Syngene’s winning formula
Syngene International was started by Biocon in 1993 to provide research services for pharma companies. Three decades later, the entity wants to become a global science company in its own right.
An announcement is imminent. This will be the first approved drug to treat patients with progressive familial intrahepatic cholestasis, or PFIC, a rare inherited condition that causes progressive liver disease until a transplant is required. The global biopharmaceutical company will grab the headlines, but as deserving will be Syngene International Limited, the Bengaluru-based contract research organisation that provided the entire workflow of the testing phase, from pre-clinical supplies to regulatory filings in the U.S. and Europe.
Syngene, which declined to name the client for confidentiality reasons, started in 1993 as a part of biopharma Biocon Limited. It has since grown to a team of about 5,400 employees, roughly 4,700 of whom are scientists who provide end-to-end drug discovery, research, development, and manufacturing services. The company, which was listed on the bourses in 2015, has amassed a clientele of over 400 global companies—ones that typically resist outsourcing critical drug discovery work outside the U.S and Europe.
No wonder Jonathan Hunt, CEO and managing director, Syngene, can barely contain the pride in his voice. “The minute you come through the doors into our campus, you can travel the world scientifically. I am proud of the fact that we do that degree of knowledge-intensive work in Bengaluru.”
However, Syngene is not just restricted to the medical space. It also conducts research on chemical ingredients that go into cosmetics and nutritional products. It even works on polymers, which are widely used in television and aerospace applications like jet engines.
But the core of their operations is in the medical sphere, including research on small molecules, the chemical compounds that are the active ingredient in drugs.
“From research of small molecules to large molecules such as proteins, oligonucleotides, DNA and RNA molecules, we do it all. We also work on consumer applications research such as polymers. This range of work requires a very complex and highly trained talent base across all levels of the organisation,” says Mahesh Bhalgat, COO, Syngene.
The demand for outsourced contract research has grown not just because of cost benefits but also due to other structural issues facing pharma firms globally. These include growing competition, an impending patent cliff on top-selling drugs, and shrinking product pipelines. “Today it is not about cost arbitrage anymore. It used to be a few years back, but more and more, we realise that is not the case,” says Bhalgat.
Sibaji Biswas, CFO, Syngene, echoes that, saying that of late, companies are increasingly getting more comfortable to offer Syngene a higher share or the entire process of the research work. “It is no more about an efficient financial model but growing confidence in our ability to do good quality scientific research work around drugs and medicines,” he says.
Syngene’s client base has grown from 256 to 400 between FY16 and FY21, which helped its revenue increase at a CAGR of 15% in the same period to reach ₹2,184 crore in FY21, according to a recent ICICI Securities report. This client list includes names like Bristol Myers Squibb, Amgen, Herbalife, Zoetis, GlaxoSmithKline, and Baxter International. In fact, Syngene has been working with eight of the top 10 global pharma firms for the last five years, according to the ICICI report, while the company says its client retention rate tops 90% consistently.
Bhalgat boils down the reason for Syngene’s success to three key factors. The first is that the company offers integrated services. “Because if you can do one-stop shopping, then you are in a much better position to actually have a good orchestrated control of your programmes, and understand the different moving pieces and leverage that.” The second is productivity through “a Lean Six Sigma way of working embedded in our operations,” and the third, he adds, is quality, without which one cannot command competitive prices.
“There is an increasing trend within the global life sciences industry to partner with integrated contract research organisations that can provide customised and end to end support to both large conglomerates [and] to young startup biotechs,” says Kiran Mazumdar-Shaw, executive chairperson, Biocon, which has a 70% stake in Syngene. “Today our clients see us not just as an additional pair of hands but more as a strategic partner who can contribute to cutting-edge innovative science,” adds Shaw, who is also non-executive chairperson on Syngene’s board.
Syngene’s business is divided into four verticals: discovery, development, manufacturing, and dedicated research and development (R&D) centres.
The discovery services are on early-stage research from target identification to delivery of drug candidates for further development. Its development services are typically preclinical to clinical trials for a drug candidate, while its manufacturing arm makes small and large molecules for clinical and commercial use. About 32% of Syngene’s revenue comes from discovery services, and 37% from development and manufacturing, according to the ICICI Securities report. The remaining 31% is from long-term dedicated contracts, a business Syngene started in 2007.
“The dedicated centres are big business for us. We provide the scientists and the entire ecosystem and infrastructure to run an R&D facility that is exclusively for a particular client. The whole intellectual prowess is controlled by Syngene. It is our scientists who conduct the research work,” says Biswas. Syngene has four such centres, for Baxter International, Amgen, Herbalife, and Bristol Myers Squibb, all in Bengaluru.
