Ladies and gentlemen, good day and welcome to Syngene International's second quarter and H1FY 2026 financial results 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Nandini Agarwal. Thank you, and over to you.
Thank you, and good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's second quarter and half-year results for FY 2026. To discuss the financial and business performance for the period, we have on this call today Mr. Peter Bains, Syngene's Managing Director and Chief Executive Officer, and Mr. Deepak Jain, Chief Financial Officer. After the opening remarks, Peter and Deepak will be happy to answer any questions you may have. 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.
With this, I would now turn the call to Managing Director and CEO, Mr. Peter Bains.
Thank you, Nandini. Good afternoon, everybody, and thank you for joining us in this call today. Let me begin with a brief overview of our key financials for the quarter and the first half of the financial year before I move on to operational and strategic highlights. I'll then hand over to Deepak, who will provide a more detailed breakdown of the financials. Revenue from operations for the quarter stood at INR 911 crore, up 2% year-on-year and up 4% sequentially. Operating EBITDA was INR 200 crore, a decline of 18%, with an operating EBITDA margin of 22%. Reported profit after tax was INR 67 crore, down 37% year-on-year with a 7% PAT margin. The second quarter performance was characterized by two key dynamics. Firstly, maintained momentum in research services, and secondly, the anticipated inventory correction in biologics manufacturing.
First-half revenue from operations was up 6%, and at the midway stage of the year, our performance has been in line with our expectations. Historically, Syngene's performance in the second half has been stronger than the first half of the year, which we expect to be the case this year, and on that basis, we are maintaining our full-year guidance. Deepak will provide more financial details in his remarks shortly. Let me now turn to some of the business highlights and start with research services, where we saw sustained growth momentum. I'm also pleased to share that in this quarter, Syngene has been awarded our first global phase III clinical trial by a U.S.-based biotechnology company. This trial will recruit patients across clinical sites both in India and the United States. This is an important milestone and reflects our growing capabilities in managing large, complex global trials.
We see the clinical trial market opportunity as an important driver of Syngene's growth in the mid and longer term, and we are investing to strengthen our capabilities and reach accordingly. To that end, we have also expanded our clinical trial footprint across Australia and New Zealand, the U.K., and Eastern Europe through strategic partnerships with established CRO players. These collaborations will build on and strengthen our capabilities in early-stage healthy volunteer studies, first-in-human studies, and patient-based clinical trials. Along with our translational and clinical research platform in Bangalore, these partnerships will help us meet the increasing demand from global customers and regulators to include diverse patient populations in their phase II and phase III trials. In the CDMO market, we are continuing to invest in and build on our strengths in fast-growing new modalities, including antibody drug conjugates and peptides.
In this regard, and building on our experience in antibody and small molecule discovery and development, we are now expanding our biologics facility in Bengaluru with a GMP bioconjugation suite. This will allow us to offer fully integrated services for antibody drug conjugates from discovery through to GMP manufacturing, and this will place us amongst a select group of CDMOs with full-service ADC capabilities. The suite will enable monoclonal antibody production and GMP bioconjugation at the same site, accelerating ADC development timelines. Importantly, the facility is capable of supporting a wide range of advanced conjugates and related modalities. It is expected to be operational within this financial year. Turning to peptides, in quarter one, we had commissioned a dedicated peptide laboratory at our Bengaluru facility, expanding our discovery capabilities in this area. We are now planning to enhance this capability with a larger-scale GMP peptide facility in Mangaluru.
With this facility, we will be able to partner with our customers in peptides from discovery through to clinical and now commercial-scale supplies, enhancing our ability to serve clients across the full development cycle in this fast-growing area. In our Bangalore biologics facility, Unit 3, we are pleased to advise that we have now operationalized and are supplying GMP clinical material to a U.S. biotechnology collaborator. With our Bayview facility for monoclonal antibody manufacture in the United States, we are on track with our preparations to commence operations in the second half of the year. With those highlights, I will now hand over to Deepak, who will take you through the financials in a little bit more detail before the Q&A.
Thanks. Thank you, Peter. Very good afternoon to everyone. Let me begin by discussing the second quarter performance, and I will cover the first half and the guidance before I close my commentary. Revenue from operations remained in line with expectations for the second quarter at INR 911 crore. This marks a 2% year-on-year growth in reported terms, down 3% in constant currency terms. Sequential growth quarter on quarter was at 4% in reported terms. This quarter saw research services continuing its year-on-year growth trajectory, led by volume improvements in discovery business. CDMO business was impacted due to inventory adjustments in biologics manufacturing, which we explained during the start of the year. Our small molecule CDMO saw growth in the quarter led by formulations.
