Q3 20/21

Jan 21, 2021

Ladies and gentlemen, good day, and welcome to Syngene International Third Quarter FY twenty twenty one 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. Signal an operator by pressing then 0 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to miss Divya Dhawan from Thank you, and over to you, ma'am. Thank you, Raymond, and good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's third quarter and nine months FY 2021 financial and business performance. We have on the call today mister Jonathan Hunt, Synge's managing director and chief executive officer mister Subhaji Viswan, chief financial officer and mister doctor Mahesh Balga, chief operating officer. Other members of the executive team are also present on the call. After the opening remarks, Jonathan, Subhaji 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. The replay of this call will be available for the next few days after this call has ended, followed by the transcript. With this, I would now hand over to Mr. Jonathan Hunt for his opening remarks. Over to you, sir. Good afternoon, and thank you for joining us on this earnings call to discuss Syngene's third quarter performance. So let me start with a comment on COVID-nineteen and how we've been managing our business in what are still, I think, uncertain times. At a company level, we're coping well, but have managed to maintain near normal levels of operations throughout the quarter while keeping our staff safe and healthy. India in general seems to be faring well compared to many countries around the world. And today, we've not seen here in India a meaningful second wave. In contrast, many of our key client locations such as The U. S. And Europe are clearly experiencing a strong second wave. And in response to this, going back to various stages of lockdown, these countries are facing both the current and fresh cases as well as the emergence of a number of new strains of the COVID-nineteen virus. The positive news is that we're also seeing these countries commence large scale public vaccination programs and hope that these deliver as planned and the spread of the virus is contained. Taken together, I think we can be hopeful that widespread vaccination will curb the disease, but the short term impact on client demand in the coming quarters as a result of further lockdowns and global travel restrictions, I think it remains uncertain. Consequently, I think it's prudent that we take each quarter as it comes. Now that said, I expect to be in a better position to guide for the year ahead of the full year results in April. By then, hopefully, the peak of the second wave in The U. S. And Europe will have passed and the world will have made progress on the rollout of the vaccine. Closer to home in Bangalore, the newly better as the spread and the intensity of the COVID-nineteen virus appears to be receding. We're witnessing a gradual reopening of businesses and a return to more normalized day to day living. I think we also embarked on a major vaccination join. As you're aware, right from the beginning, we took necessary steps to ensure our employees are safe at work and we continue to maintain the same level of protocols at our campuses. Reflecting on the last nine months, I feel satisfied that Syngene has not only handled the operational challenges effectively, but in the process has built a stronger and more resilient organization. With that, let me now quickly give an overview of the quarter's financial performance before moving on to some of the operational highlights. So first, focusing on the financials. Third quarter performance is in line with our full year guidance with revenue from operations growing 13% over the corresponding period last year. Over the past few months, we've continued to implement operational excellence initiatives using the array of productivity enhancing tools like Lean, Six Sigma and Kaizens, which helped us to continuously improve our operational efficiency. This, together with good cost control measures, helps us sustain our profitability with EBITDA and PAT growing 11%, respectively. Now I'll let Soubagi give more details on the quarter's financials in a moment. So let me move on to the operational highlights. As we reported in the press release, third quarter performance was driven by overall strong performance, I think, from all of our divisions. Integrated drug discovery projects, as you know, are a strategic focus area for Syngene. Here, our ability to seamlessly integrate every stage of the discovery, development and manufacturing value chain saves time and creates significant value for clients. Some view it as an extension of their internal capability and resources and others really as an alternative to an in house facility. These partnerships are characterized by a shared objective, which is to ensure that products reach the people who need them as quickly as possible through the optimization of every stage of research development and preparation for regulatory approval. So in line with this, earlier in the quarter, we announced a collaboration with Deerfield Discovery and Development Corporation or 3DC. This is the drug discovery and development subsidiary of the Deerfield management company. The collaboration brings together expertise with three d C in identifying potential novel biological targets and Syngene's integrated drug discovery capability to conduct target validation, therapeutic discovery and preclinical development for both large and small molecules. And today, three d C has moved quickly to award us four antibody IVD projects in the oncology and autoimmune segments to be executed during FY twenty twenty two. So that relationship is off to a good start. In past quarters, we've talked to you about our online events and our increasing use of social media to engage clients. We've also developed a virtual exhibition group to allow us to have a presence at major congresses around