Ladies and gentlemen, good day and welcome to Syngene International first quarter FY2021 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 and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karthik Shankaran from EY. Thank you, and over to you, sir.
Thank you, Aman. Good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's Q1 FY21 performance. To discuss the financial and business performance for the first quarter, we have on this call today, Mr. Jonathan Hunt, Syngene's MD and Chief Executive Officer, Mr. Sibaji Biswas, Chief Financial Officer, and Dr. Mahesh Bhalgat, Chief Operating Officer. Other members of the executive team are also present on the call. After the opening remarks, Jonathan, Sibaji, and the rest of the team will be happy to answer any questions you may have. Before we begin, I would like to caution that comments made during this conference call today will contain certain forward-looking statements and must be viewed in relation to the risks pertaining to the business. The safe harbor clause indicated in the investor presentation also applies to this conference call.
The replay of this call will be available for the next few days after this call, and the transcript will be made available. With this, I would now turn the call over to Mr. Jonathan Hunt. Over to you.
Well, thank you, Karthik, and good afternoon. Thank you all for joining this call to discuss Syngene's first quarter performance. I'll start with an overview of the financials and then talk about the key highlights of the quarter, and Sibaji will provide a more detailed commentary on the financials in a few moments. Starting with our operational performance. Overall, the quarter played out in line with our expectations. If you recall at the full year results announcement, I indicated that we expected to see some impact of COVID-19 in our first quarter due to the temporary suspension of operations in April. As it turns out, despite the temporary suspension of operations, we quickly made adjustments to our working practices, and this has allowed us to resume close to normal operations relatively quickly.
We operated at near normal levels for the last six weeks of the quarter and have brought most projects back on schedule. Revenue for the quarter at INR 437 crore was slightly down on the corresponding figure last year. Revenue from operations was flat at INR 422 crore. The difference, of course, being interest from investments. Through the quarter, we maintained good cost control, which in turn helped to minimize any adverse impact on profitability due to the short operating shutdown. EBITDA for the quarter was INR 140 crore against INR 142 crore last year. While PAT was INR 58 crore against INR 72 crore in the prior year quarter, a drop of 19% year-over-year. That's better than the 25% drop we'd originally guided to at the end of Q4. Sibaji will take you through the differences in his commentary.
Overall, like many companies, I think it's been a challenging quarter from an operational perspective. A temporary suspension of operations needs to be carefully managed, and the restart requires just as much care and attention. That's without taking into account the human factor, where some anxiety and family concerns, I think, have naturally been on everybody's minds. This seems likely to be a factor for many months to come. If we put COVID-19 to one side, I think it's been a busy quarter for us. Across the company, we continue to make good progress on our strategic priorities, as well as continue to invest in core operational requirements like safety and operational excellence. Like others, we're focused on adapting aspects of our business that are particularly impacted by COVID-19. During the quarter, we made good progress on implementing virtual audits for clients and regulators.
We're in the late stages of preparing to offer virtual tours of our laboratories for new clients, as well as trialing new online marketing channels to replace and supplant the face-to-face sales model that's the traditional norm. We were pleased to receive an improved credit rating from CRISIL a couple of weeks ago following their annual review. Of course, the improved rating has a beneficial impact on our ability to raise funds. However, and I think more importantly, the improved rating recognizes the work that's being done across the business to build robust processes, establish strong leadership and a loyal client base, and I think a sound risk profile. On the COVID-19 front, as I mentioned earlier, while operations were suspended, we implemented safety measures across our campuses to protect our employees as they came back to work.
A robust business continuity plan ensured minimal disruption to our operations, and we're currently operating at close to 100% capacity. We're also supporting the efforts of the government in the fight against COVID-19 in India, and we have a number of initiatives currently underway. At a time when the number of COVID cases is increasing across the country, there really is an urgent need to make and distribute reliable testing kits using advanced technology to test and identify positive cases. To meet this requirement, our discovery research scientists developed an IgG ELISA test. This is an advanced, highly reliable serological test that identifies the presence of the SARS-CoV-2 antibodies in blood samples and confirms if a patient's been exposed to the coronavirus. It has a capacity to test multiple samples in a single run and generates results within three hours.
