Syngene International says US dollar strength aided better-than-expected revenue growth

According to him, the main engine of the business is the research side. Two-thirds of the company's revenue comes from dedicated centres and discovery services.

"They're seeing really buoyant market demand at the moment. I've put that down to the structural shift with the return to work in the US and Europe. Many of our clients are trying to catch up on the lost grand projects during the pandemic, they're back into their laps, and back into their offices, and are really pushing very hard. That's created quite a buoyant market over the first half of the year for us,” he noted.

Biocon’s subsidiary Syngene International had upgraded its revenue growth target for the fiscal to mid-to-high teens on the back of a significant change in the Rupee/US dollar exchange rate as most of its client contracts are dollar-denominated and the agreement with Zoetis. Following a stellar result in the September quarter, the company believes it is on track to achieve the upgraded guidance.

The company’s EBITDA margin came in at 29.6 percent as against 30.5 percent in the corresponding period a year ago. Hunt expects a few 100 basis points (bps) improvement in the second half of the year as he said the firm is coping well with inflation.

He added that the firm is getting healthy demand from much smaller businesses like biotech startups that are real innovation engines. He said there’s been a structural shift for the company over the last three to four years in this area. “We're just as likely now to be doing partnership deals with very large global biopharma companies, the megacaps, and we’re also just as likely to be doing it with small venture-funded startups and that really balances the business,” he said.

Speaking about the Zoetis deal, Hunt said its contribution to the revenue will only begin next year. The firm is in the preparation setup and getting ready to start manufacturing the product.

He expects regulatory inspections to happen anytime between now and the beginning of the next financial year. “That puts us in a position to start manufacturing, maybe as soon as the fourth quarter, but it becomes a revenue factor next year,” he said.

Despite strong quarterly results, Syngene International shares were trading more than 2 percent lower at Rs 577.75 on BSE at 2:22 pm.