Cohance Lifesciences Limited earnings call

Thank you very much. We will now begin the question-and-answer session. We will take our first question from the line of Amey Chalke from J M Financial Services. Please go ahead.

The f irst question I have on the pharma CDMO side within Suven which was registered around Rs. 200 crore revenue with double digit growth. Also, you have mentioned there that it is led by BD efforts and microenvironment. So, if management can elaborate more on this line for the BD efforts and the micro what had changed during the quarter? And also, if you can provide color within CDMO whether it has been led by development revenues or the commercial revenues?

While we try to respond to you, we caution against reading into a single quarter growth because we remain optimistic due to the overall sustained customer interest and a strong pipeline broadening the relationship; however, quarter growth should not be read beyond what is expected to. However, as we have also discussed in the previous calls, we have created additional bandwidth from the business development side because customers also wanted to have more touch points with them and the prospective engagement is happening and reading their pipeline and offering our services to them and deeper engagement levels with the customer is actually supporting us. This is first point. Second, from a macro standpoint, data is available in the public domain. In the first 9 months of current calendar year 24, there are 3000 plus small molecules have actually got introduced into the overall clinical pipeline, out of which close to around 52% belong to the small molecules and ADC and specialty chemicals. So, coupled with macro and BD, we are able to see the traction of the RFQs as well as the growth as well.

So, Mr. Prasada, for Suven specifically after new management have come in, are we seeing traction, which is now resulting into good growth, is that the right understanding?

Yes.

Is this growth basically led by our efforts since last one year, what we are putting, what I mean to say?

So, I would say the additional efforts which we have put in because some of the efforts which were kept by the previous management and coupled with our additional interventions have helped. That is the right way to read it.

And second question I have on the GLP side, what opportunities typically are we seeing from the innovator side for the GLP-1 product?

It is a very interesting evolving space to watch, two types, one is predominantly prepared based and there is also research that what we learned doing ourselves. Definitely, this space is going to be much more exciting going forward.

But in terms of Suven, what role could it play in this value chain?

At this stage, it is too early to comment, right now. You should allow us for some time till such time something gets materialized.

Thank you. We will take our next question from the line of Darshit Shah from Nirvana Capital. Please go ahead.

Sir, on this Suven pharma CDMO, as you alluded there were two readouts that are going to happen. So, both the readouts have happened and out of that one readout for Phase-3 is positive. Is the understanding correct?

That is right.

And even on the Cohance side, we have one Phase-3 approval by the US-FDA. So, in total we have two molecules that have cleared Phase-2, right?

Slight differentiation. In the Cohance product, it has moved from clinical to commercial, which means Phase-3 has actually been approved for launch of the product, meaning it is in the commercial phase. On the Suven side, launch will take time, but definitely, results are positive. The way to read here is the extent of uncertainties is minimized, predictability of the revenue coming in for midterm to long term is much higher.

What I understand is Cohance will have little early commercialization as compared to the Suven pharma CDMO molecule which has just cleared Phase-3?

That is right.

One more thing, just a suggestion, I think the results and the presentations come out pretty late. So, by the time we are going through the presentation, the call is already out. So, maybe you can schedule it a little later or the next day that would be helpful for shareholders like us to go through it and then attend the call.

Point very well noted, Darshit. Thank you.

Just one book keeping question, post this merger with Cohance, your 11 shares of Suven are to be issued for 295 shares of Cohance, what will be the share capital of Suven, numbers of share currently, it is Rs. 25.4 crore if I am not wrong?

Darshit, this is Himanshu. So, there would be Rs.38.11 shares would be outstanding.

Rs. 38.11 crore shares would be outstanding post-merger, right?

Yes.

And lastly on the Spec Chem side, we have not seen much revenues in either any growth in the first half and now, we are seeing now the segment to be bottoming out. So, when can we probably see some growth happening in this segment, maybe in the second-half or probably next year? What is our estimate?

As we understand, the complete bottom down has already happened and we don't expect any further bottom to happen. It is all done. At the same time, we also have started seeing the early signs of recovery. And definitely from a bottom number, full year of next year, which is CY of FY25, we expect the growth to come back to us. Not just only the chill product, there is also a discussion around the new products as well.

Including the newer products as well, you will see growth coming in from next calendar year?

Yes, in a sense, the accelerated growth is going to happen in FY25-FY26.

Thank you. Next question is from the line of Arjun Sindhwani from Goldman Sachs. Please go ahead.

Probably, this question has already been answered in the last set of questions. I just want to understand, on the Spec Chem, like just from the presentation, both the zero revenue is booked for this quarter for Spec Chem? And like just the second part of the question is that you mentioned like the recovery you started seeing in the segment. So, we are expecting some sort of pickup from the second quarter onwards or will we see most of it from next year?

So, yes, this quarter there is zero revenue for Spec Chem, AgChem and to the second part of your question, the H2, we do expect that there would be orders and that would get recorded in the H2 of the current year. And as Dr. Prasada mentioned in the previous question, we would be looking at a growth for FY26.

But the majority of growth is expected in FY26 is what then is probably that is the expectation from management because then H2 is when the sort of orders come in and it is sort of like SKU towards the end of the year then?

I would not conclude to that. I would say that there would be an execution in FY25. And they would also be over and above delivery in FY26 as well.

Thank you. Next question is from the line of Vivek Agarwal from Citigroup Global. Please go ahead.

