Syngene International Limited (SYNGENE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Syngene International First Quarter FY 2021 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kartik Sankaran from EY. Thank you, and over to you, sir.

Thank you, Aman, and good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's Q1 FY '21 performance. To discuss the financial and business performance for the first quarter, we have on this call today, Mr. Jonathan Hunt, Syngene's MD and Chief Executive Officer; Mr. Sibaji Biswas, Chief Financial Officer; and Dr. Mahesh Bhalgat, Chief Operating Officer. Other members of the executive team are also present on the call. After the opening remarks, Jonathan, Sibaji and the rest of the team will be happy to answer any questions you may 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. A replay of this call will be available for the next few days after this call and the transcript will be made available. With this, I would now turn the call over to Mr. Jonathan Hunt. Over to you.

Well, thank you, Kartik, and good afternoon. Thank you all for joining this call to discuss Syngene's first quarter performance. I'll start with an overview of the financials and then talk about the key highlights of the quarter. And Sibaji will provide a more detailed commentary on the financials in a few moments. So starting with our operational performance. Overall, the quarter played out in line with our expectations. And if you recall at the full year results announcement, I indicated that we expect to see some impact of COVID-19 in our first quarter due to the temporary suspension of operations in April. As it turns out, despite the temporary suspension of operations, we quickly made adjustments to our working practices, and this has allowed us to resume close to normal operations relatively quickly. We operated at near-normal levels for the last 6 weeks of the quarter and have brought most projects back on schedule. As a result, revenue for the quarter at INR 437 crore was slightly down on the corresponding figure last year. However, revenue from operations was flat at INR 422 crore. The difference, of course, being interest from investments. Through the quarter, we maintained good cost control, which in turn, helped to minimize any adverse impact on profitability due to the short operating shutdown. EBITDA for the quarter was INR 140 crore against INR 142 crore last year. And while PAT was INR 58 crore against INR 72 crore in the prior year quarter, a drop of 19% year-over-year and that's better than the 25% drop we'd originally guided to at the end of Q4. Sibaji will take you through the differences in his commentary. Overall, like many companies, I think it's been a challenging quarter from an operational perspective. A temporary suspension of operations needs to be carefully managed, and the restart requires just as much care and attention. And that's without taking into account the human factor where some anxiety and family concerns, I think, have naturally been on everybody's minds, and this seems likely to be a factor for many months to come. So if we put COVID-19 to one side, I think it's been a busy quarter for us. Across the company, we continue to make good progress on our strategic priorities as well as continue to invest in core operational requirements like safety and operational excellence. And like others, we're focused on adapting aspects of our business that are particularly impacted by COVID-19. During the quarter, we made good progress on implementing virtual audits for clients and regulators. We're in the late stages of preparing to offer virtual tours of our laboratory for new clients as well as trialing new online marketing channels to replace and supplant the face-to-face sales model with the traditional norm. We were pleased to receive an improved credit rating from CRISIL a couple of weeks ago following their annual review. Of course, the improved rating has a beneficial impact on our ability to raise funds. However, and I think more importantly, the improved rating recognizes the work that's being done across the business to build robust processes, establish strong leadership and a loyal client base, and I think a sound risk profile. On the COVID-19 front, as I mentioned earlier, while operations were suspended, we implemented safety measures across our campuses to protect our employees as they came back to work. A robust business continuity plan ensured minimal disruption to our operations and we're currently operating in close to a 100% capacity. We're also supporting the efforts of the government in the fight against COVID-19 in India, and we have a number of initiatives currently underway. At a time when the number of COVID cases is increasing across the country, there really is an urgent need to make and distribute reliable testing kits using advanced technology to test and identify positive cases. To meet this requirement, our discovery research scientists developed an IgG ELISA test. This is an advanced, highly reliable serological test that identifies the presence of the cause, SARS-CoV-2 antibodies in blood samples and confirms that the patient has been exposed to the coronavirus. It has a capacity to test multiple samples in a single run and generates results within 3 hours. We've partnered with HiMedia to combine our science with their expertise in manufacturing and distribution to make the ELISA testing technology available for use in India. In Development Services, we've entered into a voluntary licensing agreement with Gilead to manufacture remdesivir for distribution in India and elsewhere as required. We're currently doing our due diligence on this project, and we'll update you in due course on our plans. Syngene is also tied up with the Centre for Cellular and Molecular Biology to jointly develop and validate a high throughput assay using a deep sequencing model. And if successful, this model will be able to take somewhere between 5,000 to 25,000 samples in one run on next-generation sequencing platforms such as NextSeq or NovaSeq. And then a final word, the RT-PCR testing facility that we set up on our campus by repurposing one of our research labs has now tested more than 30,000 samples received from local hospitals in Bangalore, and we're doing that free-of-charge as part of our CSR activities. So to sum up, overall performance in the quarter was as we guided to. We delivered flat revenue year-over-year, but with a better-than-expected performance on the profit line. Our operations are back to near normal, and we expect to return to growth in the second quarter, but of course, assumes no material deteriorations in the current operating environment, and the upgrade to our credit rating is welcome and provides an objective perspective on the company's operations. So with that, let me hand over to Sibaji to run you through the financial details of the quarter.

