Maintain base business revenue guidance of 15% in FY17: Suven

Suven Life Sciences has posted a 58.1 percent increase in net profit to Rs 32.57 crore for the first quarter ended June 30, 2016. In an interview to CNBC-TV18, Venkat Jasti, CEO of the company, said the Contract Research and Manufacturing Services (CRAMS) side of the business has contributed to the bottomline on the back of good product mix.He maintains base business revenue guidance of 15 percent in FY17.Below is the transcript of Venkat Jasti’s interview to Sonia Shenoy, Anuj Singhal and Latha Venkatesh on CNBC-TV18.Sonia: It has been a very good quarter for you. Tell us which segment has performed the best and where do you see growth come in from in the next couple of quarters?A: As usual, the segmental analysis on the Contract Research and Manufacturing Services (CRAMS) side of the business, where we have the good product mix that gives you a good bottomline. So, always if you are doing the Phase-III molecule supplies, Phase-II molecule supplies that gives you better margins. If the product mix is, early stage is supplied the values and the volumes are less. That is why there is a difference.Latha: So, how is it looking in the coming quarters? Will you be able to maintain this improvement in margins? Does it get better next quarter? As well, what is the revenue run-rate or earnings before interest, taxes, depreciation and amortisation (EBITDA) run-rate one can expect?A: EBITDA run-rate is as usual, around 30 percent plus always and it keeps changing quarter-on-quarter (Q-o-Q), but the year end, it will normalise. Giving a guidance, we do not have a visibility of more than three months ourselves, unlike generic players where you have a longer visibility. This sect of molecule, at the innovator level, gives us the business. Latha: You can be sure of Rs 40-45 crore this quarter?A: No, not really. At this time, we are maintaining the same thing. If we can maintain the same thing, that would be great. That is all we are expecting. So, not knowing the full year guidance, this quarter is also, status quo kind of a thing. It is not going to be that much different. As I said, Q-o-Q, it is very difficult to maintain, but year-on-year (Y-o-Y), it will normalise.Anuj: So, on the research and development (R&D) front, there was an EBIT loss of about Rs 14 crore. If you could tell us a bit more on that and the outlook on that front?A: R&D is an expense. That is what we write off every year. It is not a loss.Anuj: But is it going to go up? This quarter it was percent of your sales.A: Roughly, Rs 60 crore is the budget for the year. Because sometimes, it will be Rs 17 crore, Rs 15 crore, Rs 13 crore. It keeps changing depending on the expenses we incur, but at the end of the year, we plan to have around Rs 60-65 crore total spend.Sonia: Two comments that you had made earlier about the guidance, whether you hold on to that. Earlier, you had told us that you expect the base business revenues to grow by 15 percent in FY17. Do you hold on to that and also, you said that the total orders could touch about USD 15 million annually in FY17. Is that a target that you will still achieve?A: On the repeat business, USD 15 million, we hope to achieve that, but as of now, the visibility is not there. We have received about USD 5 million already, but we hope to receive those other orders before the end of the year. Yes, as of now, we are keeping the guidance as it is.Anuj: A bit on the latest news. On your Hyderabad unit, there was a successful US Food and Drug Administration (FDA) inspection. If you could give us some more details on that because you have 19 Drug Master File (DMF) and four Abbreviated New Drug Applications (ANDA) from this facility.A: Yes, this unit is fourth US FDA audit which was done in March and there are some observations as usual which are trivial in nature. And those things which we answered is all standard operating procedures (SOP) related and immediately we got the establishment inspection report (EIR). And we have filed, of course, 19 DMFs and ANDAs, but these are all long gestation projects as you could see. And another three more we will be filing within the next six months.Latha: Can you therefore guide for the FY18 earnings because of these what you call longer term permissions that you have got?A: These are accretive ANDAs because as you know, unlike big generic pharmaceuticals, we are doing the ANDAs and the niche molecules with less volumes where no competition will be there. Our aim is to have around USD 2 million net on each ANDA per year when it matures and goes into the market. That is the way it works.