Now turning to costs, raw materials accounted for 26.2% of the revenue from operations, largely in line with the second quarter of last year at 26.6%, supported by a lower mix of CDMO business. We expect the full-year raw material cost to be around 25%. Employee costs increased by 13%, in line with the merit increase and the investments in talent. Other costs, primarily comprising power and utility expenses, increased by 4% year-on-year due to the new facility at Bayview and biologics facility in Bangalore. Other expenses increased by 8% year-on-year as we continue to invest in automation and digitization programs to deliver increased speed and productivity. Our company saw a hedge loss of INR 11.8 crore against a hedge gain of INR 4.3 crore in the quarter of the previous year due to the difference between average and spot hedge rates. The movement in.
Revenue and the cost resulted in an 18% year-on-year decline in operating EBITDA, with margins of about 22% in the quarter versus 27% in the last year. With FY 2026 being a transient year, our full-year margins are expected to be in the mid-20s, as guided earlier. The increase in depreciation, primarily due to addition and capacity at the biologics manufacturing in Bangalore, which became operational this year, EBIT from operations was at INR 83 crore, down 38% year-on-year due to increase in depreciation costs. Reported interest expense remained flat compared to the same quarter last year. Other income declined by 7% compared to Q2 last year, primarily due to interest income on income tax received last year, which was not there in the current year. Reported effective tax rate for the quarter was 21% against a 23%.
Same quarter of last year due to the change in mix in the SCZ units that we have. We expect the effective tax rate for the full year to be around 21%-23%. Overall profit after tax before exceptional item stood at INR 67 crore, down 37% year-on-year. As the market evolves and new technologies emerge, we continue to invest in capabilities and capacities to drive the future growth. CapEx spent for the quarter stood at $10 million. Around 50% of the CapEx was invested in research services, primarily across capability builds, including DMPK automation, ADC labs, and contractual obligations in dedicated centers. Nearly 30% of the CapEx was in the CDMO business for new formulation facilities in small molecules and modifications of the manufacturing facility at Bangalore and the Bayview facility in the U.S. The remaining of the CapEx was spent on digitization, automations, and common infrastructure.
We continue to maintain a strong balance sheet, which enables us to effectively navigate through industry cycles. After meeting the CapEx spends for the quarter, we have a net cash balance of INR 1,018 crore as of 30 September 2025. Our first-half performance was also in line with our guidance. Reported revenue from operations increased by 6% year-on-year. Raw material cost was down by 3%, driven by a revenue mix, and staff cost increased by about 14%. Our direct cost, primarily comprising power, increased by 3%, and other operating costs increased by 15% as we continue to invest in the expansion of our facilities and capabilities, including automation and digitization that I spoke of earlier. Operating EBITDA margins stood at 23% for the first half compared to 25% last year. PAT before exceptional items was down by 4% year-on-year to INR 154 crore. Finally, let me say a few words about guidance.
We advised in April about FY 2026 being a transient year. On a reported basis and in constant currency, we guided to a mid-single-digit growth on revenue. We also guided towards a mid-20s EBITDA margin and a declining PAT. We continue to hold our guidance for the full year. We continue to expand in new areas such as peptides, ADCs, augmenting our capabilities into the fast-growing new modalities. With our new biologics facilities at Bangalore and the Bayview facilities getting operational later in this year, our focus will be executing in line with our strategy, which we believe will position us for further growth in the medium and the short term. With that, I would like to open it up for questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. 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. We'll take our first question from the line of Kunal Damesha from Macquarie. Please go ahead.
Hi, thank you for the opportunity and congratulations on getting the clinical trial contract for the U.S. market. The first question pertains to the contract. I mean, what type of capabilities have we set up in the U.S. market for this? How are we differentiating from the existing players in this space, such as IQVIA, I believe, provides clinical trial solutions? How does the economics of these kinds of projects work? That would be the first question.