Thank you, Jonathan, and a very good afternoon to you all. I'm happy to take you through our first quarter FY 2021 results. We continue to operate in a very dynamic environment. The last time we spoke, it was still early days of COVID-19 pandemic, and we were hoping that the pandemic intensity would reduce from the end of the first quarter. As you all know, that has not been the case and the pandemic intensity in India and also in the United States, which is our key market, continues to rise. With this background, I am satisfied to come back to you with a set of financials which are similar, if not better, than our guidance in the last call. If you recall, we mentioned in the May call that due to the impact of the partial shutdown in the month of April, we expected Q1 revenues to be broadly at the same level as Q1 of FY 2020 with the 25% year-on-year drop in profit for the quarter. Revenue from our operations that is revenues excluding interest income, increased marginally by 0.2% to INR 422 crores from the same period last year. This was led by continuing growth in Discovery Services and is supported by a steady traction in the Dedicated Centre business. This performance is despite the fact that we recorded only about 50% of our normal revenue in the month of April and is reflective of the strong growth levers we have built across the company. While the company is one of the government designated essential services, we proactively took the decision to temporarily suspend our operations in the month of April to allow time for us to introduce safety measures on site. We returned to more normal operating levels for the last 6 weeks of the quarter and we are currently operating at over 90% of capacity, supported by multiple shifts. During the quarter, we recorded interest income of INR 15 crores, which declined by INR 5 crores compared to the same period last year. This is on account of the reduction in cash balance due to the part repayment of the ECB loan in March 2020, and also due to the reduction in yield rates on the deposits. As a result, the total revenue was slightly down at INR 437 crores compared to the same period last year. During the quarter, raw material cost as a percentage of total revenue stood at 21%, that's down 340 basis points from last year. This is due to the change in sales mix in favor of Discovery Services and due to certain operational efficiencies in Materials Management. As you may know, Discovery Services tends to consume a lower level of raw materials than our development and manufacturing divisions. Also, in April, when operations were suspended, we had much lower levels of materials consumption compared to a regular month, which also helped in reducing this ratio. Let me now take a moment to explain other cost lines in the P&L. During the quarter, stock cost increased by 6% to INR 140 crores as compared to INR 130 crores in the same period last year. This increase is attributable to the increase in headcount due to new facilities that went live in the last year, and currently, we have around 5,000 employees in the organization against 4,600 employees same quarter last year. The gross margin for the quarter stood at 45% as compared to 43% for the same period last year. This is an improvement of 2 percentage points and this is due to savings in raw material costs and other operational efficiencies offset by some increase in staff cost. Turning now to other expenses, which comprises of selling expenses, IT cost and general overheads, we are flat at INR 52 crores compared -- and it's flat compared to the same quarter last year. As stated in the last call, safety measures undertaken as a part of our COVID-19 response has put an additional burden on our costs as we spend more on transport, personal protective equipment and staff welfare expenses to support multiple shifts to reduce density in our laboratories and other facilities. However, this increase was offset by proactive measures to reduce discretionary spending and savings in travel costs due to travel restrictions across the globe. EBITDA for the quarter was almost flat at INR 140 crores compared to INR 142 crores in the same period last year. It may be noted that in spite of the fact that we lost close to 0.5 month of revenue due to lockdown, we turned in a similar level of EBITDA as in quarter 1 of FY 2020. We saw our EBITDA margin being maintained at 32%, which is similar to margin we had in quarter 1 of last year. This is an outcome of carefully calibrated approach to spending during the pandemic period. At an underlying level, the adjusted EBITDA margin for the quarter, excluding interest income is at 30% and this has improved compared to 29% for the same period last year. The delivery of EBITDA margin is an illustration of the resilience in our business during these trying times and our ability to maintain a high degree of operating effectiveness. Depreciation stands at INR 66 crores, which is a 39% increase from INR 48 crores in quarter 1 of last year. As stated in the last call, it is mainly owing to the investments in the Hyderabad facility, expansion at our main Bangalore facility and completion