We've partnered with HiMedia to combine our science with their expertise in manufacturing and distribution to make the ELISA testing technology available for use in India. In Development Services, we've entered into a voluntary licensing agreement with Gilead to manufacture remdesivir for distribution in India and elsewhere as required. We're currently doing our due diligence on this project and we'll update you in due course on our plans. Syngene's also tied up with the Centre for Cellular and Molecular Biology to jointly develop and validate a high throughput assay using a deep sequencing model. If successful, this model will be able to take somewhere between 5,000 and 25,000 samples in one run on next generation sequencing platforms such as NextSeq or NovaSeq.
Final word, the RT-PCR testing facility that we set up on our campus by repurposing one of our research labs, has now tested more than 30,000 samples received from local hospitals in Bangalore, and we're doing that free of charge as part of our CSR activities. To sum up. Overall performance in the quarter was as we guided to. We delivered flat revenue year-over-year, with a better than expected performance on the profit line. Our operations are back to near normal, we expect to return to growth in the second quarter. That, of course, assumes no material deterioration in the current operating environment. The upgrade to our credit rating is welcome and provides an objective perspective on the company's operations. With that, let me hand over to Sibaji to run you through the financial details of the quarter.
Thank you, Jonathan, and a very good afternoon to you all. I'm happy to take you through our first quarter FY 2021 results. We continue to operate in a very dynamic environment. The last time we spoke, it was still early days of COVID-19 pandemic, and we are hoping that the pandemic intensity would reduce from the end of the first quarter. As you all know, that has not been the case, and the pandemic intensity in India and also in the United States, which is our key market, continues to rise. With this background, I am satisfied to come back to you with a set of financials which are similar, if not better, than our guidance in the last call.
If you recall, we mentioned in the May call that due to the impact of the partial shutdown in the month of April, we expected Q1 revenues to be broadly at the same level as Q1 of FY 2020, with a 25% year-on-year drop in profit for the quarter. Revenue from operations, that is revenues excluding interest income, increased marginally by 0.2% to INR 422 crores from the same period last year. This was led by continuing growth in Discovery Services and is supported by a steady traction in the dedicated center business. This performance is despite the fact that we recorded only about 50% of our normal revenue in the month of April and is reflective of the strong growth levers we have built across the company.
While the company is one of the government-designated essential services, we proactively took the decision to temporarily suspend our operations in the month of April to allow time for us to introduce safety measures on-site. We returned to more normal operating levels for the last six weeks of the quarter, and we are currently operating at over 90% of capacity, supported by multiple shifts. During the quarter, we recorded interest income of INR 15 crores, which declined by INR 5 crores compared to the same period last year. This is on account of the reduction in cash balance due to the part repayment of the ECB loan in March 2020, and also due to the reduction in yield rates on the deposits. As a result, the total revenue was slightly down at INR 437 crores compared to the same period last year.
During the quarter, raw material cost as a percentage of total revenue stood at 21%. That's down 340 basis points from last year. This is due to the change in sales mix in favor of Discovery Services and due to certain operational efficiencies in materials management. As you may know, Discovery Services tends to consume a lower level of raw materials than our Development Services and manufacturing divisions. In April, when operations were suspended, we had much lower levels of materials consumption compared to a regular month, which also helped in reducing this ratio. Let me now take a moment to explain other cost lines in the P&L.
During the quarter, staff costs increased by 6% to INR 140 crores as compared to INR 130 crores in the same period last year. This increase is attributable to the increase in headcount due to new facilities that went live in the last year. Currently we have around 5,000 employees in the organization against 4,600 employees same quarter last year. The gross margin for the quarter stood at 45% as compared to 43% for the same period last year. This is an improvement of two percentage points. This is due to savings in raw material cost and other operational efficiencies, offset by some increase in staff cost. Turning now to other expenses, which comprises of selling expenses, IT cost, and general overheads. We are at flat at INR 52 crores. It's flat compared to the same quarter last year.
As stated in the last call, safety measures undertaken as a part of our COVID-19 response has put an additional burden on our costs as we spend more on transport, personal protective equipment, and staff welfare expenses to support multiple shifts to reduce density in our laboratories and other facilities. However, this increase was offset by proactive measures to reduce discretionary spending and savings in travel costs due to travel restrictions across the globe. EBITDA for the quarter was almost flat at INR 140 crore compared to INR 142 crore in the same period last year.