the world, albeit virtually, and these are taking place online over time. We're also investing in building in our global sales force to stay closer to our customers. This will mean that we can maintain close relationships with our existing customers as well as introduce the company to new customers. And this is particularly important at a time when international travel may be constrained for some time to come, especially in the key markets of The U. S. And Europe. During the quarter, our scientists continued to contribute their expertise in the fight against COVID-nineteen. We've commissioned a new RT PCR testing facility, which is approved by the NADL and the ICMR. And as you know, Centene has been supporting the state government in conducting PCR tests. And so far, we're very proud to have tested more than 100,000 samples. Our scientists were also actively involved in supporting our clients with their COVID research projects. Finally, the expansion of the hydro battery search facility with additional laboratory capacity reflects the growing business potential for our services. We're currently close to 175 scientists operating out of our Hyderabad facility. And with this expansion, we'll add an additional 90 scientists. So to sum up, I think the third quarter is a good quarter. We've got pretty good visibility on the final quarter of the year. It looks to be a very busy one for us. Expect to end the year in line with our guidance, there or thereabouts of revenue pretty much spot on, maybe a nudge ahead on profit. The projects coming in from the 3DC collaboration are adding to our IDD portfolio. So let me now hand over to Subhaji and he'll give you some more specific details on the quarter's financials. Subhaji? Yes. Thanks, Jonathan, and a very good afternoon to you all. I'm happy to take you through our results for the third quarter and the nine months ending thirty first December twenty twenty. As Jonathan mentioned, we got into the year with the first quarter witnessing the full impact of the pandemic. We are hoping that the pandemic intensity would moderate as the year progressed. But looking at where we are today, the pandemic is still having a significant impact on our key client locations and countries are moving to various stages of lockdown. With the prospects of vaccination programs on the horizon, we are seeing a light at the end of the tunnel, but we are certainly not there yet. Finjan responded very well to the pandemic and has been operating at near normal level since mid May twenty twenty. With this background, let me now run you through the performance for the third quarter first, and then I'll follow-up with the nine months of the year. The performance for the quarter has been good and we saw improved growth through the quarter, which is in line with our stated guidance. Revenue from the operations was at INR585 crores for the quarter, which is up 13% over the same period last year and is an increase of 12% over quarter two of the current year. This reflects our strong recovery in the quarter and demonstrates the inherent strength in our business. The performance in this quarter is driven by overall good performance across the business and as we successfully delivered client projects despite pandemic intensity increasing in certain client markets. Margin for the quarter remained steady at 32%. We have observed 150 basis points improvement in direct costs with raw materials and power being at 27% of the revenue now versus 28.5% a year ago. The improvement is partly on account of change in mix of our business also due to the continued improvement in operating effectiveness in both areas of raw material and power cost. You may remember from our comments in the last quarter that we have moved two renewable sources of power for our operations in our main campus in Bangalore. This gives us better pricing, more strategy of supply and helps us drive not only cost control, but also sustainability. Let me now take a moment to explain the movement in other cost lines in the P and L. During the quarter, staff costs increased by 16% to INR176 crores as compared to INR152 crores in the same period last year. The increase in headcount in our existing and new facilities that went live in the last twelve months has resulted in large part of this increase. The rest of the increase came from the amortization impact of the new ESOP plan rolled out on 06/01/2020 as previously explained. Turning now to other expenses, which comprises of selling expenses, IT costs and other general overheads, they are up 13% year on year to INR79 crores compared to the same period last year. The rise in these expenses is primarily attributed to new ways of doing business during the COVID-nineteen time and an increase in cost associated with maintaining necessary health and safety protocols. The quarter also saw us complete our quality digitization program and moved to a completely online process from a paperless system. This will strengthen the quality function and will make a meaningful contribution to our goal of becoming anytime audit ready. EBITDA was at INR193 crores and the margin for the quarter was maintained at 32%, which is same as last year. Interest income was down this quarter to INR17 crores versus INR20 crores in the same period last year. Overall, we have seen softening of interest rates in the market and this is reflected in lower interest rates. Depreciation stands at INR70 crores, which is a 22% increase from INR57 crores in the same period last year. The increase on a year on year basis is mainly owing to the investments in the Hyderabad facility, expansion at our main Bangalore campus and the commencement of the Bangalore Commercial API plant in the end of the last financial year. During the quarter, we have expanded our Hyderabad facility by adding 50% more space to the current facility over there. The CapEx for this expansion has been fully booked and is reflected