Suven Pharmaceuticals Q1 FY25 Earnings Conference Call Summary
Key Management Participants
• Executive Chairman: Mr. Annaswamy Vaidheesh
• Managing Director: Dr. Prasada Raju
• CFO: Himanshu Agarwal
Company Outlook
• Positive outlook in the CDMO sector due to:
• Increased customer demand
• Healthy inflow of RFQs
• Focus on expanding pipeline and customer base in:
• US
• Europe
• Japan
Strategic Initiatives
• Shift towards specialty chemicals and AgChem
• Ongoing investments in Vizag plant
• Integration of acquired Sapala to enhance technology and GMP capabilities
• Growth in Cohance segment, particularly in ADC and API Plus
Financial Performance
• Q1 FY25:
• Free cash flow: Rs. 33 crore
• Cash balance: Rs. 64 crore
• Revenue decline: 34% YoY
• Anticipated growth in second half of FY25:
• Improved gross margins
• Adjusted EBITDA margins: 38%
• R&D expenditure: Rs. 22 crore
• One-time cost affecting EBITDA margins
• USFDA procedural observations at formulations plant
• New auditors appointed for governance enhancement
Merger and Revenue Projections
• Proposed merger with Cohance approved
• Combined Q1 FY25 revenue projected at Rs. 483 crore
• Cohance showing 10% YoY revenue growth
Management Insights
• Strategies for converting RFQs into confirmed orders discussed
• Integration of new agrochemical SBU
• Stability of Cohance's margins expected
• Increase in RFQs due to:
• Rising clinical trial trends
• Geopolitical factors favoring Indian CDMO industry
Project and Profitability Discussions
• RFQs include early and late-phase projects
• Potential for new projects to be more lucrative
• Growth expectations based on existing purchase orders
Additional Inquiries
• Dividend policy and timeline from RFQs to firm orders discussed
• Focus on oncology projects in advanced stages
• Commercialization timeline for seven Phase-III molecules:
• Two expected readouts in FY25
• Working capital days increased to 127 due to supply delays, now normalized
• Active pursuit of acquisitions in unique technology platforms
Growth Aspirations
• Projected 15-16% CAGR viewed as conservative
• Management committed to strong results and robust pipeline
• CDMO segment expected to drive growth, with specialty segment recovery anticipated
Conclusion
• Management expressed confidence in strategic direction and future performance.

Acquisition Overview
• Date of Call: June 19, 2024
• Company Acquired: Sapala Organics, a Hyderabad-based CDMO specializing in oligonucleotide drugs.
• Investment Details:
• Initial investment: Rs. 2,295 million for a 51% stake.
• Full acquisition planned at 13x to 15x EBITDA over three years.
• Market Growth: Oligonucleotide market projected to grow at over 20% CAGR.
• EPS Impact: Expected to be EPS-accretive from the first year.
• Ongoing Merger: Will not impact Suven's merger with Cohance.
Strategic Rationale
• Niche Technologies: Acquisition aligns with Suven's goal to invest in emerging technologies.
• Partnerships: Importance of collaborating with innovator firms in complex areas like ADCs and oligonucleotides.
• Chemistry Skills: Emphasis on strong chemistry capabilities and timely material provision.
Synergies and Growth
• Synergy Timeline: Expected realization of synergies in two to four years, depending on clinical success.
• Customer Base: Top five customers contribute less than 50% of revenue, indicating diversification.
• Growth Drivers: Leveraging existing relationships and expanding into new technologies.
Client Acquisition and Capacity
• Client Trends: Consistent addition of clients and molecules, particularly in oligonucleotides.
• Focus on R&D: Current emphasis on research and development, with future plans for GMP manufacturing.
• Competitive Landscape: Unique competencies of Sapala not matched by competitors.
Key Personnel
• Mr. Yella Reddy: Highlighted for his technical experience in oligonucleotide science and connections in Japan.
• Role: Advisor for Suven's market entry in Japan.
Conclusion
• Management's Gratitude: Call concluded with thanks to participants for their time.