It may be noted that in spite of the fact that we lost close to half a month of revenue due to lockdown, we turned in a similar level of EBITDA as in quarter one of FY 2020, with our EBITDA margin being maintained at 32%, which is similar to margin we had in quarter one of last year. This is an outcome of carefully calibrated approach to spending during the pandemic period. At an underlying level, the adjusted EBITDA margin for the quarter, excluding interest income, is at 30%, and this has improved compared to 29% for the same period last year. The delivery of EBITDA margin is an illustration of the resilience in our business during these trying times and our ability to maintain a high degree of operating effectiveness.
Depreciation stands at INR 66 crores, which is a 39% increase from INR 48 crores in quarter one of last year. As stated in the last call, it is mainly owing to the investments in the Hyderabad facility, expansion at our main Bangalore facility, and completion of the construction phase of the Mangalore commercial API plant. During the quarter, we recorded finance charges of INR 8 crores, which includes INR 2 crores towards our facility lease as per the new lease standard. This is compared to INR 7 crores in the same period last year. We also recorded INR 5 crores in income tax associated with this interest income, compared to INR 7 crores in the same period last year. As you may know, Syngene follows a practice of hedging all foreign currency revenues. The company recorded an exchange loss of INR 3 crores in the quarter.
This reflects the difference between forward rates versus the prevailing spot rate. The hedge rate was at INR 74 per US dollar as against the spot rate of INR 75 per US dollar during the quarter. If I compare this with the last year same quarter, we booked a hedging gain in that quarter for INR 2 crores. The effective tax rate decreased to 12% compared to 17% in the same period last year. The decline in the effective tax rate is mainly due to the incremental depreciation impact in the tax books coming from the new units that have gone live in the second half of the previous year. In addition, the operating losses in the newly set-up commercial API plant at Mangalore and the decline in interest income also continues to reduce the effective tax rate.
Profit after tax was down 19% to INR 58 crores as compared to INR 72 crores in the same period last year. Profit after tax margin is at 13%. This compared to last year of 16%. However, this is better than our previous guidance, where we expected around 25% year-on-year drop in quarter one FY 2021 profits. As I mentioned before, we returned EBITDA almost in line with the last year. This drop in profit is entirely due to the high depreciation from the new facilities, especially the Mangalore API plant. Now I'll move to the balance sheet. During the quarter, we invested approximately $30 million in ongoing CapEx programs. Of this, US$4 million pertains to the commercial API manufacturing plant.
Another US$5 million was invested in Discovery Services, US$2 million in the biologics manufacturing facility, and the balance of US$2 million in the dedicated centers and Development Services. With this capital expenditure, our fixed assets currently stand at US$463 million, and this includes an asset under construction of US$30 million. Syngene is well-funded, financially secured business, and as you can see, we continue to maintain a strong liquidity position despite the ongoing CapEx program. The cash generated from the operating activities after funding for the ongoing CapEx program resulted in a net cash position of INR 395 crores at the end of the quarter, which is an improved position from the end of March 2020. One of the reasons I would like to call this out for the current quarter was because of the strong performance in managing our working capital.
We had very robust collections of receivables despite the pandemic situation. This is reflective of our premium clientele, many of them major pharmaceutical companies, and their resilience to the pandemic. In addition, I am very pleased to report that the majority of Syngene suppliers now fall under MSME category, and we have made all payments to them on time without any delays, thereby supporting them in their hour of need. Our investment plans, we are following up measured and well-calibrated capital allocation strategy this year with a stage gate approach in our spending and investments. We continue to prioritize our investments on projects where there is revenue visibility. We expect the CapEx spend to increase in the later part of the current financial year, and we are still targeting to spend a cumulative CapEx of US$550 million by the end of financial year.
However, this will depend on the progression of the pandemic situation, and I'll give you a better visibility on the subject in my next call. We are pleased to inform you that the company's long-term rating has been upgraded from ICRA AA+ to ICRA AA+ (Stable). The short-term rating is retained at A1+. It is an indication of Syngene's strong fundamentals, sound business model, and a robust risk prediction. In context of our current strong financial position and the availability of low-cost currency debt, we'll continue to explore opportunities to optimize our capital structure. At this stage, we do not see the need to reassess our guidance given in May. Based on the current visibility of the order book on a full year basis, we expect PAT for the full year FY 2020 to be as guided.
