Syngene joins hand with HiMedia for COVID-19 test kits

Shares of Syngene International climbed over 5% in Wednesday’s trade after the Asia’s largest contract research firm announced a deal with HiMedia Laboratories to produce and distribute ELISA test kits for Covid-19.

HiMedia will manufacture the kits at its facility in Mumbai and distribute it across India. The kit has the capacity to test samples together in a single run and generate results within 3 hours.

Interestingly, Syngene share price rallied 50% since April. The company guided for double digit growth growth during the current fiscal. However, it expects Apr-Jun quarter earnings performance to remain study due to the ongoing lockdown in the country.

Syngene posted a healthy 24% on year (YoY) growth in Ebitda (earnings before interest, taxes, depreciation and amortization) at Rs 225 crore in the March quarter of FY20 (Q4FY20).

Ebitda margin, too, expanded by 300 basis points to 36% from 33% in year ago quarter.

The company booked quarterly revenue of Rs 628 crore, an jump of 13% YoY from the corresponding quarter last year, when it had posted a revenue of Rs 555 crore. Profit after tax rose 20% to Rs 120 crore relative to last year’s profit of Rs 100 crore.

The fourth quarter performance was driven by strong growth in its discovery and development services divisions. During the quarter, the company commissioned a new research facility at Biocon Park in Bengaluru.

The company’s API manufacturing facility in Mangalore was completed and is currently in a critical phase of completing qualification and preparing for commencement of GMP commercial operations towards the end of this financial year.

The company has successfully cleared a US FDA inspection of its small molecule bioanalytical laboratory within the clinical development unit with no observations or formal discussion points.

Although the management does expect a negative in the Q1FY21 both on topline and profitability, the company is yet looking at a double digit revenues growth on the back of continuous client additions, an extension of existing contracts, increasing manufacturing and biological contributions besides currency tailwinds. Profitability will be flat in comimg year due to incremental opex and higher depreciation

Syngene also remains aggressive on the capex front (US$451 million already spent & another US$100 million earmarked by FY21), which is due to strong pending order book visibility

With several strong client additions like Amgen, Zoetis, Herbalife, GSK, etc, and multiple year extension of BMS and Baxter contracts, the company remains well poised to capture opportunities in the global CRO space

Net net we expect a good year performance in FY22 although in the current year the company is likely to face challenges due to the covid outbreak until normalcy resumes again.

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