Submission Details
• Date of submission: June 4, 2024
• Earnings call date: May 30, 2024
• Focus: Quarter and year ended March 31, 2024
Key Executives' Insights
• Mr. Annaswamy Vaidheesh (Executive Chairman)
• Established a strategic roadmap.
• Successful FDA audits; confidence in overcoming challenges.
• Dr. V Prasada Raju (Managing Director)
• Positive outlook for FY'25 due to increased inquiries and a strong clinical pipeline.
• Update on Cohance's ADC segment: significant growth in commercial products and therapy expansion.
• Himanshu Agarwal (CFO)
• Decline in overall revenue; 16.2% growth when adjusted for COVID and Ag-chem impacts.
• Reported EBITDA margin of 39.4%.
• Awaiting SEBI approval for merger with Cohance.
Cohance Update
• Anticipates healthy growth rates in the API business.
• Five new product validations completed by March 2024.
• Revenue and EBITDA growth expected in FY'25, with acceleration in FY'26.
Q&A Highlights
• API Segment Performance
• Price correction of 4% to 5%; variable volume growth.
• Potential pricing appreciation in emerging pharma markets.
• CDMO Segment Inquiries
• Mix of developmental projects and Phase 2 inquiries.
• Focus on reviving client relationships.
• Merger Progress
• No anticipated delays; eager to complete merger for synergies.
Financial Performance Concerns
• Decline in EBITDA Margins
• Rising employee costs and expenses explained as part of long-term growth strategy.
• Cohance's Cash Flow and Growth Projections
• Ongoing efforts to improve working capital ratios.
• Both Suven and Cohance expected to grow at similar rates, primarily driven by CDMO.
Future Outlook
• Optimism for recovery in both business segments in the second half of the year.
• Expectations to maintain operating margins in the mid-30s.
• Emphasis on understanding customer needs to drive growth in the CDMO sector.
Conclusion
• Management expressed gratitude for participant engagement and reiterated growth expectations.

Merger Overview
• Date of Call: March 5, 2024
• Participants: Key executives including Annaswamy Vaidheesh and Dr. Prasada Raju.
• Objective: Create a leading integrated CDMO in India.
• Expected Outcomes:
• Increased revenue and expanded capabilities.
• Anticipated synergies (cost savings, enhanced services) within 12 to 48 months.
• Emphasis on high corporate governance and due diligence.
Merger Structure
• Swap Ratio: 11 Suven shares for every 295 Cohance shares.
• Post-Merger Ownership: Promoters (66.7%), Public shareholders (33.3%).
• Earnings Impact: Significant EPS enhancement expected within the first year.
• Timeline: Completion projected in 12 to 15 months, pending regulatory approvals.
Business Performance Insights
• Cohance's Growth: 16% revenue growth and 27% EBITDA growth over four years.
• Market Focus: Strong positioning in low to mid-volume APIs.
Medium-Term Outlook
• Market Conditions: Temporary softness expected, with recovery anticipated in H2 FY25.
• Customer Engagement: Strong progress in product pipeline.
Financial Strategies
• Debt Management: Plans to convert 20% to 35% of EBITDA into cash annually to reduce debt.
• Dividend Policy: Conservative approach focusing on reinvestment for growth.
Product Pipeline and Margins
• Phase III Pipeline: Increase from six to ten intermediates.
• Margin Expectations: Short-term dip in EBITDA margins due to investments, with long-term goal of mid-30s margins.
Challenges and Opportunities
• Receivables Issues: Currency crises and geopolitical factors affecting debtor days.
• Capital Expenditure: Focus on maximizing existing capacity before new investments.
Future Aspirations
• Billion-Dollar CDMO Goal: Commitment to achieving this target within five to seven years.
• Synergies with Advent: Current focus on internal growth before exploring external opportunities.
Conclusion
• EPS Accretion: Confidence in achieving double-digit EPS growth in the first year post-merger.
• Working Capital Stability: Cohance's working capital expected to remain stable.
• Share Dilution: Approximately 38.97 crore shares post-dilution.
The call concluded with an invitation for further inquiries.