For clarity, PAT for FY20 we refer to is without the one-time exceptional gain from insurance. As I mentioned, we are getting through a very dynamic, and this guidance should be in context of quite clearly volatile conditions. We'll continue to monitor the situation and keep you updated in the future calls based on how that evolves over the next few months. That completes my commentary on the results. We can now open the floor for questions.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are expected to limit their questions to two per participant. If time permits, you may join the question queue for any follow-up. Ladies and gentlemen, please hold one moment while the question queue assembles. The first question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Yeah. Thanks for the opportunity. Am I audible? Hello?
Yes, you are.
Hi, Prakash. Go ahead.
Yeah. Hi, Jonathan. Just my line got dropped in between, and I just wanted to make sure I heard right. On the full year guidance remains with double-digit growth on the top line and flat PAT, and this is assuming the current capacity utilization of 90%. Just one clarification, if there is a second round of lockdown which is affecting us. Thank you.
Okay. Super. Yeah. I think you got that absolutely right. I'll let Sibaji sort of restate it. The message is we gave you guidance last quarter. We're not changing that. We called the first quarter correctly, I think. We guided to flat on revenues, down on profit. Maybe we got the profit a little bit wrong. We actually did better than the guidance, but not by a material amount. Our expectations for the full year remain unchanged, which is we should return to revenue growth in the second quarter, and that should then endure through the rest of the year. At the full year basis, we should see growth. I'll let Sibaji walk back through the specifics so that everybody's got it. The message is no change. On your second lockdown question, I don't know. It depends.
Where we are currently is the first suspension of operations for us. Remember, we're categorized as an essential service, we're absolutely free to continue to operate. In fact, I think we have an obligation to, given the type of work we do, and that society still needs new innovation. It needs solutions to things like COVID-19, it needs drugs to continue to be discovered, developed, and manufactured. Now is a moment where I think what we do and what we do as an industry has never been more important. What that first suspension allowed us to do was put in what I think is a pretty good, robust operating plan, that gives me confidence that we can continue to operate through current circumstances.
Now, there is actually a little bit of a localized lockdown, as you know, in Bangalore, and we are continuing to operate in that. We provide transport for our staff. We get them into work. Many of them are working from home, those that are in roles that are amenable to that. The others are coming in. We've moved from general shift to shift working to decompress and give people more space for social distancing. Those measures are proving effective. I think if the current situation endures, we will continue to operate at near normal levels. We'll revisit that in light of experience if things change. We'll update you on that. Sibaji Biswas, a comment maybe just on the guidance.
Nothing much to add, Jonathan, but I'll just repeat what I said, because Prakash dropped off. We said we expect PAT for the full year FY21 to be at similar level as FY20, which is the same thing we said in the last call, and we expect low double-digit growth in revenues. This assuming that for the rest of the year, we operate at the normal levels, which we are doing almost at this point. In case of continuity situation remaining same, and we hope that to happen, this guidance would hold.
Perfect. Great.
Okay.
Sorry, go ahead.
No, I was going to say, does that give you a sense of a good answer to your question?
Yeah. Perfect. That helps. This is all the INR terms guidance in terms of top line.
Yes
double digits.
Yeah.
Okay. My second question is.
This is all on a rupee.
Okay, perfect. On the second question. On the CapEx, FY 2020, on the CRO business, Discovery Services, Development Services dedicated, we made around $65 million in FY 2020. Just wanted to understand how much of it is operational and revenue generating in FY 2021. You said you are on track to do $550 million, assuming that there's another $70 million-$75 million in the CRO business this year. How much would that be operational next year? That would be helpful.
Yeah. Clearly, that one was pitched in for Sibaji Biswas.
I'll take that, Jonathan. Yes, you are right, Prakash. We did invest that much of money in our Discovery Services and Development Services. If you remember in the last call, I mentioned that when we invest money in our core business, which are these three essentially, we look for an asset turnover of 1X to be attained between a period of 18 months to 24 months. We are very calibrated, very careful in our investments, and we are quite confident that that investment will generate the asset turnover as was mentioned in the last call. This was the answer to your first part of the question. The second part of the question is how much of the next INR 75 million-INR 80 million is going towards Discovery Services center. We are not giving any specific guidance over here.
Essentially, the plan for the current CapEx is expansion of our capabilities, mostly in core capabilities. Although we have a little bit of CapEx also in the manufacturing to complete the remaining activities of our API plant and the biologics plant. Most of the money would essentially go for the expansion requirements for our Discovery Services dedicated and Development Services. As I said, we'll continue to follow our stringent guidelines that we have set for ourselves on asset turnover. Does that answer your question, Prakash?