in the reported CapEx figures. Now moving to the impact of our currency hedges, the company recorded an exchange gain of INR8 crores in the quarter versus a gain of INR 10 crores last year. This reflects the difference between forward rate versus the prevailing spot rate. The hedge rate was above INR 74 per U. S. Dollar and against the spot rate of INR 73.5 per U. S. Dollar during the quarter. The effective tax rate decreased marginally this quarter to 12.3% compared to 13.9% in the same period last year. The decline in the effective tax rate is predominantly due to the incremental depreciation impact in the tax books coming from the new units that have gone live, operating losses in the newly set up commercial API plant at Mangalore and the decline in the interest income during the period. A small part of the reduction also takes the reversal of a tax provision from earlier like the one explained in the previous quarter. Profit after tax was up 11% to INR102 crores as compared to INR92 crores in the same period last year, reflecting an overall strong performance for that quarter. Now moving to the nine months results. Revenue from operations for the first nine months of the year was at INR1526 crores, up 9% against the nine months of the last year. I would like to point out over here that Syngene was a beneficiary of the service export incentive scheme till last year. This benefit is no longer available to us from the current financial year. Adjusted for this, our underlying revenue from operations grew around 12% year on year in the first nine months. In a challenging year, while we saw a temporary suspension of operations in the early months of the year and almost complete suspension of business travel, we're happy to deliver an underlying growth of 12% in the business for the first nine months. EBITDA for the first nine months is up 6% to INR503 crores, a reflection of the improved operating performance in the business. If we exclude other income, our business EBITDA has improved 10% year on year as we made significant changes to our operating models and get cost down while benefiting from the increased scale of operations. On a nine month basis, the increased gross block value of our fixed assets has resulted in close to 30% increase in depreciation expense to INR205 crores versus INR157 crores in the same period last year. Foreign exchange gain for the nine months was at INR12 crores versus INR15 crores last year. Overall, for the first nine months, our profit after tax before exceptional gain was at INR244 crores, which is almost in line with the profit of INR246 crores in the last year. Let us now move to some of the other items such as CapEx and cash flow. Our investments for the first nine months were at $53,000,000 as a part of our ongoing CapEx program. Of this, 8,000,000 pertains to the commercial API manufacturing facility. Another US16 million dollars was invested in discovery services, US15 million dollars was invested in dedicated centers, dollars 7,000,000 in biologics manufacturing facility and a balance of $7,000,000 in development services and other assets. With this capital expenditure, our fixed assets currently stand at $5.00 2,000,000 While our guidance of spending $550,000,000 by March, still holds from the point of execution and therefore accrual in the books of account, some part of this will spill over to the next year. It is important to note that our decision to operate multiple shifts in our business means that we have released dormant capacity, which gives us headroom to absorb additional business within the existing infrastructure. Hence, the slight delay in CapEx execution is not likely to have any impact on our ability to support growth of our business. We have deployed innovative digital tools to improve our sales and commercial effectiveness during this times of pandemic. We have also successfully executed client audits and regulatory inspections through digital means, which is helping business continuity even when clients and inspectors are unable to travel. However, in our industry, nothing is as effective as physical connect with the customer. The absence of business travel has been a challenge throughout the year, but we believe this is a temporary situation. And as the vaccination program gets widely rolled out, we'll be able to get back to our accustomed level of commercial intensity. I would now like to reflect on the partnership with DSL Discovery and Development, also known as 3DC, a premier venture capital funding organization backing new data companies in the life science space. This commercial partnership will allow us to fully utilize our integrated drug discovery platform. And while I do not advise you to see this as an inflection point from the purpose of your financial model, it is important from the point of evolution of our drug discovery platform. This three digit partnership puts us at the center of an arrangement between some of the world's best academic institutions, drug innovators and venture capital funds and hence its significance. In previous calls, we have discussed the impact of COVID-nineteen initiatives. To avoid any confusion, I would like to underline that our primary focus has been to help the scientific community battle this pandemic. While the revenues from these initiatives are difficult to predict, we do not expect any of them to fundamentally change the revenue and profit expectations for the year. Before I conclude, let me summarize the results for the company for this quarter. We are tracking in line with our guidance provided at the beginning of the year. Execution factors are in sharp focus in the fourth quarter under the shadow of the continued pandemic as some key markets get into a second wave. The commencement of large scale vaccination programs in this market give us the confidence that the challenges are temporary and normalcy will return soon. Nonetheless, we expect to deliver on