I am pleased to report that Syngene delivered an excellent performance for FY19. Our ability to create value for our clients is anchored in our deep domain expertise and ability to deliver world-class, affordable innovation. At the same time, the investments we are making to strengthen delivery, safety, operational efficiencies, as well as drive sales and marketing, will enhance our position as a premium R&D services provider.
Globally, research-focussed organisations are increasingly merging an outsourced model of R&D with their traditional “in-house” research capabilities as a way to address rising research costs and declining R&D productivity. Within the life sciences industry specifically, companies are increasingly shifting from transactional outsourcing relationships to more strategic, relationship-based models as they grapple with patent expiries, the rising cost of new drug pipelines, competition and a growing demand to access new technologies. The rise of virtual biotech companies, focussed on outsourcing all but core activities to drive efficiency, is also adding to the demand for external innovation.
Integrated contract research organisations (CROs) offer a wide range of scientific solutions that address each of the discovery and development stages. These solutions can enable clients to access the innovation they seek, while maintaining quality standards and achieving better efficiency and often reducing costs. Access to specialised knowledge also enables integrated CROs to successfully navigate the growing complexities across the value chain.
Syngene offers integrated scientific services spanning the discovery, development and manufacturing continuum. Provided across multiple scientific domains, our integrated services enable us to deliver innovation and improve both time and cost-to-market for our clients. At the same time, our flexible operating model allows us to customise our offerings to fit each client’s unique needs, capabilities, systems and processes. As a specialised CRO, we have also built expertise in emerging technologies to accelerate innovation. These attributes, together with our world-class infrastructure, large pool of scientific talent, strong client relationships and the high priority we place on ensuring that we operate to the highest regulatory standards, make us well positioned to leverage growing opportunities in the global R&D outsourcing market. These same capabilities, coupled with a cost-efficient operating environment also enable us to cater to the R&D requirements, in segments as diverse as nutrition, animal health, agrochemicals, consumer goods and specialty chemicals. All these sectors are looking to access affordable innovation while ensuring world-class quality and compliance.
The Baxter Global R&D Centre was set up in 2013, and the renewal of this collaboration reaffirms the confidence they have in our services.
From an operational standpoint, we continued to make good progress on our strategic priorities. Aligned with our focus on building long-term sustainable partnerships with our clients, I am delighted to share that amongst others, we extended and expanded our agreement with Baxter Healthcare Corporation. The Baxter Global R&D Centre was set up in 2013, and the renewal of this collaboration reaffirms the confidence they have in our services. Our ongoing collaboration with Merck KGaA was also extended during the year. This relationship goes back two decades, and we are proud to have consistently advanced our client’s research projects in the areas of protein technology, molecular biology, cell science, antibody discovery and antibody drug conjugates.
As we strengthen existing collaborations, we are also investing in new partnerships. The year recorded several new client wins and expansion in our global footprint. Besides working with major overseas clients, Syngene takes great pride in being selected by the Government of India to partner with them in their goal to make the country a global hub for biotech research. Under this partnership, we established the first National Centre for Advanced Protein Studies (CAPS) at our Bengaluru facility. Funded by the Biotechnology Industry Research Assistance Council (BIRAC), the Centre will work on strengthening innovation in research.
Unlocking the undoubted opportunities around us requires investment in talented, experienced leadership. The role of Senior Vice President – Discovery Services was created to strengthen Syngene’s ability to meet evolving client requirements. Dr. Kenneth Barr, a Ph.D. from the Massachusetts Institute of Technology, has been appointed in this role. With more than two decades of experience in the areas of drug discovery in small molecules, Dr. Barr will help to further integrate our core strength of discovery services across our R&D value chain. We also appointed Mr. Alok Mehrotra, M.Tech - Chemical Technology, with over 25 years of industry experience, as Chief Quality Officer. Mr. Mehrotra will be responsible for Syngene’s quality and compliance functions and will lead initiatives to ensure we maintain our strong track record in this area.
Syngene continues to invest in infrastructure to meet the demands of a growing business. We commissioned Phase I of our upgraded S2 facility, which brings in 105,000 sq. ft. of stateof- the-art research space.
Syngene continues to invest in infrastructure to meet the demands of a growing business. We commissioned Phase I of our upgraded S2 facility, which brings in 105,000 sq. ft. of state-of-the-art research space. The completion of the second phase will add a further 165,000 sq. ft. of laboratory space, providing us with further scope to grow. In biologics, we expanded our process development capabilities by adding state-of-the-art equipment.