Thank you, Kunal. I'll start with a reply, and Deepak may want to add something. Again, let me step back because this is an important milestone for Syngene. It's our first phase III global clinical trial, and it builds on our pre-existing strengths in the clinical trial arena in India, which is becoming, I think, a greater focus for global clinical trials. It builds on our collaborations with established CROs in other geographies, including the United States. As I said in my opening remarks, we've now extended that into Europe, Australia, and New Zealand. We're building on existing capabilities, and we're leveraging our collaborator CROs in the United States in order to recruit patients and to undertake all the analytics, etc., required in this study. As you would expect, we very recently signed this.
The economics of this trial will be spread out over three years, and the bulk of that will come in FY 2027 and 2028 as the trial recruits pick up and so forth. Kunal, does that answer your question?
Yes, partially. I wanted to understand more about how these kinds of projects fare in terms of their potential, let's say, revenue upside versus the typical research projects that we take, not just for this particular project, but how do clinical projects fare against, let's say, the commercial manufacturing or the services project that we take just from the business angle perspective?
Kunal, let me just try and help understand, or let me help understand the answer to this, actually. When we look at our clinical trials, right, it's actually a business that's growing for us. It's in an industry segment that's growing. It's evolving as we speak. We got our first clinical trial batch, right? That's the first global clinical trial batch. I think at this stage, I would rather refrain from commenting upon how it compares to our business and our margins across each of the businesses because we typically don't break down our businesses, right, in terms of margin structures. It's an area that we believe has got a lot of potential. There is good traction and growth that we're seeing. We look forward to seeing more information on this as we share with you all in the coming quarter.
Okay. That's helpful. Second one on the ADC and peptide where we are adding capacities. What kind of visibility have we got there to kind of utilize the capacities that we are adding in? If you can provide some color there?
Yes, Kunal. I mean, we do have visibility here and customer traction. Very clearly, in a longer lens, the antibody drug conjugate market is expected to grow substantially over the coming decade and more. As we look at the pipelines of our customer base and the utility of combining the targeted effectiveness of a monoclonal antibody with a directed payload and the requirement for conjugation. Again, we are building from a position of strength in our historical expertise on monoclonal antibodies, our historical expertise in small molecule chemistry for the payloads, and our growing capability in linkers. Putting all of this in one site creates a differentiated capability for integrated antibody drug conjugate development. We do have existing partners, and of course, we're looking to expand that and build on that going forward. It's a very important area of growth for us.
Sure. Lastly, if I may just squeeze in, I think as Leslie mentioned, recovery in biotech funding. We have seen some green shoots there, and our research service, anyway, has done decently well in the first half. Do you expect meaningful acceleration if the biotech funding comes back in the second half from here on?
Sure. I mean, we are seeing the same picture. We're seeing an encouraging improvement in VC funding into biotechs. Syngene has a substantial early discovery capability, and biotechs are an important part of our customer mix. I will note that the underlying research services growth has remained robust, but a tailwind with an increasing venture capital flow into early-stage biotech will just add another layer of growth opportunity onto our pre-existing momentum in research services. It's encouraging. We're obviously tracking it. Of course, we hope that that trend continues and we see something more like a full recovery in the VC biotech funding going forward.
Great. Thank you. All the best.
Thanks, Kunal.
Thank you. We'll take our next question from the line of Shyam Srinivasan from Goldman Sachs. Please go ahead.
Yeah, good afternoon. Thank you for taking my question. Just the first one on the split of the revenues, I think in Q1, you disclosed some either large molecule, or if you're doing it CRO versus CDMO, if you could kind of give us that for the quarter and for the year ago, please.
Our research services has been about 67%, and 33% is the manufacturing or CDMO business for this year. Last year, same period was about 63% versus 37%, right? So there's a higher growth in the research services than in the CDMO business for us.
Sorry, Deepak, there was some disturbance. So 67% of CRO versus 63% last year, correct?
Yes.
Okay. No, no, I was just trying to get the numbers right.
Yes. Yes.
This is Q2 or Q2, right? Not H1 versus H1 or something like that.
Q2 over Q2.
Okay. So that clearly shows that. I can do the math later because I'm not able to see the number in front of me. But research services has grown positive growth, I would imagine, higher than whatever the quarterly growth is.
Yes.
Right? So how does this now pan into the second half, per se? Do we continue to see? What are some of the leading indicators on the research services that gives you the confidence that we can keep this momentum going?
Shyam, we don't typically break down the forecast by these segments, but we're maintaining our guidance for the year, and we'd want to stick to that. We wouldn't break down the forecast by quarter and by the business right now.
