**The Big Outsourcing Opportunity: CRAMS CDMO space in Pharma and SYNGENE Ltd Company Research**
CRAMS/CDMO stands for Contract Research and Manufacturing Services/Contract Development and Manufacturing Organizations. These players are integral to the pharmaceutical industry, providing a wide range of specialized services to pharmaceutical companies.
The Global Growth of CRAMS/CDMO: The demand for CRAMS/CDMO services is on the rise, driven by the complex drug development process and the need for specialized capabilities The CDMO market is expected to grow at the rate of 5.2% The rise of CRAMS/CDMO indicates a growing trend of pharmaceutical companies outsourcing specialized services.
2️⃣ These players offer comprehensive solutions to pharmaceutical companies, combining research, development, and manufacturing capabilities. They act as strategic partners, supporting various stages of the drug development lifecycle.
3️⃣ CRAMS/CDMO companies typically offer the following services:
Research and Development (R&D): Conducting early-stage research, including target identification, lead optimization, and preclinical studies.
Process Development: Optimizing the manufacturing process to ensure efficiency, scalability, and regulatory compliance.
Analytical Services: Providing analytical testing and quality control services to ensure product safety and efficacy.
Formulation Development: Developing the appropriate dosage forms for drug delivery, such as tablets, capsules, or injectables.
Clinical Trial Support: Assisting in clinical trial design, execution, and monitoring.
Manufacturing: Large-scale production of Active Pharmaceutical Ingredients (APIs) and finished dosage forms.
Regulatory Support: Assisting with regulatory filings, compliance, and ensuring adherence to global quality standards.
4️⃣ CRAMS/CDMO players offer several advantages to pharmaceutical companies:
Cost Efficiency: Outsourcing to CRAMS/CDMO companies allows pharma companies to reduce capital expenditure and operating costs.
Access to Expertise: CRAMS/CDMO players often have specialized scientific and technical expertise, enabling efficient development and manufacturing processes.
Scalability: CRAMS/CDMO companies can quickly scale up production or adjust capacity based on the pharmaceutical company’s requirements.
Regulatory Compliance: Established CRAMS/CDMO players have a strong focus on adhering to global regulatory standards, ensuring compliance and quality assurance.
5️⃣ The CRAMS/CDMO industry is experiencing significant growth due to increased outsourcing by pharmaceutical companies. The complex drug development process and the need for specialized capabilities drive the demand for CRAMS/CDMO services.
8️⃣ The CRAMS/CDMO sector is expected to witness sustained growth as pharmaceutical companies increasingly focus on core competencies while outsourcing specialized services. This trend is driven by cost-effectiveness, access to expertise, and the need for flexible manufacturing capacities.
6️⃣ The Indian pharmaceutical industry is a major supplier of CRAMS/CDMO services to the world. The industry accounts for about 10% of the CRAMS/CDMO services used in the world. The Indian pharmaceutical industry is able to supply CRAMS/CDMO services at a lower cost than other countries due to the low cost of labor and the high quality of manufacturing.
Key players in the CRAMS/CDMO space include:
Syngene International Ltd.
Piramal Pharma Solutions
Suven Pharma
Strides
7️⃣ These players compete based on their scientific expertise, manufacturing capabilities, regulatory compliance, customer relationships, and geographic reach.
**Lets dive into Syngene Ltd.**
Company Research:
1️⃣ Syngene, a subsidiary of Biocon Ltd, was established in 1993 as India’s first Contract Research Organization (CRO). CROs provide research services on a contract basis to the pharma industry, aiming to reduce cost
2️⃣ Syngene operates as a Contract Research & Manufacturing Services (CRAMS)/CDMO player, offering extensive research, development, and manufacturing services to big pharma companies.
3️⃣ Syngene has 4 main divisions:
Discovery: Conducts early-stage research, from target identification to delivery of drug candidates for further development.
Dedicated R&D: Facilities for clients with a long term 5year+ engagement model.
Development: Engages in activities from pre-clinical to clinical trials, including drug substance and drug product development.