Just one question on that. You said looking at asset turnover 1X over 18-24 months, would it be fair to say that 0.5X would be achievable in 12 months? Would that be a fair comment? Very roughly.
I leave that to your modeling, but common sense would say you can assume that way. It always doesn't work that way, Prakash, but what we hold good in our mind is that based on our pipeline visibility, we should be able to achieve 1X in 18-24 months.
Thank you, Mr. Agarwal. Request you to join the question queue for any follow-up.
I'll join back. Thank you.
Thank you.
Thank you so much, and all the best.
Thank you.
Thank you.
The next question is from the line of Tarang Agarwal from Old Bridge Capital. Please go ahead.
Hi, team. Good afternoon.
Good afternoon.
My question really pertains to the molecules that are discovered in our dedicated centers or Discovery Services. Once the molecule is discovered, how likely is that the development and consequent manufacturing of the molecule would move to Syngene? That's question number one. Second, other than maybe lack of capabilities, what other possible reason could result in the customer moving the development or the manufacturing of the molecule to other CDMOs?
Yeah, good question. Actually, in the dedicated centers, remember, the nature of those is they are fully integrated, almost captive sort of centers that we run integrating them back into the client's organization. If you take the longest-running one of those, the dedicated center we run along with BMS, from their perspective, it effectively is BMS' research hub in Asia, and it sits alongside their other research facilities around the world. It's indistinguishable from their point of view from any other one of their research labs. It has the same look and feel, the same systems. It's fully customized to effectively be a BMS facility run by us on their behalf. From that insight, you can see that the logic prevails that any of the innovations that gets delivered in that research center flows into the rest of the BMS organization.
Things like the next development stage, some of that comes to us, but manufacturing in the main flows straight through into BMS' own manufacturing infrastructure. I get the spirit of the question. The dedicated centers is probably the wrong starting point. If you look outside of the dedicated centers and look more broadly into Discovery Services, which Ken Barr runs, and Development Services, which Jan-Olav Henck runs, those two organizations are much more likely to follow the path that I think your question suggests, which is where we co-ideate or co-discover a molecule with a client or for a client that we can then add value to that by doing the downstream steps of that innovation, further development, and ultimately through to manufacturing. I don't think it's a particularly strong driver of the dedicated centers business, but very relevant for Discovery Services, Development Services.
As for percentages, I don't think I've got a number that would be helpful, just because it's, as you know, the discovery development timeframe in the industry runs over up to 10 years, and we haven't been offering that fully integrated service for long enough that I've got a big statistical base to answer it. On the last part of your question, which is other than capability, is there a reason why we couldn't actually deliver it? What are the other reasons that would flow to somewhere else? I think it's just all the usual factors. Either people choosing to do that work in-house because they've already got spare capacity and capability, or they've already got a vendor that they've got a long-term relationship with. We do have certain structural advantages, as does any integrated CRO.
If you do the discovery work, and then you flow through into development and on into manufacturing, you can, in some ways, lower the execution risk for the client because there are just fewer handover points. There's fewer opportunities for things to get delayed or a slip in a tech transfer. There are good reasons in an industry, and here I'm thinking of life sciences such as biotech and pharma, where fundamentally innovation is patent-bound, and therefore everybody's very conscious that every piece of innovation has a sell-by date, and there's a patent clock ticking away. Moving quickly as well as moving with great capability and competence is important. If we can integrate those internally, we potentially can be quicker. We can certainly minimize the number of moving parts. Bit of a long answer, but I thought it was more of a strategic, broader question you were asking.
Hopefully that helps.
Long was good, Jonathan. Thank you so much. This is really helpful.
Thank you.
Thank you.
The next question is from the line of Charulata Gaidhani from Dalal & Broacha. Please go ahead.
My first question pertains to the traction in Discovery Services. Are you seeing a visible difference in the pace of projects coming up?
Was there a context to that or a time period? During the first quarter, I think our Discovery Services business has continued to perform very well. That's actually true. I think over the last three, four years, we've continued to build momentum in that part of the organization. I think some of the changes that Ken has brought through around closer integration, acting as one single unit rather than four or five disparate units, just starts to make more sense to our clients because they can see, if I take the answer I gave to the prior caller's question, that integration in practice, and they can see those linkages. I think we're doing pretty well in Discovery Services. Was there an angle of the question around is it being particularly impacted by the current COVID-19 lockdown and the sort of global restrictions on travel?