PAT guidance and we remain optimistic about delivering the guidance on revenue growth. At present, we are operating at near normal levels on all campuses and the overall cost structure is in good shape with clear signs of efficiencies visible in many lines despite the additional expenditures related to functioning in times of pandemic. As an organization, we continue to make investments across our business, which also include transformative projects in the areas of digitization, automation and process improvement. The benefits of this should accrue in the coming years. Our liquidity position is strong and our balance sheet continues to be healthy at the end of the period. With this, I complete my commentary on results. We can now open the floor for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press and 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press and 1. The first question is from the line of Alankar Gurude from Macquarie. Go ahead. Yeah. Hi. Thank you for the opportunity. So my first question is, is there any difference in the nature of conversations you are having with your clients, say, versus what it was in March, April, and and now? I mean, was there perhaps more urgency then versus what the situation is now? And also, are there, if at all, if you could highlight any structural changes in how clients are thinking about outsourcing, especially to Indian companies? Yeah. Good question. I got I mean, there's an obvious one. The the the conversations right at the beginning of last year would have been face to face and probably, you know, in their offices or in ours. In most of the last year, we've all just become virtual and Zoom enabled. But, you know, that's a sort of superficial answer to how things have changed. The nature of what we're doing hasn't really changed. I think one of the things that clients have really appreciated, and I think it's true with particularly with Syngene, we've operated at near 100%. It's not 100% normal operations for the second quarter, the third quarter. So we're there and we can get work done and deliver for them. And in many cases, and I think this is something that will sort of play out and be more obvious in hindsight, our operations in India have been less impacted by COVID than most of our clients have been in the West, in Europe and The US. So we're now at a point where if we're talking to clients, where in the office we're operating at normal levels, many of them are still working from home or in lockdowns. So it's becoming a more amplified problem at the client end. Now, in the context of outsourcing, that's a reinforcement of the resilience you can put into your operating models if you're a client by having outsourcing plus having your own facilities and doing it on a global basis. If anything, the most companies do their operations are heavily centered on The US and heavily centered on Europe have had a more challenging year than those that have had the luxury of having operations all the way around the world, including in India, And it had the ability to dial up their operations in Asia, whether it be in China or India to offset some of the limitations operations that they're facing in the West. So net net, I think this idea that the the the intrinsic lesson of COVID is don't do things globally, don't outsource, it's less resilient. Actually, the the the lesson is probably the other way around. Organizations with sophisticated, globalized, well connected supply chains and and and partnerships that have thought of date resilience have probably done better. Does does that sort of make sense? No. That's really, really helpful, Jonathan. So maybe a small follow-up to that would be so do you expect this this change to be structural? Do you expect this to persist even after COVID, say, maybe one, two years down the line? Or that there is a scope that clients are looking at this purely from a near term perspective? No. I think it's more longer term. I think the sort of the fact that the whole world's done an experiment in work from home digital working and found it to be pretty effective. It may be a bit frustrating at times and all of us have developed to sort of eight hours on a dooms call can give you a headache. But I think it's proven to be particularly effective. So I think that actually shrinks the world, not makes it bigger because we're all that much more connected. The other bit that's maybe a little bit cultural, don't know whether you see it in your day to day work, people are little bit more accessible, a little bit more informal. I think we're finding it in all aspects of our business. You can pick up the phone and talk to people, whereas previously we would have probably been battling with diaries and seeing when can we find a spot where we can both meet. So there's some positives coming out of this. Again, I think it's about thinking smartly about resilience. And I know for many of our clients, as we come to the end of the year, they're looking back and saying, you delivered for us. Even in a pandemic as a partner, we were back at work operating 100% and delivering for them. And at times, we were delivering when their local lockdown situation was making it much more difficult for them to get into the office or into the lab. So I think that's been a positive experience, for many people. That's helpful, Jonathan. My second question is to Shivaji, sir. Sir, can you quantify the cost pertaining to the Bangalore facility that is currently being reflected in the third quarter? And also if you could tell us if this will be approximately what percentage of the total OpEx for Bangalore once the plant is fully operational? Yeah. So I'll repeat what I said, I think, in the last call. Bangalore OpEx is diluting our margin by close to two percentage points. That is the OpEx level. And depreciation, you can calculate because we have spent some $75,000,000 and we are amortizing this over a period of eighteen