Manufacturing Services) company. It has got an advantage of scale as it has already an established relationship with clients from research to now manufacturing, and this transition may prove to be the next trigger of growth. The partnership aims to provide innovative research and development services to Zoetis, focusing on the animal health market.

Working with Zoetis enables Syngene to gain access to Zoetis’s domain expertise in animal health research.

The partnership with Zoetis opens the doors to a broader client base in the niche segments in which the company operates. This not only increases Syngene’s market reach but also positions it as a preferred partner for other companies in the sector, potentially attracting more business opportunities.

Meanwhile, Bristol Myers Squibb (BMS), one of the world’s largest pharmaceutical companies, celebrated 25 years of collaboration with Syngene in March 2023. The partnership, which started with a handful of scientists in a single laboratory, is now BMS’s largest R&D facility outside the United States, accommodating several hundred scientists working in therapeutic areas including cardiovascular, fibrosis, immunology and oncology. In 2021, the collaboration was extended up to 2030, with the breadth of drug discovery research being expanded as well.

BIGGER CAMPUS

In addition to these contract wins, the company has been expanding its manufacturing capacity at its Biocon Park campus in Bengaluru. The company set up and commissioned a new microbial cGMP facility and expanded its mammalian cell manufacturing facility to offer end-toend chemistry, manufacturing and control (CMC) development solutions. With this, Syngene can now manufacture an array of biologics across mammalian and microbial platforms. These include antibodies, bispecific antibodies, fab fragments, fusion proteins, therapeutic proteins, pDNA, mRNA and live biotherapeutic products.

All these developments already indicate that the prospects for the company are highly promising going ahead.

If we look at the technical charts, the stock has broken above a channel and is getting ready for an up move towards a medium-term target of Rs 860-900.

We maintain ‘Buy’ on the stock and a long-term target of Rs 1,200-1,400.