Earnings Call Overview
• Date: February 5, 2024
• Transcript submitted to BSE and NSE on February 9, 2024
• Discussion of performance for the quarter and nine months ended December 31, 2023
Key Management Insights
• Executive Chairman Mr. Annaswamy Vaidheesh
• Acknowledged macro challenges, including inventory destocking and COVID-related supply impacts
• Expressed confidence in mid-term growth despite near-term softness
• Emphasized customer engagement and operational optimization
• CEO Dr. Sudhir Singh
• Highlighted progress in the RFQ pipeline and ongoing capacity expansions
• CFO Mr. Himanshu Agarwal
• Reported an 18% decline in revenue for FY24 due to external factors
• Noted a 35% growth in underlying business revenue when excluding external impacts
Conference Call Highlights
• Management Transition
• Completed transition to new management with strengthened leadership
• Q&A Session Insights
• Clarified revenue from COVID-related products was present in Q3 FY23
• Discussed the pharma CDMO business performance on a year-to-date basis
• Updates on the Cohance merger evaluation by the board
• Cautious outlook on phase-III trials and clinical success timelines
• Ongoing projects in API development and challenges in formulation
M&A and Growth Strategies
• Inorganic Growth Opportunities
• Exploring M&A activities, particularly in technology platforms
• Anticipated revenue impacts from the increasing RFQ pipeline in the next 1-2 quarters
• Healthy pipeline of M&A opportunities, aiming to close a deal within the next year
• Capacity Utilization
• Expectation to achieve optimal capacity utilization within two years
• Focus on filling current capacities before new capital expenditures
Future Outlook
• COVID-Related Revenue and Growth Potential
• Recent approvals and commercialization efforts promising for future profitability
• Focus on strategic growth while managing existing capacities and relationships
Profit Margins
• Inquiry about profit margins among newly commercialized molecules
• Margins expected to be evenly distributed based on molecule composition
Conclusion
• Call concluded with thanks to participants and invitation for further questions directed to Investor Relations
• Noted corrections made in the transcript for accuracy and clarity

Key Management Participants
• Executive Chairman: Annaswamy Vaidheesh
• Managing Director: Dr. V. Prasada Raju
• CEO: Dr. Sudhir Singh
Company Vision and Strategy
• Commitment to becoming a leading CDMO.
• Focus on customer partnerships and operational excellence.
• Strategic growth plans include investments in R&D, infrastructure, and talent acquisition.
Financial Performance
• Revenue: 6% decline to INR 579 crore.
• Profit After Tax (PAT): 11% increase to INR 200 crore.
• Excluding specialty chemicals and COVID products, revenue growth was 42% year-on-year.
Operational Updates
• Successful leadership transition with positive customer feedback.
• Ongoing investments in a new R&D center.
• Focus on stabilizing operations while pursuing aggressive growth.
Market Challenges and Opportunities
• Current challenges due to global destocking in specialty chemicals.
• Strong growth potential driven by favorable macroeconomic trends in India.
• Record number of requests for quotes (RFQs) and a robust project pipeline.
Capital Expenditure and Strategic Planning
• New strategy for capital allocation is being developed.
• Focus on leveraging existing capacities, particularly in the API market.
• No immediate need for new investments; maintaining similar spending rates.
Customer Engagement and Feedback
• Positive feedback from major customers regarding management transitions.
• Strong relationships with customers are expected to enhance future collaboration.
Future Outlook
• Cautious optimism for growth in the next six quarters despite current challenges.
• Emphasis on long-term growth over short-term fluctuations in margins.
• Commitment to improving ESG capabilities and optimizing the formulation business.
Conclusion
• Management expressed confidence in the company's strategic direction and growth potential.
• Invitation for further questions and engagement with the investor relations team.

Conference Call Overview
• Date: August 14, 2023
• Submitted transcript to BSE and NSE
• Moderated by Rishab Barar from CDR India
• Key executives present: Managing Director Venkat Jasti
Company Performance Highlights
• Strong growth in Contract Development and Manufacturing Organization (CDMO) sector
• Muted performance in Specialty Chemicals due to:
• Global inventory destocking
• Drought conditions affecting demand
• Optimism for future growth with a record number of inquiries for new developmental molecules
Analyst Inquiries and Responses
• Acquisition Status:
• Expect resolution before August long stop date; approvals progressing.
• Casper Product Line:
• Two products launched; three more expected in six months; eight additional in the pipeline.
• Current sales volume small; significant revenue anticipated in 12-18 months.
• Capital Expenditures:
• Suryapet facility operational by end of Q2 or early Q3.
• No new facilities until existing products succeed.
• Margins:
• Variable based on product mix; cannot predict consistent high margins.
• Increase in new product inquiries noted.
• CDMO Business:
• Acknowledged unpredictability and lack of visibility beyond six months.
• Focus on innovator products; confidence in achieving 20% CAGR.
Future Outlook
• Growth Potential:
• Lack of visibility acknowledged, but strong track record referenced.
• Capex Execution:
• INR 600 crore planned capex; INR 170 crore spent on Suryapet site.
• CRAMS Sector:
• Strong inquiries; tangible results may take 24-36 months.
• China Plus One Strategy:
• Increased interest in India for CDMO services.
• R&D Deferral:
• Deferred R&D at Pashamylaram unrelated to Advent deal; made 2.5 years ago due to government requirements.
Conclusion
• Acknowledged challenges in the agrochemical sector but expressed optimism for recovery in 2024-2025, particularly in the CDMO business.