years. Broadly, this will be what percentage of the total cost once maybe in FY 'twenty two, once the client is fully operational, this will be roughly what percentage of the total cost related to manual? The OpEx cost, I'm asking. Can you repeat the question? To you want to understand what would be manual OpEx as a percentage of total OpEx? Is that the question? Sir, my question is now the cost which is being attributed to manual as of now, as of the third quarter, approximately, what it would be as a percentage of the total OpEx for Bangalore once the client is completely operational. So, essentially, what part of the Bangalore cost is being reflected in the p and l as of now? Participants, please stay connected. We seem to have lost the line for the management. Please stay connected while we reconnect the lines. Ladies and gentlemen, please stay connected while we reconnect the lines for the management. Ladies and gentlemen, thank you for patiently holding your lines. We have the lines for the management reconnected. Over to you, sir. Sir, do you want to have on the call? Yes, sir. You want me to repeat the question, sir? No. I understand. If you're if you're asking the saying what percentage of our OpEx would be from Bangalore, it will be close to 3% when the operations are actually there. Okay. So so, actually, my social is slightly different, but maybe I can take it offline, sir. No worries. Thank you, and Yeah. We can Thank you. Thank you. Before we take the next question, we'd like to inform participants that in order that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have follow-up questions, we request you to rejoin the queue. The next question is from the line of Tarang from Old Bridge Capital. Please go ahead. Jonathan and team. Very good afternoon. On your collaboration with TTC. Just to get a better sense, of what led the CDC to she to choose Syngene to collaborate with. And in terms of competitive intensity, is Syngene the only partner that CDC has for its integrated drug discovery projects? And, you know, how does it really benefit Syngein qualitatively in establishing credentials in the space and, you know, maybe from a medium to long term perspective getting more business? Yeah. And a good good set of questions. Really, what what what over the last few years, you've seen us continue to deliver what we I think it says functional services, almost sort of point and shoot. The client is very clear on what they want. We're very good at delivering it and we deliver components of the discovery to the value chain that they then reintegrate back into all of the other work they do. We'll So maybe do some standalone chemistry or we'll do some biology, but we deliver those. And then if the client takes that data that's generated, they synthesize it, they think it through, they make decisions on it and they take that back into their own sort of research and development processes. So that's the core of what companies like ours have always done and it's the core of the business. What's becoming alongside that, so it's not an eitheror, It's the opportunity for us to do drive more of the science, do more of the ideation, do more of the added value interpretation, think through the scientific problems and almost get paid to suggesting a solution rather than executing the solution. And that's really what the integrated drug discovery platform does. It allows us essentially to bring together all of the disparate bits that we have in the company but bring them together in a way that looks a little bit like a biotech company that works on behalf of other clients who own the IP and sort of come up with the original sort of scientific questions or challenges. But we do, in this model, increasingly more of that innovative ideation piece alongside delivering all of the work and the experimental data. So for for me, it's a good indicator of the maturing and the of the sophistication of the type of science that we're capable of of doing at Syngene. So to your question, why would, you know, why would three d c choose us? Well, because we're pretty good. We've got a good track record. We've demonstrated over a number of years with a number of other clients that the science that we can do within Syngene is indistinguishable and every bit as good as they can do in their own labs in the West or they could do with other collaborative partners. So we're we're scientifically capable. I think we also have some advantages around scale. So we can flex quickly and reach a scale that few other companies can and particularly few startup companies can do. So we can move from, you know, north of 50 to a 100 to 200 scientists on a problem much quicker than many of our partners can. And that that's important to them. And alongside scale, I think we've also got speed and cost efficiency. So, you know, we can make a dollar go further and faster than some of our clients can in their own laboratories or with other partnerships. Put all of those things together and you've got sort of the the recipe that that makes sense for a company like three d c to partner with us. They're they're free to to deal with a whole bunch of other partners. In fact, part of this model is that they will cap their net very, very wide in academic relationships and in finding that very, very early stage good science. I think if the model is successful, you'll find us positioned as their predominant and largest operational partner. So once we move things into formal projects, then, you know, we're very much set up to be central to that and that's the spirit of the collaboration. But it's one of what I hope to be many. So we we we point it out not because I think it's gonna be easy for you to put into your Excel model and it won't be a hockey stick in next quarter or the quarter after that's revenue. It'll just be baked into the performance of our Discovery Services division. But it is significant in that it it's a real