of the construction phase of the Mangalore commercial API plant. During the quarter, we recorded finance charges of INR 8 crores, which includes INR 2 crores towards our facility lease as per the new lease standard. This is compared to INR 7 crores in the same period last year. We also recorded INR 5 crores in income tax associated with this interest income compared to INR 7 crores in the same period last year. As you may know, Syngene follows the practice of hedging all foreign country revenues. The company recorded an exchange loss of INR 3 crores in the quarter. This reflects the difference between forward rates versus the prevailing spot rate. The hedge rate was at INR 74 per the USD as against the spot rate of INR 75 per USD during the quarter. If I compare this with the last year same quarter, we booked a hedging gain in that quarter for INR 2 crores. The effective tax rate decreased to 12% compared to 17% in the same period last year. The decline in the effective tax rate is mainly due to the incremental depreciation impact in the tax books coming from the new units that have gone live in the second half of the previous year. In addition, the operating losses in the newly set up commercial API plant at Mangalore and the decline in interest income also continues to reduce the effective tax rate. Profit after tax was down 19% to INR 58 crores as compared to INR 72 crores in the same period last year. Profit after tax margin is at 13%, and this compared to last year of 16%. However, this is better than our previous guidance, while we expected around 25% year-on-year drop in quarter 1 FY '21 profits. As I mentioned before, we returned EBITDA almost in line with the last year, and this drop in profit is entirely due to the high depreciation from the new facilities, especially the Mangalore API plant. Now I'll move to the balance sheet. During the quarter, we invested approximately USD 13 million in ongoing CapEx programs. Of this, USD 4 million pertains to the commercial API manufacturing plant. Another USD 5 million was invested in Discovery Services, USD 2 million in the biologics manufacturing facility and the balance of USD 2 million in the Dedicated Centres and Development Services. With this capital expenditure, our fixed assets currently stand at USD 463 million, and this includes an asset under construction of USD 30 million. Syngene is well funded financially secured business. And as you can see, we continue to maintain a strong liquidity position despite the ongoing CapEx program. The cash generated from the operating activities after funding for the ongoing CapEx program resulted in a net cash position of INR 395 crores at the end of the quarter, which is an improved position from the end of March 2020. One of the reasons I would like to call this out for the current quarter was because of the strong performance in managing our working capital. We had very robust collections of receivables despite the pandemic situation. This is reflective of our premium clientele, many of their major pharmaceutical companies and their resilience to the pandemic. In addition, I am very pleased to report that the majority of Syngene suppliers now fall under MSME category, and we have made all payments to them on time without any delays, thereby supporting them in their hour of need. Our investment plans, we are following a measured and well calibrated capital allocation strategy this year with a stage-gate approach in our spending and investments. And we continue to prioritize our investments on projects where there is revenue visibility. We expect the CapEx spend to increase in the later part of the current financial year, and we are still targeting to spend a cumulative CapEx of USD 550 million by the end of financial year. However, this will depend on the progression of the pandemic situation and I'll give you a better visibility on the subject in my next call. We are pleased to inform you that the company's long-term rating has been upgraded from CRISIL AA to CRISIL AA positive with stable outlook. The short-term rating is retained at CRISIL A1 plus. It is an indication of Syngene's strong fundamentals, sound business model and a robust liquidity position. In context of our current strong financial position and the availability of low-cost foreign currency debt, we'll continue to explore opportunities to optimize our capital structure. At this stage, we do not see the need to reassess our guidance given in May. And based on the current visibility of the order book on a full year basis, we expect low double-digit growth in revenues. We expect PAT for the full year FY '21 to be at similar level as in FY '20. For clarity, PAT for FY '20 we refer to is without the onetime exceptional gain from insurance claims. As I mentioned earlier, we are going through a very dynamic period and this guidance should be seen in context of quarter clearly volatile conditions. We'll continue to monitor the situation and keep you updated in the future call based on how the situation evolves over the next few months. That completes my commentary on the results. We can now open the floor for questions.

