Venkat Jasti, chairman and chief executive officer, Suven Lifesciences says FY17 looks to be a more promising year and he hopes to log a revenue growth of 20 percent in the same year.
Below is the verbatim transcript of Venkat Jasti’s interview with Reema Tendulkar and Ekta Batra on CNBC-TV18.
Reema: When spoke to you post your Q2 earnings, you indicated that Q3 will be similar to Q2; you could expect some recovery and pickup only in the final March quarter. What could be the early expectations how FY17 would shape up for you?
A: As I was telling you before, Q3 will be same as Q2 but Q4 we see the revival because some of the molecules are moving from early phase to the next phase in the clinical development with the innovators. FY17 looks much promising from the way the customers are looking at their portfolio. Some of them are moving from phase two to phase three, that will give additional revenue generation. In addition to that, the three molecules for which we have supplied the pre-launch quantities, which are already launched now, we expect some post launch commercial quantities coming in starting 2017. So, we see 2017 to be much better and 2016 this year it will be same as last year.
Ekta: Can you give us more details about these three molecules where you have given pre-launch quantities already and that on commercial you are going to be providing more. How much are each of these molecules worth and how much do you think it could add in terms of sales for you?
A: Pre-launch time we have supplied around USD 30 million.
Ekta: Three molecules?
A: Yes, three molecules put together. We expect USD 15 million will be the run rate year-on-year (Y-o-Y) from now onwards until the end of the patent period; that will be the expectation.
Ekta: How much do you think you can make cumulatively from supplying post commercial launch of the three molecules?
A: Roughly USD 15 million a year.
Reema: What is your expectation of how much the R&D spend is going to be in the second half of the year as well as in FY17 and recently there were also some changes in the tax breaks for depreciation which the government is keen to implement. How will that affect a business like yours?
A: Even though the tax rate is giving benefit to us because even under the minimum alternate tax (MAT), 24-25 percent is our rate of taxes. So, it is not going to affect that much for us and not even a problem.
Reema: What about the R&D spend?
A: R&D spend will remain the same, in the Rs 50-60 crore range on a Y-o-Y basis.
Ekta: I wanted to bring up what is happening with regards to the US FDA with a lot of companies. You supply or you have new chemical entities that you work on and you also supply molecules to the US. Can you tell us for example for Suven Life Sciences how many facilities do you have currently, how many are US FDA approved and how do you manage to meet the expectations of the US FDA? Do you have your clients, whoever you supply to, come in and check the facilities on a regular basis and hence your compliance is much higher?
A: As you know since we go for the innovative molecules, new chemical entities, the regulations are much stricter not from the FDA perspective. It is mainly from the customer perspective. Customers do a lot of audits for us because it is the validation of the things they have to do using our intermediates or advanced intermediates. The FDA is only one of the requirements and we have out of the four facilities only one is US FDA approved. This has four times already re-audited; so far no problems. The help from our customers -- from the beginning very strong audit system by our customers keeps us abreast of the new developments; that way we will keep up to the FDA requirement also.
Ekta: When is your latest US FDA audit of the one facility that is approved?
A: We are expecting anytime soon because it is ready for renewal.
Reema: When you indicated that FY17 looks a lot more promising could you help us in understanding what it would mean in terms of a revenue growth as well as the likely margins that you will enjoy?
A: We expect revenue growth of about 20 percent at least and the margins will be in the range of plus 30 percent EBITDA margins, plus 20 percent net profit margins. This is after writing off the R&D expenses, not before, after writing it off otherwise it will be much higher.
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