Understood. Understood. Not to worry. Let me then flip the question around. We have seen, again, I think, the manufacturing services decline. Is it largely led by just the destock of, say, the biologic, or is there maybe core business, if you were to separate that out? This quarter or last quarter? How do you think that is progressing? Anything that you want to add on what's happening at the Mangaluru API plant?
Let me answer the question for you. We did call out a slowdown in our large molecules because of the inventory correction, and we're seeing that play out. Nothing beyond that, as what we had anticipated should have happened for the year, is happening, right? It's more or less the way I would take it is no surprises yet. Our CDMO business is impacted by the inventory correction, which is what was playing out. We saw that starting from this quarter more than what we saw in the previous quarter. In terms of—sorry, I missed the second part of your question. You had one more part to it, right?
No, no, Mangaluru API plant.
Mangaluru API plant. Sorry, yeah.
Small molecule manufacturing service.
Sorry. On the small molecules. We did mention the fact that we're seeing the utilization levels, and we don't call out the utilization level, but we're seeing the trend lines on the utilization levels improve. We like the trend lines. Is there more to be done so that we get optimal? I think yes. We continue to hold that point. Yes, we're seeing more and more traction. In fact, the peptide facility that we spoke of earlier in the conversation is something that we are putting up at the Mangaluru plant.
Got it. Last question, Deepak and team, just on our overseas facilities, the acquisitions that we have done, how are they tracking either in terms of recruitments and also in terms of the pre-op expenses? When do we think monetization starts?
We had guided towards the second half of this year for us to start operations in the Bayview site. We're on track to do that. Things going as planned. The recruitment is happening. We are going as per what we had planned it to be. The dates or periods of monetization, obviously, once we get the site operational, it will need to do some trial batches, etc. We still continue to hold to our guidance around the second half of this year for the site to become operational. Things going on as per track.
Thank you. Thank you so much.
Thanks.
Thank you. We'll take our next question from the line of Harith Ahmed from Avendus Park. Please go ahead.
Hi. Good afternoon. Thanks for the opportunity. I see a write-off of around INR 28 crores related to unrecoverable receivables in the footnotes. Trying to understand under which line item this is recorded in the P&L. Is it a one-off and non-recurring item?
Yes, it's a one-off. It's a non-recurring, and it's sitting in other expenses.
Okay. Got it. On the Bayview facility, I noted your comment about commissioning this facility in the second half.
Yes.
We're also hearing about a lot of push from the U.S. administration towards local manufacturing. Do we expect the ramp-up in the order book to be faster than our initial expectations here? If you've had any conversations with clients, any takeaways from those? Also, any update on the order book, how that's shaping up at Unit 3?
Okay. I'll take that one, Harith. Thanks for the question. On the Bayview facility, what we're seeing in the United States, and of course, it moves around a bit, but clearly, there is a push from the administration to localize manufacturing in the U.S., and that very much plays to our site being located in Baltimore. We have numerous discussions going on with potential clients and customers, but I think I'll revert to Deepak's guidance, which is everything that we've set out in terms of preparation timelines remains very much on track, and we are looking forward to commence commercialization. That will, as Deepak's initial batches, qualification batches, and so forth, we are on track to do that in the second half of this year, and we would look to see the ramp-up coming through later. I think that's in good shape and on the same timeline.
With regard to Unit 3. Our Bangalore Biologics facility, as I said in my remarks, we're very pleased that that is now operational. We are supplying GMP clinical supplies to a US biotech. Of course, that's just the start. We have more to do, and we'll look to build on that going forward. One of the implications of that, Deepak spoke to in terms of that now operationalizing, creates the depreciation that Deepak spoke about in his remarks.
Thanks. Just a quick one on the phase three clinical trial contract that we've won. Given that this is a new foray, and so far we've largely focused on BA/BE studies and early-stage trials, does this foray entail some investments from our side to get into these large phase three trials?
The patient recruitment, Harith, will be split between India, where we've already got a well-established platform and capability with strong connections into the hospital networks and with the appropriate investigators. In the United States, we'll work with a collaborator. Operationally, of course, we'll work with them. In terms of investment, incremental, nothing significant here, and we'll operationalize it, I think, before the end of this fiscal. As I said in response to one of the earlier questions, we see the bigger economics of this global trial flowing through in fiscal 2027 and 2028. It's a multi-year trial, and we would expect the economics to flow and reflect that.