I'm not quite sure where you were coming from.
Yeah. It was pertaining to the lockdown globally. Are you seeing less of outsourcing in the research activities?
No, not measurably so. It's difficult to measure, so I can't be 100% certain that we would have that visibility yet anyway. Secondly, it's quite soon. What you are seeing, though, What we have seen during the quarter is virtual client visits, virtual audits. We've even seen regulators do virtual regulatory inspections. If you put the technology there, and we've worked very hard to do that, you can have a very good outcome from doing it. The world's digitizing because it needs to. I'm sure as we come out of COVID-19, that will leave a legacy for many businesses.
Thanks. My second question pertains to the CapEx spend.
Yes, Charulata, and what's the question?
How much of CapEx do you expect in FY 2021?
Yeah. I mentioned that in my commentary. We said that we would spend INR 100 million. As of March, we were at INR 450 million cumulative spend, and we guided that it would become INR 550 million by March 2021, and we are still holding on to that. First quarter was a bit slower. We hope to catch up in the next few quarters. As I said, it will all depend on the pandemic intensity, and I'll come back with the updated guidance if required at all later. At this point of time, we are still to spend INR 550 million by end of March 2021.
Thank you. Ms.
Okay. Thank you.
Thank you. The next question is from the line of Nitin Gosar from Invesco. Please go ahead.
Hi, team. Good afternoon. Jonathan, one question to you. Wanting to broadly understand what's happening on the global platform when it comes to outsourcing discovery activities, especially in last six months. Has things changed? How are clients seeing this service offering keeping in mind the profitability pool overall in pharma industries has improved over the last couple of quarters. Are they wanting to explore more projects at this slowdown? Your thoughts on that.
Nitin, I hate to do this to you, but it's a really crackly line. Could you just restate your question? I missed the beginning of it.
Okay. Just wanted your thoughts and observation on how are clients seeing the overall Discovery Services as an avenue keeping in mind over the last six months we have seen pandemic, and we have also seen profitability pool improving for a lot of pharmaceutical companies. Are they wanting to explore more projects, so maybe they will be required to adopt a discovery research outsourcing activity kind of route? Or are they wanting to curtail down their already ongoing discovery projects or innovation projects? Just wanted to understand where are we right now.
Yeah, good question. I haven't really detected a material change from the situation that you described, which by the way, I think is quite a positive one. I think you are right. You're seeing at a societal level, at an industry level, an increased willingness to put more of society's wealth and/or companies' investment into innovation, into R&D for a whole bunch of structural reasons. Demographics, increasing global population, increased distribution of wealth parity, all of those things. What we do know, it's a 50, 60-year-long almost development journey around the world. As nations get wealthier, as economies evolve, as populations grow, there's a higher demand for healthcare. I think that's absolutely. It's almost glacial in the strength with which it moves. It's going in one direction.
On the pandemic element of it, you've seen a real burst of energy, I think, globally in the scientific community. This was a disease that was not recognized or known at the beginning of the year. We're halfway through it. We've already got a drug such as remdesivir. There are others that are starting to come through. There's 90-odd parallel vaccine programs. There's an intensity to the collaboration between governments around the world, between industry, between corporates. There's a lot of science being done, which really is the need of the hour. If you're looking for a more strategic comment, what I hope one of the lessons that we collectively learn as we come out of this, however long that takes, will be that fundamental investments in innovation and science is the best way for the world to address these sort of problems. It's a real lesson.
The anti-vaxxers, for example, are fairly quiet at the moment given the clamor that there is around the world for a solution that allows us to get back economies to be normalized and for people to get back to a normal way of living. I'm not detecting any material change. I do think it's a good environment where science is proving its worth.
Good, sir. One question to Sibaji. Wanted to understand, I think you commented. The asset turnover is looked around 1x from 18 to 24-month perspective, given with pipeline visibility. I'm not sure now, whether you commented on pipeline in past, but could you throw some kind of understanding of where we are on the pipeline, and any color on that would be helpful.
Yes. I will. Typically, the way we operate is that we have at least two quarters of good visibility of our pipeline at any point in time, and future quarters thereafter is work in progress whenever we are basically doing our CapEx planning. The case is very similar now. Good visibility of two quarters and the rest of the quarters work in progress, and we have confidence that we'll be able to take it forward in a nice way.
Thank you.
Did I answer your question? Yeah?
Yes.
Okay.
Thank you.