[Operator Instructions] The first question is from Prakash Agrawal from Axis Capital.

Am I audible? Hello?

Yes, you are.

Prakash, you may go ahead.

Just my line got dropped in between and I just wanted to make sure I heard right. On the full year guidance remains with double-digit growth on the top line and flat PAT, and this is assuming the current capacity utilization of 90%? And just one clarification, if there is a second round of lockdown, which is affecting us?

Okay. Super. Yes, I think you've got that absolutely right. But I'll let Sibaji sort of restate it. The message is we gave you guidance last quarter. We're not changing that. We called the first quarter correctly, I think, we guided to flat on revenues, down on profit. I mean, maybe we got the profit a little bit wrong. We actually did better than the guidance, but not by a material amount. And our expectations for the full year remain unchanged, which is we should return to grow -- revenue growth in the second quarter, and that should then endure through the rest of the year and at the full year basis we should see growth. But I'll let Sibaji walk back through the specifics so that everybody's got it. But the message is no change. On the -- on your second lockdown question, I don't know, it depends. Where we are currently is that the first suspension of operations for us -- remember we're categorized as an essential service. So we're absolutely free to continue to operate. In fact, I think we have an obligation to, given the type of work we do and the society still needs new innovation. It needs solutions to things like COVID-19 and it needs drugs to continue to be discovered, developed and manufactured. So this -- now is a moment where I think what we do and what we do as an industry has never been more important. What that first suspension allowed us to do was put in what I think is a pretty good, robust operating plan. And that gives me confidence that we can continue to operate through current circumstances. Now there is actually a little bit of a localized lockdown, as you know, in Bangalore, and we are continuing to operate in that. We provide transport for our staff. We get them into work. Many of them are working from home those that are in roles that are amenable to that. The others are coming in. We've moved from general shift to shift working to decompress and give people more space for social distancing and we -- and those measures are proving effective. So I think if the current situation endures, we will continue to operate at near-normal levels. But we'll revisit that in light of experience. If things change, we'll update you on that. Sibaji, a comment maybe on -- just on the guidance.

Yes. Nothing must to add, Jonathan, but I'll just repeat what I said because Prakash dropped off. We said we expect PAT for the full year FY '21 to be at similar level as FY '20, which is the same thing we said in the last call, and we expect low double-digit growth in revenues. And this assuming that for the rest of the year we operate at the normal levels, which we are doing almost at this point. So in case of continuity situation remaining same, and we hope that to happen, this guidance would hold.

Okay. Great. And just -- sorry, go ahead.

No, I was going to say, does that give you a sense of a good answer to your question?

Yes, perfect. That helps. And this is all rupee terms guidance, in terms of topline double-digit?

Yes, yes. This is all on a...

Okay. And my second question -- okay, perfect. And on the second question -- yes. So on the CapEx, so fiscal '20, we did a -- on the CRO business, Discovery Development Dedicated, we made around $65 million in fiscal '20. Just wanted to understand how much of it is operational and revenue-generating in fiscal '21? And so -- and you said you're on track to do $550 million. So assuming that there's another $70 million, $75 million in the CRO business this year. So how much would that be operational next year? That would be helpful.

Yes. I think that's -- clearly, that one was pitched in for Sibaji.

Yes, I'll take that, Jonathan. So yes, you are right, Prakash. We did invest that much of money in our Discovery Dedicated and developed -- and Centres -- Discovery Dedicated and Development Services. And if you remember in the last call I mentioned that when we invest money in our core business, which are this 3 essentially, we look for an asset turnover of 1x to be attained between a period of 18 months to 24 months. So we are very calibrated, very careful in our investments, and we are quite confident that, that investment will generate the asset turnover, as was mentioned in the last call. This was the answer to your first part of the question. The second part of the question is, how much of the next $75 million, $80 million is going towards Discovery Dedicated Centres. So we are not giving any specific guidance over here, but essentially, the plan for the current CapEx is the expansion of our capabilities, mostly in core capabilities although we have a little bit of CapEx also in the manufacturing to complete our -- the remaining activities of our API plant and the biologics plant. But most of the money would essentially go for the expansion requirements for our Discovery Dedicated and Development Services. And as I said, we're continuing to follow our stringent guidelines that we have set for ourselves on asset turnover. Does that answer your question, Prakash?