The Baxter centre is a 70,000 sq. ft. facility with 200 scientists who work on products and devices, as well as preclinical evaluation in parenteral nutrition and renal therapy for the Illinois-based company, which recently extended its contract till 2024. The 60,000 sq. ft. centre for Californiabased Amgen has 170 scientists working on a variety of projects for biotechnology and small molecule medicines. The smallest centre is a 3,200 sq. ft. facility for Herbalife that has eight scientists supporting formulation, product testing, sampling, and end-product development of the Los Angeles-based company’s nutrition products.
But easily the biggest of the quartet is the one for Bristol Myers Squibb (BMS). It is also the largest R&D centre outside the U.S. for BMS, which extended its contract with Syngene till 2030 this April. The extension will lead to a 40% increase in the 600 scientists already working exclusively at the 300,000 sq. ft. campus. There will be an additional 50,000 sq. ft. of space to continue the work on drug discovery research across chemistry, biology, drug metabolism, as well as medicinal research and development. Syngene has been working closely with BMS—which won 13 additional drug or formulation approvals last year—since 1998.
“This (the contract extension) shows that we are getting something right, if a client wants to extend their relationship for a whole decade, instead of a standard year,” says Hunt. He joined Syngene in 2015 after spending over a decade in leadership roles at Anglo-Swedish drugmaker AstraZeneca in Austria and India.
To meet the growing demand for research services among its clients, Syngene opened a new 52,000 sq. ft. R&D centre in Hyderabad in February last year. The facility—its first outside Bengaluru—has close to 200 scientists, which the company expects to increase to 600 in the next six months.
The focus on the dedicated R&D centres, however, is not at the cost of Syngene’s other businesses. Last year, Syngene was one of seven Indian companies contracted by Gilead Inc. to manufacture remdesivir, an antiviral drug used to treat Covid-19 patients. Syngene manufactures the API (active pharmaceutical ingredient, which gives a drug its efficacy), while it partnered with Sun Pharmaceutical to manufacture and distribute the drug.
In May, Syngene partnered with the U.S.-based Dyadic International to co-develop a Covid-19 vaccine candidate to protect against emerging variants of the Coronavirus. If successful, the vaccine—being developed using Dyadic’s patented C-1 cell protein production platform—can be manufactured at pace and in bulk, while keeping it affordable.
Speaking of affordability, Syngene is also working in the hugely important emerging field of cell and gene therapy, which COO Bhalgat estimates currently costs about $350,000 to $500,000 per treatment globally. “We are putting up a new facility to do antiviral manufacturing, which is a key component and a key contributor to the overall cost of cell and gene therapy. Today cell and gene therapy is a very expensive treatment, not really affordable for everybody in India. But to make it affordable, we are looking at what are the components that we can bring into India and make it possible here,” he says.
The company also opened an API manufacturing facility in Mangaluru in March 2020 at a cost of $100 million, of which nearly $80 million has been invested. The facility, set up to produce novel chemical entities rather than to do generic research, is certificated by the Indian health regulator, while it is in the process of getting U.S. and European approvals.
These efforts show the spread of Syngene’s businesses, says Vinita Bali, an independent director on the company’s board. “Syngene is a great example of a company that combines an entrepreneurial mindset with business models that have built delivery capability over a wide spectrum of services. It is also a company that rightfully prides itself on the scientific rigour it brings to customers with a little over 10% of its employees having doctoral degrees,” says Bali, who has been on the board since July 2017.
Syngene’s constant quest to diversify led to a partnership with Deerfield Discovery and Development Corporation (3DC), the drug discovery and development subsidiary of Deerfield Management Company, a healthcare investment firm, last November. Deerfield Management is an investment firm that backs innovative startups with outsized ambition, in the healthcare, pharmaceuticals, and biotechnology space, says Hunt. The five-year contract signed last November will see the two firms collaborating on advanced therapeutic discovery projects: from target validation to pharmacological proof of concept and preclinical evaluation
“For us to be a key partner in enabling their (Deerfield’s) mission to go with new companies to build new science is a good example of an India-based company like ours, starting to match the level of sophistication that you traditionally see in Europe and the U.S.,” says Hunt. The team at Syngene have firmly set its sights on the endgame: to become a global science company and not merely an Indian outsourced service provider that clients turn to in order to save some money.
Taking science from India to the world and repeating history once again; stockholders would be pleased with that.
Source : fortuneindia