Yes, thank you.
The next question is from the line of Sajal Kapoor from Unseen Risk Advisors. Please go ahead.
Hello. Go ahead.
Yeah. Sajal Kapoor, your line is unmuted. Please go ahead with the question. Seems there's no response from the line. We will move to the next question that is from the line of Manoj Garg from White Oak Capital. Please go ahead.
Very good afternoon, gentlemen, and thanks for taking my question. Just two questions. One on the manufacturing assets which you are putting across. First on the API side, how should we look at in terms of the visibility for those assets, given I do presume that we have a lot of molecules on the development side. Given in what stage of clinical trials they are, if one has to look at from a visibility perspective, would you like to put some color over there?
Yeah. I think we gave quite a bit of an extensive commentary on this at the full-year results. I think this year is quite a pivotal one for sort of the enablement of our Mangalore API facility. The real priority for the year is having now completed the building stage of it, and that came in pretty much on time and on budget into quality. It's now to complete the qualification. The order of the hour through the rest of this year is qualifying the plant and then also starting to win those sort of regulatory inspections and approvals. That really is the general shape of it. I think the comments we've made were, think of it as in startup mode, certainly for the rest of this year. It should start to generate some revenue as we go towards the end of this year into next.
Then you're into a multi-year program of building that up. We'll keep you updated as we go through that process.
It shows the endeavor out there is basically to have the assets which we are developing in-house or probably we are open to get assets even as a second source of supply. Those assets might have been developed in some other
Yeah. No, Manoj, just to be clear, the facility is a CMO facility, therefore, all of the assets that go through it will be somebody else's molecule. Some of those may come from work that we've already done at the discovery stage and flows through from development into manufacturing. It's more likely that those will be molecules that, and you gave a good example, where you take on being a second supplier or you do work sort of for the clinical stage of manufacturing and then roll into the pre-launch for new molecules. What we're not doing is developing our own pipeline of assets and then manufacturing those.
Sure. That's helpful. If I can squeeze one more question, with your permission?
Yeah. Of course.
Sure. Thank you. On the biologic assets, which again, we are putting up, basically just would like to understand your perspective that are we primarily looking at projects on the biologic side or even we are open for the biosimilar project as well?
Yeah. Certainly, actively looking for projects. We've got a good capability there. It's a state-of-the-art facility. It's based on 2,000-liter scale disposable assets. It's probably best for medium batch size, medium sized products early in their life cycle. We'll be very happy if there's a good fit to do biosimilars with it.
Very much, and wish you all the best.
Thank you.
Thank you.
The next question is from the line of Sajal Kapoor from Unseen Risk Advisors. Please go ahead.
Oh, hi. Thanks for the opportunity. Am I audible now?
Yes, you are. Please go ahead.
You are, yeah.
Okay. Thank you. Yeah, thanks, Jonathan. Yeah, my question is a little medium to longer term. Our competitors like Lonza and Catalent are guiding that in the next five years, biologics development pipeline would be almost 50%, if not more, of the overall drug development pipeline. I know we have expanded both mammalian and microbial capacities recently, but what's your long-term outlook on the biologics manufacturing from Syngene's perspective? Thank you. I've got another question.
Yeah, sure. I don't disagree with that. You can see that one of the nice things about the pharma biotech business is because of the highly regulated nature, all of the clinical trials or many of the clinical trials are put into the public domain, and it's a little bit like looking at starlight. The light that you see today left the planet quite some time ago. You can do the same thing with where the industry is going scientifically. If you go onto ClinicalTrials.gov, for example, the U.S. government site that lists the ongoing clinical studies in the U.S., you get a good sense of where the industry's pipeline is going.
The indicators on that for the last three, four, five years at least, maybe even longer, are that if you split the world into chemistry and biology or small molecules and large molecules, then it's about a 50/50 split. To some extent, if that's Lonza and Catalent's view of the world, absolutely agree with it, and it's reflective in our strategy, which is to be very capable, but to some extent, platform neutral. Our intention from discovery into development and then into manufacturing is to be able to bring the right tool for the job. Sometimes scientifically at the discovery end, the right tool will be a small molecule, and sometimes it'll be a large molecule. The skill and the expertise is to know the difference, but it's to have both of them in your toolkit.
We flow that logic all the way through to become an integrated and full-scope CMO, CDMO, CRO, whichever one of the abbreviations for the industry model you prefer. It is to be sort of platform neutral, led by the science, and that flows all the way through to manufacturing.