Yes. I mean, just one question on that. So you said looking at asset turnover 1x over 18 to 24 months. Would it be fair to say that 0.5x would be achievable in 12 months? Would that be a fair comment, very roughly?

I leave that to your modeling, but common sense would say you can assume that way. It always doesn't work that way, Prakash. But what we hold good in our mind is that based on our pipeline visibility, we should be able to achieve 1x in 18 to 24 months.

The next question is from the line of Tarang Agrawal from Old Bridge Capital.

Just to get a better sense on the business and industry, so my question really pertains to the molecules that are discovered in our Dedicated Centres or Discovery business. So once the molecule is discovered, how likely is that the development and consequent manufacturing of the molecule would move to Syngene? That's question number one. And second, other than maybe lack of capabilities, what other possible reason could result in the customer moving the development or the manufacturing of the molecule to other CDMOs?

Yes, good question. Actually, in the Dedicated Centres, remember the nature of those is they are fully integrated almost the captive sort of centers that we run integrating them back into the client's organization. So if you take the longest-running one of those, the Dedicated Centre we run along with BMS, from their perspective, it effectively is BMS' research hub in Asia and it sits alongside their other research facilities around the world. And it's indistinguishable from their point of view from any other one of their research labs. It has the same look and feel, the same systems. It's fully, fully sort of customized to effectively be a BMS facility run by us on their behalf. So from that insight, you can see that the logic prevails that any of the innovations that gets delivered in that research center flows into the rest of that -- of the BMS organization. So things like the next development stage, some of that comes to us, but manufacturing in the main flows straight through into BMS's own manufacturing infrastructure. So I get the spirit of the question. The Dedicated Centres is probably the wrong starting point. If you look outside of the Dedicated Centres and looking to more broadly into Discovery Services, which Ken Barr runs and Development Services, which Jan-Olav Henck runs, those 2 organizations are much more likely to follow the path that I think your question suggests, which is where we co-ideate or co-discover a molecule with a client or for a client that we can then add value to that by doing the downstream steps of that innovation, further development and ultimately through to manufacturing. So I don't think it's a particularly strong driver of the Dedicated Centres business, but very relevant for Discovery Services, Development Services. As for percentages, I don't think I've got a number that would be helpful just because it's -- as you know, the Discovery Development timeframe in the industry runs over up to 10 years, and we haven't been offering that fully integrated service for long enough that I've got a big statistical base to answer it. On the last part of your question, which is other than capability, is there a reason why we couldn't actually deliver? What are the other reasons that, that would flow to somewhere else? I think it's just all the usual factors, either people choosing to do that work in-house because they've already got spare capacity and capability or they've already got a vendor that they've got a long-term relationship with. But we do have certain structural advantages as does any integrated CRO. If you do the discovery work and then you flow through into development and on into manufacturing, you can, in some ways, lower the execution risk for the client because there are just fewer handover points. There's fewer opportunities for things to get delayed or a slip in a tech transfer. So there are good reasons in an industry. And here, I'm thinking of life sciences such as biotech and pharma where fundamentally innovation is patent band and therefore, everybody is very conscious that every piece of innovation has a sell-by date and there's a patent clock ticking away moving quickly as well as moving with great capability and competence is important. And if we can integrate those internally, we potentially can be quicker, we can certainly minimize the number of moving parts. Hopefully, that's a bit of a long answer, but I thought it was more of a strategic, broader question you were asking. Hopefully, that helps.

Long was good Jonathan. It was really helpful.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha.

Yes. My first question pertains to the traction in Discovery Services. Are you seeing a visible difference in the pace of projects coming up?

Is there a context to that in our time period? I mean, during the first quarter, I think our Discovery Services business has continued to perform very well. That's actually true. I think, over the last 3, 4 years we've continued to build momentum in that part of the organization. I think some of the changes that Ken has brought through around closer integration, acting as one single unit rather than 4 or 5 disparate units just starts to make more sense to our clients because they can see, if I take the answer I gave to the prior caller's question, that integration in practice, and they can see those linkages. So I think we're doing pretty well in Discovery Services. Was there an angle of the question around is it being particularly impacted by the current COVID lockdown and sort of global restrictions on travel? I'm not quite sure where you were coming from.