Just my question is related to CDMO segment, so over the next 2 years, let us say, right, so as far as the growth is concerned, is it going to be completely dependent on the product where you are working or involved with the innovator, let us say from the clinical stage Phase-1, Phase-2, Phase-3 or in the recent time, have you added any product, which is already commercialized or the customer might be trying to diversify their supply chain or adding, let us say, another CDMO like you. So, how to look at or do you think this kind of opportunity, let us say, for the near term or are you in any kind of discussion with any of the innovators or any of the big pharma company like that?

Obviously, March ‘23, our Phase-3 products stands at 3 products and 6 intermediates. As of today, of September ‘24, we have 7 Phase-3 products covering 12 intermediates. Definitely, there is going to be a component of new product addition that is going to drive growth in the next midterm. Number two, we also have discussed and made strategic interventions of looking for potential laterals which also we are able to see some evidences. Combination of these two will definitely be going to drive the port.

So, have you added any potential lateral product that is already in market or already commercialized at this point of time?

We do have a few examples. We were able to create a few case studies in the last few quarters. Earlier, it was an intent, but we have evidence in our hand which is quite differently promising for us.

And over the next couple of years, can we see any big kind of laterals?

That is right.

Thank you. We will take our next question from the line of Ashish Thavkar from JM Asset Management Pvt. Ltd. Please go ahead.

Sir, I had a question on this entire BIOSECURE Act. So, as and when it becomes a law in the US, where do you see the first part of benefit coming in? Would it be at the early stage of clinics like a discovery stage or you feel it could immediately also flow to the customs on this side of the business?

So, I think in some ways, we are already seeing the traction. People are starting to talking to us about de-risking their supply chain. When the act becomes real, I think with the changes in the government and all that we don't know, but in general, we are seeing the traction already. People are talking to us. In my view, it is not about early stage or commercial. It is about China, right, so whatever work people have in China, they will try to migrate. So, we have some early-stage discussions going on, some large supply chain discussions going on, but keep in mind, there is time for people to make their decision. But we are excited about the potential that we see out there for us to help our customers, de -risk our supply chain business channel in China.

Yes, so our strategy, I think as we have said very clearly, right, it is organic as well as inorganic, you have seen the company has done inorganic acquisitions to add capabilities in the past. And I think that remains a key focus. We will continue to look at capabilities that are better to buy than built. So, that is a key part of our strategy and we will continue to evaluate those opportunities as they come across.

Just to add to Vivek, as mentioned, our commitment on platform technologies is completely unwavering. We are definitely poised for looking for such kind of opportunities to offer wider offerings to our customers.

By any chance, would you guys also be there on the GLP-1 side of the thing?

As I was just mentioning to some other question, when Amey has asked, it is too early for us to comment and definitely we will be more than happy to come back to you once we have pharma answer internally.

Just last question from my side, so you said second-half will be a recovery, but given the fact that first half saw a revenue decline, are you saying for the full year of FY25, we will see a growth?

Ashish, as we have mentioned that at the platform level for full FY25, we would be growing versus FY24.

Thank you. We will take our next question from the line of Darshit Shah from Nirvana Capital. Please go ahead.

Sir, I just want to ask on both these molecules which have kind of cleared Phase-3, can you let us know or throw some color on which therapeutic segments they are focused into and a little bit more on if you can highlight some opportunity or market size of where these drugs are going to be launched and all this.

I can only say because we are governed by the CDS that we have executed with our customers. Hope you can understand, but definitely, this is one of the most fastest - growing space in the therapeutic segments. It always stands for top 5 of the therapeutic segments for the last 10 years.

It is for the both the drugs, right?

You can draw the conclusion.

Yes, for both the products, right?

For one.

And sir, lastly, when we say that FY25 on a full year basis as a platform combined, we might see some growth happening. So, just to be clear, would it be on the revenue side or also on the profitability side?

The ship it would certainly be on the revenue side, but you do understand that profitability is a function of many elements. So, at this stage, once we have more visibility of the order pipeline, we will come back to you.

Sir, on the API side of the business, the kind of filings that we had appears that almost 50%-60% are niche in nature, so when do you see monetization of this pipeline starting?

It is continuously happening, Ashish and we are very happy to inform you that even first quarter and the second quarter half year basis, around 7%-8% of the growth has already been demonstrated. It is going to be better in the next half of the year. Monetization of these products is happening and the uniqueness of this asset is the pipeline is healthy. Last year, 5 validations have happened . This year, at least 7 -8 new products are going to be introduced in the platform, so that the midter m to long term is fully secured.

And lastly, sir, would you be open to considering international elements? Is there something which is on the card?

So, whatever our commitment on technology -led platform, if it means for us to go outside of this country, we will be open minded.

Thank you. We will take our next question from the line of Karthi Kayen from Suyash Advisors. Please go ahead.

Just one clarification, can you give some context on the appointment of Mr. Vinod Padikkal? What exactly does he bring to the table and some context, please?

I think Vinod as you would have read in the notice, Vinod is an appointee from Berhyanda perspective? So, he is a nominee of Berhyanda and he represents the Berhyanda by virtue of Platinum Poppy investment in Berhyanda.

Thank you. Ladies and gentlemen, that was the last question for today. I hand over the call to the management team for closing remarks. Over to you.

Thank you, operator. Thank you, everyone for giving your time and we look forward to interacting with you on next quarter's call. Thank you everyone. Please note: We have edited the language, made minor corrections, without changing much of the content, wherever appropriate, to bring better clarity.