Syngene International’s share prices have faced volatility due to concerns regarding challenging funding conditions for US biotech companies. This has led to a decrease in demand for R&D services, contributing to the instability in share prices. Jonathan Hunt, Managing Director and Chief Executive Officer of Syngene International Limited, acknowledged that the fourth-quarter performance was below expectations. However, he highlighted that the underlying reason behind this setback was reduced demand for research and development services within US biotech firms stemming from a difficult funding environment. This issue is well understood and already showing positive signs of recovery.
Syngene International reported a decline of 8% year-on-year in revenue from operations for the fourth quarter, reaching Rs. 917 crores. Despite this, the company’s profit after tax saw a 6% increase year-on-year to Rs. 189 crores. Other business segments, such as development business and manufacturing services, provided support to the company’s performance, offsetting the slowdown in Discovery services and dedicated centers.
For the full year (FY24), Syngene reported a 9% increase in revenue from operations, reaching Rs. 3,489 Crore. This resulted in a 12% rise in profit after tax and before exceptional items to Rs. 519 Crore. Hunt emphasized that the growth guidance set by Syngene for FY25 is in the range of high single digits to low double digits, compared to around 6% in FY25.
US Biotech majors have recently stepped up their efforts in fund raising, and the January-March quarter has witnessed a substantial amount of funds being raised by US biotech firms in FY24. Historically, it has been observed that after raising funds, investments start rising within the next six months. Therefore, the second half of the year may witness a rise in investments.
Syngene also completed the acquisition of a biologics manufacturing plant from Stelis Biopharma, strengthening its Manufacturing Services sector. The repurposing of the plant is proceeding as planned, and facility upgrades and qualifications are expected to be completed in the second half of 2024.
The Indian pharmaceutical industry has seen an increase in inquiries and site visits from global pharmaceutical companies seeking to reduce their dependence on China. Hunt noted that these are positive signs, and the industry, including Syngene International, is expected to reap the benefits of the ongoing China rotation.
Syngene International announced a significant 150% rise in dividends, increasing from Rs. 0.50 per share at the end of FY23 to Rs. 1.25 per share at the end of FY24. Hunt stated that investors have been rewarded with higher dividends in FY24. The company plans to continue rewarding shareholders with higher dividends, but this will be reviewed on a yearly basis.
In terms of capital expenditure, Syngene International invested around $60 million in FY24 and plans to invest $55 million in FY25. Approximately half of this investment will be allocated to research services, and the remaining will be utilized for automation and digitalization of manufacturing facilities.