symbol of us moving up the value chain and with what is a very premier partner. So that that alone, I think, will help over the coming years. And I would say it's years, not weeks and months. We'll open doors for many other people who will see if you if you're working with organizations like Deerfield and then traditionally companies like Amgen and BMS and some of our other strategic partners, they reflect very well on the capabilities that we must have and that opens doors. So a bit of a long answer, but I think you wanted more of a qualitative description than than a specific set of bullet points. Yes. For sure. Just a second question. You know, if I look back maybe the last three years, so and I understand why it's happened till now, but just so if I look at the last three years, I mean, the employee cost. Right? Your quarterly run rate has gone up from anywhere between 90 to 95 crores to anywhere between $1.60 to $1.65 crores. And it's visible in terms of your scientists and so on and so forth. But how should we see this going forward now? And consequently, how should we see the revenues coming in from this? Because we haven't seen a similar trajectory on the top line. Yeah. Some of that's about building capability to enable future growth. Again, I think our business has grown over quite long cycles. It's not a quarter to quarter sprint. So we're building these deep seated capabilities. You can invest for many, many quarters before you start to see a return on that. But again, on the people cost bit, there's a couple of things that's going there. In one element of our business, particularly in those where we've got FTE contracts, hiring new people is actually the unit of growth. So long may that continue and I hope that our headcount numbers continue to grow as they have done in recent years because they're a direct revenue generator in terms of how that business model works. The thing that they are just talking about with integrated drug discovery, that sort of platform and then also into our development and manufacturing, there it's more about maturing capability, bringing in people with more seasoned industry veterans, bringing in people with real innovative skills. So it's smaller numbers of people, but they are sort of, in some ways, a more selective sort of resource. But again, I don't really see people as a cost. I see them as an asset. We're a science innovation business. We're fundamentally based on intellectual capital. And therefore, investing in people is the first and probably primary investment that we make. So I don't necessarily see it as a cost line as an asset development. Okay. And should we see the strength continue the way it has in the past? Yeah. What I'm sort of hinting at is I hope so on the basis that that's a unit of growth. As for your particular guidance, I think somebody will ask the question they do every third quarter. So the answer to the question, which you didn't ask but is implied, is what's the outlook for the next financial year? We'll cover that as we do every year in April at our full year results. It's a little bit too early in the year for me to be giving you guidance in terms of revenue costs and other things for next year. And then I also think given that we're in the pandemic situation, it's great that the vaccines are starting to roll out. But that's an enormous global vaccination program. It will take, I would imagine, most of the coming year for it to get to scale on a global basis. So I think it would be very wise to look at these things quarter by quarter. And that was partly what I was alluding to in my introductory comments. Fourth quarter for us looks we've got good with very good visibility. We've got to execute. We're on track to hit our guidance pretty much for the year. For next year, I'll give you guidance in April. But we really need to see what the impact from the second wave in Europe and The U. S. Is. And that's not flagging a warning. It's just saying it's clearly unknowable by anybody at the moment what those implications are. Okay. Thank you. All the best. Thank you. Thank you. The next question is from the line of Charulata Gyutani from Dalal and Brochaw Stock Broking. Please go ahead. You may go ahead with your question. Hello. Yeah. My question pertains to the order book currently. How do you see the order book moving over the next four quarters? Okay. Again, I think I just covered that in the last question, which is, isn't that just another form of what's the financial guidance for the year ahead? Very happy to talk to you about that in April. In general, there is good demand in the marketplace across all of the sort of divisional areas that we work in, whether it's discovery, the services, development, manufacturing or the dedicated centers. The only one that I think you could if you read some of the big pharma companies, if you read their statements, there's a little bit of softness in the clinical trial starting bit. Now that's not a big part of our business. We're not a clinical CRO. But if you think about it, most of the world's hospitals are running over 100% capacity coping with COVID. So there's a general slowness around the whole of the industry globally on starting with new clinical trials. So any businesses that are linked to that may have a bit of a slower start to the year, but then I suspect quite a strong catch up as we come out of COVID-nineteen towards the latter part of this calendar year and things start to normalize, if that's how it plays out. So I think it probably normalizes over the year ahead, but it might be a little bit slow followed by quite an accelerated ramp up later. Our only exposure to that, as I said, it's not massive, but a little bit in our clinical stage manufacturing services that sit within our development business. Beyond that, I think it's too soon to call anything else. Happy to talk to you more at the full year results in April. Right. Yes. My second