Very satisfactory response on that one, Jonathan. Thank you. My second question is regarding the Mangalore facility. Do we generally call it as an API manufacturing unit? We would be manufacturing even the novel intermediates that's patent protected, as well as the patent protected specialty chemicals at the same campus site. Because I think reading through the old annual reports, 2016, 2017, we were calling it out that this site will be manufacturing on-patent intermediates, specialty chemicals, as well as the API. Maybe if you could just clarify that, please. Thank you.
I think your question describes the answer perfectly. What I will do is maybe invite Mahesh. Do you want to talk a little bit about the current capabilities and what options we've got at Mangalore?
Yeah. Good afternoon. Referring to your question around the interest in using it for APIs as well as intermediates. The very straight answer for that is that we are actually looking and evaluating all of those capabilities. As you know, the government has also been on a specific mission for bringing in more and more in-house manufacturing of both critical intermediate as well as APIs. This is where we are looking at positioning the use of our Mangalore facility to bring it to its full capabilities, and that is something that we'll be looking at in the course of this year.
Thanks, Mahesh.
Thank you.
I'm very pleased to hear both responses. Thanks, team, and all the very best.
Thank you.
Thank you.
Before take the next question, we would like to remind the participants to limit their question to one per participant. The next question is from the line of [Laxmi Narayan] from ICICI Mutual Fund. Please go ahead.
Hi, good evening. Am I audible?
Yes, you are. Please go ahead.
Yes, you are.
Yeah. I was just looking at the firm over the last four years. We have almost doubled our revenues from almost INR 1,100 to close to INR 2,000 odd crores, right? Just to get an understanding of how much of that business came from the clients of 2016 and how much actually came from new clients. If I just again double-click on the existing clients of 2016, how much came from expanding our services, right? That is, like the new services you actually do. As a follow-up of that is when you actually talk to the clients, whether the decision-making is different when you actually give this suite of services. There is manufacturing involved, there is procurement involved, right? Just want to understand how that dynamic actually works.
Super question. I hope you're okay. I don't have all of the statistics off the top of my head. We'd actually have to go back and sort of do a cohort analysis, but I'm sure between the group of us will be able to put some sort of picture together that'll explain it to you. I think your question touches on something that's quite right. What I would expect is that the majority of our growth will come from existing clients. It doesn't tend to be sort of linear. It's actually sideways expansion, which I think is the other part of what you talked about. You may do a single type of work for a client. They get comfortable with you become a qualified vendor.
You build a good understanding of each other's operating approaches and systems, and to some extent, you earn their trust and confidence by delivering. That gives you a platform to find other services that you can provide to them as you get a better understanding of their needs and they get a better understanding of your capabilities. In Syngene's case, it's again, quite a dynamic backdrop because the company is continuing. While we've doubled our revenue over the four years, I would say, and I don't know how you'd measure it, but it feels as though we've more than doubled our capability and our competence and our proven track record. It's a more sophisticated organization, and that's continued to evolve in a positive way.
We find even with our clients that have known us longest and know us best, we occasionally surprise each other by being able to show them a capability or a competence that they didn't know we had. That's a positive thing to do. Numerically, I would've thought most of the growth would've come from deepening and expanding the relationship with existing clients. There's a reasonable amount of churn. People come in, people go out. Maybe they only had one project. You do it for them. They don't have repeat work for you to do. We're also seeing good progress, I think, on expanding the number of clients that we have. Certainly over the time period you described, sort of 2016 onwards, I think we've got a better footprint in medium-sized businesses than we had in the past.
We've got a more visible brand name since we IPO'd. I think we're better known, and I think we've done particularly well in that sort of biotech sphere. Go back to 2016, we would've been strongest in large cap pharma, and I think today we've added to that also medium-sized startup and venture-funded biotech as well. A bit of a sort of painted picture of an answer rather than numerically heavy, but hopefully that gives you a sense of it.
Thank you. Ladies and gentlemen, that would be the last.
Thank you.
Yeah, that would be the last question for today. I now hand the conference over to Mr. Karthik Shankaran for closing comments. Thank you, and over to you.
Good afternoon. Thank you all for your time. If there are any further questions, we'd be happy to get in touch and clarify that. Thank you all once again and look forward to being in touch. Thank you.
Thank you very much. Ladies and gentlemen, on behalf of Syngene International, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.