Thanks, Peter. Thanks for taking my questions.
Thank you. We'll take our next question from the line of Allankar Garude from Kotak Institutional Equities. Please go ahead.
Hi. Good afternoon, everyone. Just a follow-up on the clinical trials as well. I wanted to understand what prompted the decision to get into this. We have had a minimal presence in this over the last many years. Just in terms of timing, what exactly was the factor which prompted this decision to get into a larger presence within clinical trials now? Maybe a second question there is from a regulatory standpoint, particularly in India. Do you think the overall environment is now more conducive to conduct global clinical trials?
Let me start. I'll do the first question first. I may ask you to repeat the second half. On the first one, what's prompted us? Syngene's had clinical trial capabilities for well over a decade and more, but those have been largely focused on human volunteer and early-stage trials. The Indian hospital capability and quality has dramatically improved over the last 10 to 15 years and now provides a substantial platform to access patients for clinical trials. The investigators and the investigator network in India has also, I believe, significantly sort of advanced, and the capability and quality is now really strong. A lot of companies are looking, and indeed so are the regulators, at including diverse patient population bases in their later-stage trials toward approval. I think there have been sort of fundamental dynamics that have underpinned the emergence of the.
Indian clinical trial platform and access to patients. Syngene has been evolving along that and has now very strong networks and collaborations both with hospital groups and with investigators across a wide range of therapeutic areas. Very clearly, the interest in engaging and accessing Indian capabilities and the Indian patient population is increasing. We're looking to move with that dynamic in India. We believe that with the capabilities and platform strength that we've developed in India, working in collaboration with select CROs in other geographies, as I described in my remarks, that is a natural expansion for us into a very large market opportunity. The fundamentals are right. Syngene's very well placed to capitalize on this as an Indian-based CRO, both to access the Indian hospital and patient populations and through partnerships to expand into global clinical trials. Alanka, please repeat your second.
Part of the question.
The second one, Peter, was on. From a regulatory standpoint in India, do you think the environment is now more conducive? Because there have been challenges in the past. Has anything changed as far as the regulatory environment for clinical trials in India is concerned?
I think the answer is directionally yes and clearly yes. I think there are also encouraging signs that the regulatory environment in India will continue to sort of improve in terms of ease of doing business and speed of doing business. I think those are dynamics that the wider global customer base sees and are important in playing into decisions to increase their engagement of the Indian hospital investigator and patient access to complement their global capabilities. Definitely, Alanka, I think the answer is yes, and we look forward to more regulatory improvements to help accelerate that opportunity.
Thanks, Peter. The second one is, can you comment on the peptide facility you spoke about in Mangaluru? More details in terms of the investment entailed, how much capacity you are looking to create. Is this more of restructuring of your existing facility, or it's more brownfield? Possible to share any such details?
Yes, I can expand a little bit. It'll build on what I said earlier, and I think some of Deepak's comments. As you know, we have been into peptides in early discovery for some time, and we strengthened that with a very contemporary facility installation earlier this year in Bangalore, a discovery peptide laboratory which enhanced our capabilities in peptide synthesis, in purification, in characterization with multiple synthesizers. Very, very obviously, again, the peptide global market opportunity, which is, of course, led by GLPs, has been explosive in the nature of its growth. Behind the front end of that with GLPs into diabetes and obesity, there is a very wide and deep range of clinical programs exploring the utility of peptides well beyond diabetes and obesity. That provides, I think, for us a very attractive opportunity.
In order to enhance our capability to engage and to grow into that and building on the discovery capability, when I'm going to establish a facility, and this will be in Mangaluru, which increases our scale and enables us to go into clinical scale and into commercial scale. I mean, this is not commercial scale at the GLP level, but it will be commercial scale in other areas. It takes us from a toehold to a foothold, and then from there, I think we'd be looking to build on that as well. It's a very good example of an area of opportunity, a very fast-growing modality with peptides where we're building on our pre-existing capabilities and enhancing them to enable us to access and grow into this fast-growing market opportunity.
it possible to share details, Peter, investment entailed, how much capacity you're looking to create, timelines as well?