Yes. It was pertaining to the lockdown globally. So are you seeing less of outsourcing in the research activities?

No. I do not know measurably so, but I think it's not -- a, it's difficult to measure. So I can't be a 100% certain that we would have that visibility yet anyway. And secondly, it's quite soon. What you are seeing though [Technical Difficulty] business that we're operating at near-normal capacity levels. There is a matching set of challenges, problems, opportunities on the client's side. They outsource for a reason because they want to get the work done. And the pressure on them to get that work done and delivered hasn't diminished at all. And the point I made around most of our clients are in patent bound industries and therefore, are very time-sensitive with keeping their research projects moving. And I think out of those conditions, you see a reasonable amount of innovation. So we're doing this call today using a whole bunch of sort of technology that we weren't using in the past, whether it's Zoom or Skype or MS Teams, you choose your platform. And we're seeing the same thing with clients. What we have seen during the quarter is virtual client visits, virtual audits. We've even seen regulators do virtual regulatory inspections. And if you put the technology there and we work very hard to do that, you can have a very, very good outcome from doing it. So the world is digitizing because it needs to. I'm sure as we get -- come out of COVID-19, that will leave a legacy for many businesses.

And my second question pertains to the CapEx spend.

Yes, Charulata, and what's the question?

How much of CapEx do you expect in FY '21?

Yes. So yes, I mentioned that in my commentary. We said that we'll spend $100 million. Basically, as of March, we were at $450 million cumulative spend and we guided that it would become $550 million by March 2021, and we are still holding on to that. First quarter was a bit slower, but then we hope to catch up in the next few quarters. And as I said, it will all depend on the pandemic intensity, and I'll come back with the updated guidance if required at all later. But at this point of time, we are still targeting to spend $550 million by end of March 2021.

The next question is from the line of Nitin Gosar from Invesco.

Jonathan, one question to you. I wanted to broadly understand what's happening on the global platform when it comes to outsourcing Discovery activities? Especially in last 6 months has things changed? How are clients seeing this service offering, keeping in mind the profitability pool overall in pharma industries have improved over the last couple of quarters? So are they wanting to explore more projects at this lockdown which had some...

I hate to do this to you but it was a really crackly line. Could you just restate your question? I missed the beginning of it.

Okay. I just wanted your thoughts and observation on how are clients seeing the overall Discovery Services as an avenue, keeping in mind over the last 6 months we have seen pandemic? And we have also seen profitability pool improving for a lot of pharmaceutical companies. Are they wanting to explain more projects so maybe they will be required to adopt discovery research, outsourcing activity kind of route? Or are they wanting to curtail down on their already ongoing discovery projects or innovation projects? Just wanted to understand where are we right now.

Yes, good question. I haven't really detected a material change from the situation that you described, which, by the way, I think, is quite a positive one. I think you are right. You're seeing, at a societal level, at an industry level, an increased willingness to put more of society's wealth and/or company's investment into innovation, into R&D for a whole bunch of structural reasons. Demographics, increasing global population, increased distribution of wealth, wealth parity, all of those things. What we do know, and it's a 50-, 60-year long, almost development journey around the world as nations get wealthier, as economies evolve, as populations grow, there's a higher demand for health care. And I think it's absolutely -- it's almost glacial in the strength with which it moves, and it's going in one direction. On the pandemic element of it, you've seen a real burst of energy, I think, globally in the scientific community. This was a disease that was not recognized or known at the beginning of the year. And we're halfway through it. We've already got a drug such as remdesivir. There are others that are starting to come through. There's 90-odd parallel vaccine programs. There's an intensity to the collaboration between governments around the world, between industry, between corporates. And there's a lot and lot of science being done, which really is the need of the hour. If you're looking for a more strategic comment, what I hope one of the lessons that we collectively learn as we come out of this, however long that takes, will be the fundamental investments in innovation and science is the best way for the world to address these sort of problems. It's a real lesson. The anti-vaxxers, for example, are fairly quiet at the moment, given the clamor that there is around the world for a solution that allows us to get back economies to be normalized and for people to get back to a normal way of living. So I'm not detecting any material change. I do think it's a good environment where science is proving its worth.

