Suven Life Science Q3 net up, expects R&D expenses to rise

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Suven Life Science Q3 net up, expects R&D expenses to rise

In an interview with CNBC-TV18, Venkat Jasti, Managing Director of Suven Life Sciences, spoke about the company’s results and his outlook for it.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Suven LifeSciences Q3 PAT up at Rs 71.96 lakh ALSO READ See latest News about Suven Life Scie See previous management interviews See what other Experts & Brokerages are saying about Suven Life Scie Suven Life Scie BSE | NSE 01/06/12 Are Mutual Funds betting on Suven Life Scie?

Suven Life Sciences has announced its third quarter results of FY10. Its profit after tax (PAT) went up to Rs 71.96 lakh versus Rs 27.49 lakh (YoY). Revenues fell 16.6% to Rs 28.9 crore from Rs 34.7 crore and operating profit margin improved to 14.4% versus 4.2%.

In an interview with CNBC-TV18, Venkat Jasti, Managing Director of Suven Life Sciences , spoke about the company's results and his outlook for it.

Here is a verbatim transcript of an exclusive interview with Venkat Jasti on CNBC-TV18. Also watch the accompanying video.

Q: Can you take us through your revenue growth which is flat and your profit numbers which looks good. How good this quarter was?

A: In this quarter we have a negative revenue growth which is about 17%. However, the profit after tax (PAT) is slightly up. We have spent a huge amount on the research and development (R&D). Up till the year, we have spent more than 24% increase in R&D cost and negative growth is about 10% on the nine months together. The main problem on the negative revenue growth is because of the contract research and manufacturing services (CRAMS) which is down by about 24%.

Q: You did Rs 26 crore last year in terms of CRAMS revenues. How much did you do this year and how much did you do in services?

A: 24% of CRAMS revenues down this year.

Q: Did you do around Rs 21 crore?

A: Yes, whereas the services is up by 56%. This is the difference which is from 15 crore to 24 crore versus 84 crore to 63 crore on the CRAMS side.

Q: You have been around for over two decades. It is about Rs 100 crore, we are talking about a 3% margin in a quarter like this, I guess what analysts would be wondering is when is the big uptick, when do you go into 200 crore, when do you go into 300 crore? Right now the margins could go either way.

A: The margins are upto 30%. If you see the EBITDA that is about 18% growth is there but we are spending more money on a drug discovery which is written off. The margins are very good.

There are two drivers for us. One is in the molecule side. We are hoping to have it in the next twelve-eighteen months and then that will give me huge amount of upside - there are three other molecules which are coming in the limelight soon.

The other thing is on the CRAMs side, we see the traction last year because of the meltdown a lot of postponement has taken place and is coming back in this year.

Q: Would you continue to spend this kind of money on R&D in the next three-five quarters or we will see a fall in the R&D and perhaps an uptick in the income and if that is the case, how much of it will come from those molecules you have discussed and how much more will come from CRAMS and can you give us some specific numbers there?

A: As far as R&D expenses goes, it will not come down as a matter of fact it will go up because the number of molecules are coming into the pipeline. As far as the amount that is going to come out of the molecules in the next 12-18 months, one molecule can bring about USD 40-50 million at this stage.