question pertains to BMS. BMS has got quite a few approvals over the last three months, three to four months. Do you see any part of that business coming into its engine? When you say approvals, are you talking about new product approvals? Yes. Yeah. Well well, no. Because if you think about it, the relationship we have with BMS in time, temporarily, predates new product approvals by about eight to ten years. You know, the work we do with with BMS is a research discovery relationship. We're working on the science today that will probably become new product approvals in about eight years' time. So it's a bit like catching starlight, you know. The starlight you see today left the sun some years ago. So from a research point of view, what we do today will shape that same conversation six, seven, eight, nine years from now. Hopefully, makes sense. But, yeah, BMS seems to be doing well and the merger integration seems to be going well. Of course, I'm hopeful that we'll see some opportunity to serve that expanded organization better in the future. Okay. Congrats. Thank you. Thank you. The next question is from the line of Ankush Agarwal from Stallion Asset Management. Please go ahead. Hi. Thank you for taking my question. Jonathan, my question is on the CMO piece of the business. Based on some of the comments that you have made in the previous few quarters, I get a sense that for us, the CRO and CMO business is largely would be independent of each other. One of the comments that you have made earlier was that only minority of a CMO business is originally from our CRO projects. But given that we have a large CRO business and in the business, the research partner is naturally poised to be their commercial partner. Shouldn't it be that our CRO project should become the pipeline for our CMO business? Similarly, in case of one of the molecule that helped you, molecule that went into phase that cleared phase three last quarter. At that time, also, you made a comment that they had not yet decided on the commercial partner. So can you help me understand better what am I missing over here? No. I think actually your characterization is fine. It's just that I think it's not the connectedness that necessarily is misunderstood. It's just the relative size. An awful lot of what we do on the discovery side, we discover molecules, but for many of those partners, those molecules go back into their own development and manufacturing organizations. If you think about something like BMS, a large proportion of they have a very large global manufacturing organization as well as CMO partners. And therefore, lot of the innovation that we've done over the last decade or more with them has gone into that construct. It's not a one for one. Every time we do some innovative work, research work, that it automatically will flow through. Very happy when we do see that, and I do think that will be a growing part of our business. The only thing that I what I've tried to temper your modeling expectations as a group, this is with the analyst community. And I hope I've been consistently clear. I'm happy to own the asset in so much as the Mandalore facility. Those plants have, whatever, twenty, thirty year life cycles. That's the time horizon we will be creating value. I don't expect to see hockey sticks quarter on quarter starting from now. I think it's a gradual build. And try as I might, I'm not sure, if we've managed to deliver that thinking through to the analyst community. Right, right. So would it be a fair understanding that going forward, the kind of project that Finjan might receive would be more often integrated projects wherein the molecule might flow from the development to the commercial manufacturing because now we have the commercial manufacturing pieces here? Yes. We would love to see that, and that is part of the strategy. But over the startup period of that plan, which sort of starts really from the new financial year and runs over the next three, four, five years, I'm very happy to also take stand alone work. Right, right. Okay. My second question was on, like, if you can give some color on the biologics business, like how is it progressing? Do we currently have some clinical molecules that are doing some clinical manufacturing? And do we have commercial manufacturing capabilities on the biologics side? Or we are looking into that? Yeah. We we deal on the biologics. So it it again, it's a relatively it depends what your reference point is. You know, if you're looking at businesses like Lonza or Samsung, which are absolute giants in terms of their global capacity, then we are, you know, a new entrant and at a very modest scale in comparison. But there is a healthy marketplace for agile, modesty scaled, very competent biologics manufacturers. The scale that we've got sits, it spans, it's the right size for clinical biologics manufacturing. So, the manufacturing that supports clinical trials and there your customer would be the research and development organizations of a big pharma or a big biotech. And that same scale also is relevant at the smaller scale of commercial manufacturing, which would be relevant to the manufacturing organizations. And then we expand that. But we're a relatively new entrant and we're at relatively modest scale. That's all fine. I'm unapologetic about that. It's a business that absolutely has relevant capability to clients. It's progressing. I'm always going to say I don't think you'll ever hear a CEO say that they wouldn't like to see more growth and faster growth. But we are progressing on that strategy. Okay. That would be all. Thank you. Thank you. Before we take the next question, we'd like to request participants to please limit their questions to one per participant. The next question is from the line of Prakash from Axis. The question is on the growth that we have seen during the quarter. So what would be the CC term growth, I mean, in terms of constant