One question to Sibaji. I wanted to understand, I think you commented the asset turnover is looked around 1x from 18- to 24-month perspective depending on -- given the pipeline visibility. I'm not sure what are your commentaries on pipeline in the past, but could you throw some kind of understanding of where we are on the pipeline? And any color on that could be helpful.

Yes, I will. Typically, how -- the way we operate is that we have at least 2 quarters of good visibility of our pipeline at any point in time. And future quarters thereafter is work in progress in -- whenever we are basically doing our CapEx planning. So the case is very similar now. Good visibility of 2 quarters and the rest of the quarters work in progress, and we have confidence that we'll be able to take it forward in a nice way. Did I answer your question? Yes?

Yes.

The next question is from the line of [ Sajal Kapoor ] from Unseen Risk Advisors. Seems there is no response from the line. We will move to the next question. That is from the line of Manoj Garg from White Oak Capital.

So just 2 questions. One on the manufacturing assets which you are putting across. So first on the API side. How should we look at in terms of the visibility for those assets given like I do presume that we have lot of molecules on the development side and given in which stage of clinical trials they are, if one has to look at from a visibility perspective? Would you like to put some color over there?

Yes. I mean, I think we gave quite a bit of an extensive commentary on this at the full year results. I think this year is quite a pivotal one for sort of the enablement of Mangalore API facility. The real priority for the year is having now completed the building stage of it, and that came in pretty much on time and on budget into quality. It's now to complete the qualification. So the order of the hour through the rest of this year is qualifying the plan. And then also starting to win those sort of regulatory inspections and approvals. And that really is the general shape of it. I think the comments we've made were -- think of it as in start-up mode, certainly for the rest of this year, it should start to generate some revenue as we go towards the end of this year into next. And then you're into a multiyear program of building that up. But we'll keep you updated as we go through that process.

Sure, the endeavor out there is basically to have the assets which we are developing in-house or probably we are open to get assets even as a second source of supplier? There might -- those assets might have been developing some other...

Yes. So Manoj, just to be clear, we don't -- the facility is a CMO facility, therefore, all of the assets that go through will be somebody else's molecule. Some of those may come from work that we've already done at the discovery stage and flows through from development into manufacturing, but it's more likely that those will be molecules that -- you gave a good example, where you take on being a second supplier or you do work sort of for the clinical stage of manufacturing, then roll into the prelaunch for new molecules. But what we're not doing is developing our own pipeline of assets and then manufacturing those.

Sure. That's helpful. And if I can squeeze one more question with your permission?

Okay. Yes, of course.

Sure. And on the biologics assets which again we are putting up, just would like to understand your perspective that are we primarily looking at projects on the biologics side or even we are open for the biosimilars project test?

Yes. I mean, certainly, actively looking for projects. We've got a good capability there. It's a state-of-the-art facility. It's based on 2,000-liter scale disposable assets. It's probably best for medium batch size medium-sized products early in their lifecycle. But we'll be very happy if there's a good fit to do biosimilars with it.

The next question is from the line of [ Sajal Kapoor ] from Unseen Risk Advisors.

Am I audible now?

Yes, you are.

You are, yes.

So yes, my question is a little medium to longer term. Our competitors like Lonza and Catalent are guiding that in the next 5 years biologics development pipeline would be almost 50%, if not more, of the overall drug development pipeline. So I know we have expanded both mammalian and microbial capacities recently. But what's your long-term outlook on the biologics manufacturing from Syngene's perspective? And I've got another question.

Yes, sure. I don't disagree with that. You can see that -- I mean, one of the nice things about the pharma biotech business is because of the highly regulated nature, all of the clinical trials or many of the clinical trials are put into the public domain. And it's a little bit like looking at star light, the light that you see today left the planet quite some time ago. So you can do the same thing with where the industry is going scientifically. If you go into ustrials.gov, for example, the U.S. government site that lists the ongoing clinical studies in the U.S., you get a good sense of where the industry's pipeline is going. And the indicators on that for the last 3, 4, 5 years at least, maybe even longer. But if you split the world into chemistry and biology or small molecules and large molecules, then it's about a 50-50 split. And to some extent, if that's Lonza and Catalent's view of the world, absolutely agree with it, and it's reflective in our strategy, which is to be very capable, but to some extent, platform neutral. Our intention from discovery into development and then into manufacturing is to be able to bring the right tool for the job. And sometimes scientifically at the discovery end, the right tool will be a small molecule, and sometimes it will be a large molecule. And the skill and the expertise is to know the difference, but it's to have both of them in your toolkit. And we flow that logic all the way through to become an integrated and full scope CMO, CDMO, CRO, whichever one of the abbreviations for the industry model you prefer, but it's to be sort of platform neutral led by the science, and that flows all the way through to manufacturing.