No, I mean, Alanka, I think I can give a little bit on that. Timelines, I think this is. We'll build it this year, and it'll come into operations next year. In terms of scale, this will enable us to move into clinical. And into commercial, and it will complement our preclinical and discovery capacities that exist in Bangalore. But we're not going to sort of disclose any more details on that at this stage.
Understood. Yeah, that's it from my side. Thank you.
Thank you. We'll take our next question from the line of Madhu Ravindran from FIL. Please go ahead.
Yeah. Hi, good afternoon. I have a very basic question. This global phase three clinical trial which we're doing. Could you just, just very basic, help me understand what is the source of revenue for Syngene? Will we be generating revenue from helping recruit for the trial itself and also supply, sort of the trial quantities from a facility, or how does it work? Sorry, maybe very basic question.
It's a nature of a service contract as well, right? We would do the trials on patients and generate revenue through the client that asks us to do the trials.
Let me build on that a little bit. Madda, let me build on that a little bit. I mean, as Deepak said, this is a service contract that we will enter with a client customer. Of course, it will be built around the patient numbers and the analytics that we will do in terms of the samples and the follow-up and the reporting and so forth. It is basically a contract service around the scale and the scope of the clinical trial being conducted. Very standard format.
Okay. So this is not linked to the new biologics facilities that you are setting up? It's not linked to supplying some quantities from there.
No, no.
Just linked to that? It's a separate business altogether?
Yes. It's a separate business altogether. They're not linked.
Okay. Understood. Thank you for that. Just want to understand that on the Stellis unit as well, which we acquired some time back. Any comments on the ramp-up timeline set? That was part one. Secondly, on the Zoetis, sort of the contract as well that we have, when do we expect the restocking to end? When do we expect the supplies to restart for that project? Thank you.
Madhav, on the first question on unit three ramp-up, we just said we commissioned the site in May. It became operational with all the regulatory licenses in May. We started doing clinical batches now, and we've supplied one GMP clinical batch to a client in the U.S. We're now starting to see the ramp-up of that shape up, right? On terms of. Sorry, the second part of your question was?
Large molecules.
Yeah, large molecules.
The large molecule restocking here?
Yes. We did speak about the restocking happening in this year, and that is what gave us the guidance of what we have done or what we have got for FY2026. We continue to hold on to the guidance. We saw the impact of restocking happening in quarter two. That was in line with our anticipation or our expectations as well. We are working with the client to ensure that it is going as what we had anticipated it to be.
Would it be fair to understand that this can come back in fiscal year 2027, or that's yet to be discussed and confirmed?
I won't be able to comment much upon that because it's a little for us, we are providers of the services and the products that the clients ask for. We receive an order, we fulfill the order based on the forecast that we get. We have got a forecast which allowed us to give you the guidance that we have given, and we are holding on to the guidance right now. For the years beyond, we will come at the right time, and when we talk about FY2027, we will guide on to that as well.
Perfect. Thank you.
Thank you.
Thank you. Before we take the next question, we'd like to remind participants to ask a question, please press star and one on your phone. We'll take our next question from the line of Chirag Dagli from DSP Investment Managers. Please go ahead.
Yes. Good afternoon. Thank you for the opportunity. Sir, is there an expansion of your role with the innovator on the animal health biologic product? Are there more such products? Because at that time, you had also talked about more products for the same clients. So just how should we think about that opportunity, even while this restocking sort of continues?
Let me address that question. I mean, we are, as Deepak said, obviously in ongoing discussions with the client with regard to the commercial product that we are supplying. We do have additional discussions with them on potential additional opportunities. In the wider lens in animal health, we have a number of ongoing dialogues which could come to fruition there as well to complement our clear focus on human health. We continue to explore all opportunities in that regard, and that includes existing clients and future opportunities.
Is this like a near-term event, Peter, as in next 12 months kind of an event, the expansion of the product portfolio for the client?
Can't really guide at that level. As and when these things mature and materialize, we'll update accordingly. We have a wide range of discussions ongoing, and as and when they mature, we'll update.
Understood. Thank you so much for that. The second one was on the, while I understand you won't give an FY 2027 outlook, but when I look at history, typically, you've never had more than two years of single-digit growth, and FY 2026 will be the third year of single-digit growth. Typically, that has been followed with a very strong following year. Is this the kind of expectation you want investors to go back with, just looking at history last 15-20 years? It looks like after a couple of years of single-digit growth, you come back fairly strongly, especially in context of the last three years, which have had soft growth, but you've continued to invest in capacities as well as capabilities. Just in that context, some color around, without getting into numbers, some color around FY 2027 outlook should be helpful.