Earnings Overview
• Date of Call: May 26, 2023
• Key Executive: Managing Director Venkat Jasti
• Revenue Growth:
• Muted overall growth
• 10% decline in CDMO business
• 15% increase in Specialty Chemicals
• Year-on-Year Results: Flat when excluding one-off COVID-related sales
Future Guidance
• Challenges: Variability in project timelines and dependency on clinical trial success
Q&A Highlights
• Cost Control Initiatives:
• Rashmi Shetty inquired about cost control; slight expense reduction noted
• Venkatraman Sunder clarified no major cost changes, attributed to variable production costs
• Acquisition Status:
• Awaiting regulatory approval for promoter stake acquisition
• CDMO Pharma Segment:
• Abdulkader Puranwala noted a spike; Jasti explained it was due to product mix and shipment timing
• Slower traction for new RFQs post-COVID
Market Conditions
• Pharma Sector Approvals:
• No current indications for movement in clinical phases
• "China Plus One" Strategy:
• Potential long-term benefits for the industry
Raw Material and Logistics
• Availability: Improvements noted, but no significant margin improvements expected
Commercial Supplies
• COVID-related Products:
• 10% decrease in commercial supplies due to lack of repeat orders
Company Operations
• Client Base: Primarily medium to large pharmaceutical firms
• Transition: Gradual shift from COVID-related activities to regular operations
Open Offer Process
• Regulatory Approvals: Anticipated launch before July 1
Product Pipeline
• Molecules in Phase-3: Five molecules confirmed, no visibility on commercial timelines
• Casper Product Launches: One launched, five more expected soon
Competitive Positioning
• Differentiation: Focus on innovation over generics or APIs
• Capital Expenditure: Rs. 285 crore in FY23 for equipment replacement to enhance compliance and productivity
Conclusion
• Project Acquisition: Slower than expected, but improvements anticipated in the third and fourth quarters while maintaining existing margins.

Earnings Overview
• Date of Call: February 7, 2023
• Submission: Transcript submitted to BSE and NSE on February 13, 2023
• Performance:
• Quarter-on-quarter revenue increase
• Flat performance over nine months
• EBITDA decline due to product mix changes
Segment Performance
• Specialty Chemicals: Significant growth noted
• CRAMS (Contract Research and Manufacturing Services): Decline attributed to reduced COVID-related revenues
Future Outlook
• Long-term Growth: Optimism as global pharmaceutical R&D resumes and potential production shifts from China to India
• Expected Growth: Potential 10% growth in the upcoming fiscal year, though visibility is limited
Key Updates
• Advent Deal: Awaiting approvals, timeline extends to August
• API Forward Integration: Client audits expected soon
• Product Development: Seven products in commercial and Phase 3 stages; no updates on Phase 3 results timing
Customer Interactions
• Positive shift post-COVID with increased R&D spending and outsourcing trends
• Anticipated rise in inquiries and project flow
Molecule Contributions
• Third Molecule: Expected contribution in 18 months
• Fourth Molecule: Anticipated contribution in FY24
Facility Updates
• Casper Facility: Ongoing approvals; significant revenue expected 12-15 months post-acquisition, breakeven in about 36 months
• CAPEX: Rs.600 crore planned, with Rs.200 crore for Suryapet facility
Technology and Capacity
• Focus on innovator products in CRAMS rather than specific technologies
• New capacity creation typically takes 18 months; existing underutilized capacity can be utilized more quickly
Merger Considerations
• Potential for utilizing capacities from Advent-owned entities discussed, but details are premature until merger finalization
Patent Expiry and Production Shifts
• Earliest patent expiry in 2025, with potential extensions to 2028
• Transitioning production from China to India expected to take 1-3 years
Conclusion
• Current flat growth with expectations for slight positive growth by year-end
• Promising long-term outlook due to emerging opportunities in global pharma outsourcing, particularly towards India