Very satisfactory response on that one, Jonathan. My second question is regarding the Mangalore facility. Though we generally call it as an API manufacturing unit, we would be manufacturing even the novel intermediates that's patent-protected as well as the patent-protected specialty chemicals at the same campus side because I think reading through the old annual reports 2015, 2017, we were calling it out that this site will be manufacturing on patent intermediate/specialty chemicals as well as the API. So maybe if you could just clarify that, please?

No, I think your question describes the answer perfectly. But what I will do is maybe invite Mahesh. Do you want to talk a little bit about the current capabilities and what options we've got at Mangalore?

Yes. So referring to your question around the interest in using it for APIs as well as intermediates. The very straight answer for that is that we are actually looking and evaluating all of those capabilities. As you know, the government has also been on a specific mission for bringing in more and more in-house manufacturing of both critical intermediates as well as APIs. And this is where we are looking at positioning the use of our Mangalore facility to bring it towards full capabilities. And that is something that we'll be looking at in the course of this year.

[Operator Instructions] The next question is from the line of [ Lakshmi Narayana ] from ICICI Mutual funds.

Am I audible?

Yes, you are.

I was just looking at the firm over the last 4 years. We have almost doubled our revenues from almost INR 1,100 crores to close to INR 2,000-odd crores, right? Just to get an understanding of how much of that business came from the clients of 2016 and how much actually came from new clients? And then if I just, again, double-click on the existing clients of 2016, how much came from expanding our services, right, whether it's like the new services, you actually do? And as a follow-up of that is when you actually talk to the clients, whether the decision-making is different than you actually give the speed of services? There is manufacturing involvement, there is procurement involved, right? Just want to understand how the -- how that dynamic actually works.

Super question. I hope you're okay. I don't have all of the statistics off the top of my head, I would actually have to go back and sort of do a cohort analysis. But I'm sure between the group of us will be able to put some sort of picture together that will explain it to you. I think your question tells you that something's quite right. What I would expect is that the majority of our growth will come from existing clients. But it doesn't tend to be sort of linear. It's actually sideways expansion, which I think is the other part of what you talked about. So you may do a single type of work for a client. They get comfortable with you. You become a qualified vendor. You build a good understanding of each other's operating approaches and systems. And to some extent, you earn their trust and confidence by delivering. And that gives you a platform to find other services that you can provide to them as you get a better understanding of their needs and they get a better understanding of your capabilities. And then in Syngene's case, it's again quite a dynamic backdrop because the company is in -- while we doubled our revenue over the 4 years, I would say, and I don't know how you'd measure it, but it feels as though we've more than doubled our capability and our competence and our proven track record. It's a more sophisticated organization and that's continued to evolve in a positive way. So we find even with our clients that have known as longest and known as best, we occasionally surprise each other by being able to show them a capability or a competence that they didn't know we had. And that's a positive thing to do. So numerically, I would have thought most of the growth would have come from deepening and expanding the relationship with existing clients. There's a reasonable amount of churn. People come in, people go out. Maybe they only had one project. You do it for them. They don't have repeat work for you to do. But we're also seeing good progress, I think, on expanding the number of clients that we have certainly over the time period, you described sort of 2016 onwards. I think we've got a better footprint in medium-sized businesses than we had in the past. We've got a more visible brand name since we IPO-ed. I think we're better known. And I think we've done particularly well in that sort of biotech sphere. We were to go back to 2016, we would have been strongest in large-cap pharma. And I think today, we've added to that also medium-sized startup and venture funded biotech as well. A bit of a sort of painted picture of an answer rather than numerically heavy, but hopefully, that gives you a sense of it.

Ladies and gentlemen, that would be the last question for today. I now hand the conference over to Mr. Kartik Sankaran for closing comments. Thank you, and over to you.

Good afternoon. Thank you all for your time. If there are any further questions, we'd be happy to get in touch and clarify that. Thank you all once again, and look forward to being in touch. Thank you.

Thank you very much. Ladies and gentlemen, on behalf of Syngene International, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.