Because if I look at history, it clearly looks like FY2027 and 2028 should be very strong years. Chirag, let me answer the question a little differently. When we came at the beginning of the year, we said we have a single-digit, mid-single-digit growth that we are guiding towards. We did also call out that that mid-single-digit growth was driven by a one-off inventory correction by one of our clients. We said underlying growth still continues to remain robust and strong, which is what we hold because we are holding our guidance. In terms of you're absolutely right, we continue to be on a strategic path of investing into the right capacities and capabilities as we seem right. We continue to do that. We continue to follow the path. Now, I will not be able to comment upon how 2027 and 2028 will pan out to be.
We've always come and given our guidance at the right time, and at the right time, we'll come and talk about 2027 to you. Just a follow-up on that, Deepak, is there any reason to believe this time around it is different?
This time around for the history and every two years, us coming back.
It's different versus history. Yes.
All I can say, I can comment only upon this year and this year's guidance and what we've told you, how it shapes up. I do not want to correlate a history and then do a forward projection on that, Chirag. Apologies for that. I'd like to just stick to this year and the guidance that I've given to it.
Understood. Thank you so much. Best of luck.
Thank you.
Thank you. Next question is from the line of Suryanarayan Patra from Philip Capital, India. Please go ahead.
Yeah. Thanks for this opportunity. Most of the questions have already been answered, but I will try to understand a little bit more on the clinical side of it.
Surya, please.
The activation of our own.
Mr. Patra, your voice is sounding muffled. Can you use your handset mode, please?
Now, is it okay?
Yes. Please go ahead.
Yeah. I'm already.
Sorry.
Is it audible?
Yes, it's better. Thank you.
Hello.
Yes, please go ahead.
Yeah. I just wanted to have some more clarification about clinical trials.
I'm sorry, you're sounding muffled again, Surya.
Can you hear this?
Hello?
Hello? Yeah. Can you try now, please?
Is it audible, ma'am?
It is muffled. It is not.
My question.
Yeah. It is better now. Please go ahead.
Yes. The only question was about the clinical trial operation. Whether it is the reactivation of the old clinician business, what we used to have, and if it is yes, how extensive this business will be, whether it will be like all toxic studies also along with the human clinical trial material supply along with the real trials.
Sorry. Again, I'm not sure I got the whole question, but a part of it was, is this clinogene evolved? If that was the question, I think this is a substantial evolution of the clinogene platform of many years ago, and it's been built around a platform on translation and clinical research. We think putting translational capabilities along with clinical affords us the opportunity for a differentiated service in an area of extreme importance to our customers as they seek to take their drug candidates and de-risk them through translational science now, which is a very wide-ranging suite of capabilities and tools that will enable, for example, biomarker studies to identify suitable patient populations for the clinical phase. This bridge between pre-clinical drug candidates and clinical candidates inside patients is.
A bridge of extreme importance to our customers, and we are building a platform of capabilities to support them across that bridge. As I said, translational capabilities will be very important in a sort of integrated, joined-up, and end-to-end capability to then enhance the clinical trial output. It is a very exciting area for us. It is an area of extreme importance to our customers as they look to bridge their drug candidates into human studies and ensure that those studies' protocols, designs, and patient populations are optimized against the biological target and the diseases that these drug candidates are designed for. It is a very much enhanced, elevated, and advanced platform capability than maybe you are talking about of old with the clinigene, where it was centered around a human pharmacology unit doing BA studies for generic companies. It has transformatively shifted from that, and we will continue to build on it.
Okay. So what resources that we would have created to attract this kind of business opportunity? And let's say over a longer period of time, let's say if we consider a three-year period, how big this opportunity can be. For the entire company like Syngene?
Sir, I mean, I think I said in my opening remarks and to the answer to one or two other questions, we see the translation and clinical research part of our business, which today is a relatively small part of our business, as an area of strategic growth opportunity. I mean, we're very excited with the award of our first global clinical trial, as I described earlier, and we're looking to build on that. I think the outlook is very positive for this. I mean, we are not in a position to give any quantitative forward guidance or outlook. I mean, what is very, very clear is that the translational and the clinical trial space on the global CRO landscape is a large part of the market opportunity, and it remains a fast-growing part of that opportunity.
