Syngene International, a subsidiary of Biocon, will launch initial public offer (IPO) for subscription to public on Monday, Jul. 27, 2015. The price band has been fixed between Rs 240 to Rs 250 a share. The issue will close on July 29.
Syngene is service provider for development of novel molecular entities (NMEs) or new drugs. In this process, it works with customers to conduct discovery, development and pilot manufacturing (scale-up, pre-clinical and clinical supplies) under one roof.
ICICIdirect has recommended 'Subscribe' to IPO of Syngene. Commenting on the investment rationale, the stock broker said ''Syngene is well poised to cash in on growing global pharma R&D outsourcing trend. Global pharmaceutical players are facing structural issues such as profit pressures arising from impending patent cliff, drying product pipeline and rising R&D costs. Surprisingly, however, the new product approvals from the USFDA are on the rise. Hence to maintain the cost balance at one end and maintain the new product introduction at the other, these players are inclined to outsource some of the R&D budget to CROs like Syngene.
Also, the need for greater flexibility has reduced the willingness of these players to incur large fixed costs associated with large scale R&D programmes. Outsourcing allows clients to convert a portion of their R&D budgets from a fixed to a variable cost, giving them greater flexibility to shift strategic and development priorities in response to market conditions. According to Frost & Sullivan estimates, R&D spend in the global pharma space was ~US$139 billion in 2014 whereas the CRO pie was ~US$44 billion (32%).
Historically, India has offered a significant cost advantage and skilled personnel. However, as global pharma outsource more R&D functions, outsourcing to India is increasingly seen as a strategic move to garner quality and value, rather than just a tactical decision to lower costs.
Due to its integrated service offerings coupled with consistent performance and high data integrity ethos, Syngene enjoys high recall value, which is reflected in the fact that eight out of top 10 clients have been engaged with the company for the past five years.
At the IPO price band of Rs 240-250, the stock is available at 27-29x on FY15 EPS of Rs 8.8.''
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