Additionally, our investments to forward integrate towards full scale manufacturing are strategically important for delivering long-term growth. We currently have in operation a world-class biologics manufacturing facility, with plans for further expansion. Our upcoming active pharmaceutical ingredient (API) manufacturing facility in Mangaluru, expected to come online towards the end of FY20, will bring an additional boost to our commercial-scale manufacturing capacities for small molecules. With more innovator companies looking to outsource manufacturing to mitigate the expense of investment in equipment and facilities, combined with the significant process knowledge we have gained in the development stages of R&D, we believe this investment will enable us to create value for our clients over the long term.
Our commitment to ensuring we continue to offer leading edge services is also reflected in the speed at which we embrace new technologies. During the year, we added capabilities such as sophisticated immuno-oncology assays and CAR-T design for researching next-generation therapies. We also entered into a collaborative project with a French biotech company to further strengthen our capabilities in bioinformatics. This field deploys highly complex algorithms to accelerate drug discovery and development. We are confident that our growing expertise in these advanced technologies will help us to create more value for clients.
We continue to invest in global best practices within our quality and safety systems. Our proactive focus on quality led to another successful USFDA audit, this time of our formulation, stability and quality control units. These endorsements increase confidence in the robustness of our quality systems.
Safety is central to our culture and is articulated through our corporate safety initiative, Kavach. The programme aims to emphasise the importance of safety in every aspect of our operations and encourages employees to work towards the goal of zero injuries at the workplace and to prevent any harm to the environment or property. It is with great satisfaction that I share that we completed two million safe manhours in operations, at our project in Mangaluru. This is an important milestone for Syngene, and we will continue to invest in strengthening our safety culture.
Investing in innovation and operational excellence are the cornerstones of sustainable growth. During the year, we continued investing in operational excellence to streamline systems and processes and implemented globally recognised tools such as Six Sigma and LEAN. Our research requires highly specialised and customised materials and equipment. We continue to work in close partnerships with our vendors to ensure timely delivery while meeting all quality and regulatory requirements.
The expertise, productivity and professionalism of our staff is our greatest strength and biggest competitive advantage. Our business operations are supported by an unwavering commitment to invest in people. During the year, leading talent management principles and practices were at the forefront of our Human Resources strategy. These interventions facilitated capability development, fostered high-performing teams and promoted an engaging and inclusive work environment. The success of our people policies is reflected in our attrition rate which is among the lowest in the country.
To strengthen our position as a leading scientific solutions provider, we will continue investing in our partnerships with clients, employees, vendors, business partners, shareholders, the government, and the communities within which we operate.
The Company delivered a strong financial performance for the year. The total revenue for the year increased from Rs. 14,849 Mn in FY18 to Rs. 19,007 Mn in FY19, recording growth of 28%. Growth was driven by improved performance across all business units, led by Discovery Services and Dedicated Centres. EBITDA stood at Rs. 6,119 Mn in FY19, compared to Rs. 5,266 Mn in FY18, recording a 16% growth. PAT increased by 9% to Rs. 3,316 Mn compared to Rs. 3,054 Mn in FY18, however, EBITDA and PAT declined moderately as a percentage of revenue. The decline in EBITDA margin was largely due to higher material costs and investments in safety and business development activities. Profit margins (PAT) were lower due to the unwinding of the SEZ tax holiday benefits in some parts of the business.
At Syngene, responsibility and results go handin-hand. Investing in partnerships encompasses the communities we live in and work with, as well as our clients. Under the aegis of our Corporate Social Responsibility (CSR) arm – the Biocon Foundation, our structured interventions are aligned with the United Nations’ Sustainable Development Goals. This year, we worked on the rejuvenation of Hebbagodi Lake in Bengaluru as well as invested in rural development programmes and community education. Within our business, we continue to invest in best practices to reduce energy consumption, reduce waste solvents and lower carbon emissions. In the coming year, we aim to extend the coverage of our CSR efforts to new locations.
Over the years, we have set the foundation for a promising future, with a large pool of scientific talent and access to world-class infrastructure. Our integrated scientific services are a key building block of future success. These are underpinned by world-class talent, extensive R&D capabilities, advanced manufacturing facilities, regulatory compliant quality and safety systems, state-of-theart technology and stable vendor partnerships. We remain laser-focussed on driving operational excellence in everything we do with the aim to exceed client expectations.
There is an immense opportunity unfolding across the R&D outsourcing market. To strengthen our position as a leading scientific solutions provider, we will continue investing in our partnerships with clients, employees, vendors, business partners, shareholders, the government, and the communities within which we operate. Longterm partnerships mean greater stability and predictability for our business even as we continue exploring business opportunities in emerging areas and expand our geographical footprint.
My sincere gratitude to all our partners, shareholders and stakeholders for making FY19 another year of commendable performance. On behalf of everyone at Syngene, I assure you we will continue building upon this momentum.