We believe that we have built and will continue to enhance a platform capability that will enable Syngene to engage in that market opportunity in a differentiated way. With the opportunity to access the market opportunity and create a strong growth driver for our business in many years to come. That is the nature of the opportunity, Sir, at this stage, but we are not going to give any more characterization on quantification.
Just last one bit on here. Whether this China plus one is also a kind of a trigger here in the CTO because China was the biggest market for the CTOs. This China plus one is a kind of a big driver for clinical opportunities for Indian players. That we are seeing for Syngene.
Sorry, the question's breaking up, Sir. I don't think I'm hearing it properly.
It's China and China for us to see the growth.
For clinical trials, Sir, if the question was, is China plus one a driver for us on clinical trials, the answer is no. That's not a factor in our consideration at this stage. We clearly look at the global market opportunity more broadly than that, and it's not a driver in any of our decision-making. The decision-making around consolidating a capability, bridging preclinical and clinical to include translation sciences and the suite of capabilities that I've just described was taken on the basis of the global market opportunities as it stands, and there was no consideration of a China plus one component to that. The global market opportunity is very significant. We're starting our play in that market, and we're very excited about the opportunity.
Definitely, sir. Thank you. Wish you all the best.
Thank you. We'll take a next question from the line of Aditya Cheda from Incred Asset Management. Please go ahead.
Hi, afternoon. A couple of questions. First, on the overall return on equity profile for the company. Directionally, it has been a double whammy of lower asset turns and even lower PAT margins. If you can sort of share your outlook, considering you have invested roughly $200 million over the last two years, how do you sort of place your incremental capital allocation to improve this? If you can share what kind of investments are you looking for FY2026 and 2027? These are the first questions. Thanks.
Completely with you in terms of us going ahead and investing and that having an impact on the return on capital, but our investments that we've made have been conscious decisions of building capacity in businesses that we are seeing growth in. In my previous conversations, I've always mentioned that we look at investments in twofold. One is capacity and capability, and we continue to strategically invest as we deem right into areas, into modalities, into capacities, right? In the last few years, we've invested into our biologics capacities. We would always appreciate the fact that these capacities have a gestation before they ramp up. Even in the guidances that we've given for both our biologics facility in Bangalore and the Bayview facility, we said we will get to an asset turnover in a three to five-year time horizon.
We did call that in this transition, there will be an impact that will come to our margins and our returns. We believe the investments that we are making are strategically the right investments to make and help us look at opportunities to capitalize on in the near and the long-term horizon. In terms of the impact on margin that you just mentioned, I think, as I said, we continue to hold the guidance for this year. We continue to rationalize the fact that the guidance of this year of the mid-20s on EBITDA and a declining PAT for this year was also transient in nature, and more importantly, it was also driven by the one-offs that we are seeing in the business.
I think if I was to zoom out and look at this situation, our returns on capital right now seem a little muted, but the fact remains is that it is an investment into the future, which always will have a gestation to it. I'll pause and check if Peter has any comments.
Yeah. No, I don't.
Got it. Can you call it the capital investments that you're looking to do over the next two years? In absolute numbers.
As I said, we typically guide for a year at a time, and right now, we've not guided for anything beyond 2026. For 2026, we've guided to a $45 million of CapEx investments with an incremental $10 million of CapEx investment going into our Bayview facility as well. We're holding on to that for the moment. Any incremental changes to the guidance for the future period will come to you at the appropriate point in time when we guide for the years forward.
Got it. The last question is, you can correct me if I'm wrong. The human clinical trial business margins are typically lower than the general drug discovery business. Is that true, or should it be fair to make that reference?
The way I look at this is, we do not break down our margins, and we do not call out our margins by business yet. Therefore, I do not want to speculate for this moment. As I said, we are very pleased with the first global trial that we've got. We want to capitalize on a market that's growing, and we'll focus right now on growing that part of the business, which Peter alluded to, the fact that it's gone through a significant evolution, and we see great potential as the ecosystem in the country is also building up and supporting the growth that we have.
Thank you. Ladies and gentlemen, due to time constraints, we'll take that as a last question for today. I now hand the conference over to Ms. Nandini Agarwal for closing comments. Over to you.
Thank you all for joining us on the call today. Any further questions you have, you can get in touch with the team. Thank you and have a good day. Bye.
Thank you. On behalf of Syngene International, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.