Manufacturing: Manufacturing services including clinical & commercial supplies with GMP approve facilities and API and Biologics manufacturing capabilities
4️⃣ Syngene has evolved from a discovery chemistry-focused CRO to an integrated provider of discovery and development services for new molecular entities (NMEs) across small and large molecule biologics, as well as ADCs (anti-body drug conjugates).
5️⃣ Syngene has multiple industry segments and partnerships with global leaders The company caters to diverse end-user industries like Pharmaceuticals, Animal Health, Agrochemicals, Consumer Packaged Goods, Chemicals/Polymers.
It has 400+ active customers with engagements with 8 out of the top 10 global pharma companies. The company holds 400+ patents jointly with clients and has a base of 5200+ scientists. In FY22, USA accounted for 73% of the Co’s revenues followed by India at 10% and rest of the world at 17%.
The Co serves emerging, mid and large sized Bio-Pharma companies, Animal Healthcare companies, Agrochemical companies, consumer products companies etc. Its clientele includes Amgen, J&J, GSK, Merck, Sanofi, Bayer, FMC, Unilever among others.
Syngene has a strong track record of financials It is operating at around 30% EBIDTA margins, which is among the best in the world.its net asset turnover is comparable to global peers, indicating efficient investment management.
6️⃣ Capex, New Business and Partnerships:
The company is investing around $100 million in capex for FY ’24, with half going into the Research Services division and the remainder spread across the rest of the business.
Zeotis Deal: Syngene’s relationship with Zoetis has grown over 11 years, starting with research, discovery, and development.Syngene signed a 10-year agreement with Zoetis for commercial manufacturing of drug substance. The long-term deal with Zoetis and successful regulatory inspections set a solid foundation for the future for future molecule development. The $500 million business deal with Zoetis over the next 10 years will add to overall revenue growth,
Syngene is building a development business and a manufacturing one, and they work together as part of their full-serve offering.
BMS opening a facility in Hyderabad is not seen as a risk as it is off strategy for Syngene and reflects the emergence of the Indian economy.
Mangalore API Facility: Syngene invested nearly 1000cr in developing a state-of-the-art production facility. Syngene’s API plant expansion in Mangalore FDA approval is expected in the coming quarter.
Multiple-year contract extensions with major clients like Amgen, BMS, and Baxter position Syngene well to capitalize on global growth opportunities.
SynVent: Syngene’s Integrated Drug Discovery platform expands business from existing clients and attracts new clients.
Expansion of Biopharma Manufacturing: Commissioning of cGMP microbial facility and expansion of mammalian cell manufacturing facility.
7️⃣ Management:
Syngene’s management is of top quality. Syngene has an excellent compliance track record
8️⃣ Guidance/Expectations
Revenue doubling in 4 years.
Company expected to maintain a 30% margin.
Financial pressures pushing pharma companies to outsource more
The breadth of capability and relative cost advantage of Syngene offers can be attractive to emerging biopharma companies.
Zeotis deal execution will be a key monitorable.
9️⃣ Valuation:
Currently trades at 32x EV/EBITDA, which is expensive
Risks
Terminable contracts – Any delay in the renewal or the termination of a large services contract could adversely affect the Company’s revenue and profitability.
Dependence on Outsourcing: fluctuations in industries like pharmaceutical, biotechnology, agro-chemistry, consumer health, animal health, and cosmetic companies because company’s dependence on the outsourcing of R&D.
Dependence on Clients: The Company depends on a limited number of clients, and a loss of or significant decrease in business from them could affect the Company’s business and have a material impact on SIL’s profitability.
The CRO/CRAMS business is highly regulated in terms of the compliances
**Conclusion:**
CRAMS/CDMO is a long-term story of outsourcing of the pharma and is one of the fastest-growing segments in the pharmaceutical space. Considering the industry’s growth potential and Syngene’s position as a leading CRAMS/CDMO player, it is worth monitoring the to take advantage of this shift. Syngene is an impressive player in the CRAMS/CDMO space with world class manufacturing infrastructure and processes, talented pool of 5000 scientists, diversified client base, strong financials, strategic deals, and expansion plans position it well for future growth. However, it trades at expensive valuations of 32x EV EBIDTA.
**Disclaimer:- This is my own study Not an investment recommendation Please consult your own financial advisor before making any investment decisions**
View on r/IndianStreetBets by ritu1212