currency? And given the fact that we had put in $100,000,000 last year and about 50 this year, so has the last year's $100,000,000 start generating revenues? We started to see, you know, order flow or it it takes more time to build in and we should look at year after. That's my question. One of the things coming to you. Yes. So, thanks Pratash for asking this question. Growth at constant currency would be at about 10%. So, the reported growth of 13% and at constant currency, it would be just a bit above 10%. Coming to your other question on the CapEx investments, if you understand the $100,000,000 of last year, most of that money actually went towards creating our Bangalore plant and which is under, as you know, qualification validation and we'll start to see some traction in revenues only from the coming year. Apart from that, whatever money that we're investing in the research side of the business and in the Biologics side of the business, they are showing very good returns. So my understanding is of the $100,000,000 you spent last year, 75 was in the CRO discovery development, and 25 was for Bangalore in fiscal twenty twenty. I think it no. It it is not that, so we can connect off line, but I it it is much more than 25,000,000 spent in the last year. Most of the 75,000,000 of Bangalore was actually spent last year. Okay. Is it? Okay. Okay. So so Yeah. Benefits of the CapEx last year, since Bangalore, you are saying, be commercialized from fiscal twenty two, that is what we will see now. Right? Yeah. Over a period of next three to five years because, you know, this is a long duration project, and this this will have a gestation period, which is much longer than in our research business. This investment, we firmly believe, has very strong return relationship, but it is just a different business from our research business. So it will not generate overnight or over a only one year return. It will take few years. So over a period of three to five years, we'll see strong return on that to employed in that investment. Yeah. That's the plan. It's it's it's it's to scale up. Sorry, sir. Go ahead. Yeah. Just just an additional yeah. I was gonna make an additional comment on it. And just to think about it, you know, in terms of the picture in your mind, much of the development services business and manufacturing, they're essentially manufacturing type businesses. So you build some capacity, you build some infrastructure, and you build what you think you're gonna need at peak, and then you grow into it. So it's a classic sort of manufacturing way of modeling. The the Discovery Services business tends to be and if you think about the story over the last year, about this time last year, we were opening for the first time our new campus in Hyderabad. During the course of the year, we told you about one and now a third, you know, one, two, and three expansions of that site. Each one of those modular builds, building new, building online, opening up a new floor in a building, adding new hoods. It's a sort of linear one for one growth. And and it's an indicator of revenue. You know, what we say we're gonna we've added 175 people. That's 175 scientists, all of whom are generating revenue instantly. Does that help in terms of a bit of a color between the Discovery Services business? Go ahead. Yes. Sorry. No. I understood. So Discovery is much more faster to, you know, start operations and build and development and manufacturing takes time. So just the last follow-up is that would it require inspection by other regulatory bodies? Or you would start seeing some, at least some production to start within fiscal 'twenty two for the manufacturing side? No. I think regulatory inspections, as we flagged up repeatedly over the years, are a key enabler and therefore on the critical path. We need to build that track record for the plan. So the first FDA inspection, the first EMA inspection, the first Japanese inspection are all noble points along the way. And they can only be triggered by client work. So that's always one of the inherent processes you have to go through when you open up a completely new site. But I think that's well understood by the investor and the analyst community. And it's one of the reasons why over the last two years, I've repeatedly encouraged you to model a very, very phased gradual ramp up from that plant linked to those the achievement of those sort of milestones. Thank you. We'll be able to take one last question from the line of Shrikanth Kalorkar from Ashikha Stock Broking. Please go ahead. Hi. Thanks for the opportunity. I would like to know if we have booked any revenue from remdesivir or ELISA antibody testing kits during the quarter? Yes. We have. But I would put a context around it. The the motivation for playing a role, taking part in COVID-nineteen is because I think it's the right thing to do. Those that have got scientific capability in a pandemic need to come to the front and really contribute in the way they can. It it was never done to be a core business driver nor do I have any expectations that it's a hockey stick, you know, driver of valuation or revenue. It's just us doing what I think is the right thing to do, which is helping the world respond to a pandemic. So hopefully, that gives you the right context about how to think about it. I I don't think it merits a line item in your modeling spreadsheet. Alright. No problem. Thank you so much. Thank you very much. Super. We'll take that as the last question. I would now like to hand the conference back to miss Divya Devan for closing comments. Thank you, everybody, for your time. If there are any further questions, we would be happy to get in touch and answer them. Thank you all once again, and look forward on engaging with you as we continue our progress. You may now disconnect your lines. Thank you very much. On behalf of Syngene International Limited, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.