Syngene International Limited (SYNGENE) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Syngene International Third Quarter FY 2021 Financial Results Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Divya Dhawan from EY. Thank you, and over to you, ma'am.

Thank you, Raymond, and good afternoon to everyone. Thank you for joining us on this call to discuss Syngene's third quarter and 9 months FY 2021 financial and business performance. We have on this call today, Mr. Jonathan Hunt, Syngene's Managing Director and Chief Executive Officer; Mr. Sibaji Biswas, Chief Financial Officer; and Mr. -- Dr. Mahesh Bhalgat, Chief Operating Officer. Other members of the executive team are also present on the call. After the opening remarks, Jonathan, Sibaji and the rest of the team will be happy to answer any questions you may have. Before we begin, I would like to caution that comments made during this conference call today will contain certain forward-looking statements and must be viewed in relation to the risks pertaining to the business. The safe harbor clause indicated in the investor presentation also applies to this conference call. The replay of this call will be available for the next few days after this call has ended, followed by the transcript. With this, I would now hand over to Mr. Jonathan Hunt for his opening remarks. Over to you, sir.

Good afternoon, and thank you for joining us on this earnings call to discuss Syngene's third quarter performance. So let me start with a comment on COVID-19 and how we've been managing our business in what are still, I think, uncertain times. At a company level, we're coping well and have managed to maintain near-normal levels of operations throughout the quarter while keeping our staff safe and healthy. India, in general, seems to be faring well compared to many countries around the world. And to date, we've not seen here in India a meaningful second wave. In contrast, many of our key client locations such as the U.S. and Europe are clearly experiencing a strong second wave, and in response to this, are going back to various stages of lockdown. These countries are facing both a recurrence of fresh cases as well as the emergence of a number of new strains of the COVID-19 virus. The positive news is that we're also seeing these countries commence large-scale public vaccination programs, and hope that these deliver as planned and the spread of the virus is contained. Taken together, I think we can be hopeful that widespread vaccination will curb the disease, but the short-term impact on client demand in the coming quarters as a result of further lockdowns and global travel restrictions, I think, it remains uncertain. Consequently, I think it's prudent that we take each quarter as it comes. Now that said, I expect to be in a better position to guide for the year ahead at full year results in April. By then, hopefully, the peak of the second wave in the U.S. and Europe would have passed and the world would have made progress on the rollout of the vaccine. Closer to home, in Bangalore, the news is better as the spread and the intensity of the COVID-19 virus appears to be receding. We're witnessing, I think, a gradual reopening of businesses and a return to more normalized day-to-day living as India also embarks on a major vaccination drive. As you're aware, right from the beginning, we took necessary steps to ensure our employees are safe at work, and we continue to maintain the same level of protocols at our campuses. Reflecting on the last 9 months, I feel satisfied that Syngene has not only handled the operational challenges effectively but in the process has built a stronger and more resilient organization. With that, let me then quickly give an overview of the quarter's financial performance before moving on to some of the operational highlights. So first, focusing on the financials. Third quarter performance is in line with our full year guidance, with revenue from operations growing 13% over the corresponding period last year. Over the past few months, we've continued to implement operational excellence initiatives using the array of productivity-enhancing tools like Lean, Six Sigma and Kaizen, which helped us to continuously improve our operational efficiency. This, together with good cost control measures, helped us sustain our profitability with EBITDA and PAT growing 11%, respectively. Now I'll let Sibaji give more details on the quarter's financials in a moment. So let me move on to the operational highlights. As we reported in the press release, third quarter performance was driven by overall strong performance, I think, from all of our divisions. Integrated Drug Discovery projects, as you know, are a strategic focus area for Syngene. Here, our ability to seamlessly integrate every stage of the discovery, development and manufacturing value chain saves time and creates significant value for clients. Some view it as an extension of their internal capabilities and resources and others really as an alternative to an in-house facility. These partnerships are characterized by a shared objective, which is to ensure the products reach the people who need them as quickly as possible through the optimization at every stage of research, development and preparation for regulatory approval. So in line with this, earlier in the quarter, we announced a collaboration with Deerfield Discovery and Development Corporation, or 3DC. This is the drug discovery and development subsidiary of the Deerfield Management Company. The collaboration brings together expertise of 3DC in identifying potential novel biological targets and Syngene's integrated drug discovery capability to conduct target validation, therapeutic discovery and preclinical development for both large and small molecules. And today, 3DC has moved quickly to award us 4 antibody IDD projects in the Oncology and Autoimmune segments to be executed during FY '22. So that relationship is off to a good start. In past quarters, we talked to you about our online events and our increasing use of social media to engage clients. We've also developed a virtual exhibition booth to allow us to have a presence at the major congresses around the world, albeit virtually, and these are taking place online all the time. We're also investing in building in our global sales force to stay closer to our customers. This will mean that we can maintain close relationships with our existing customers as well as introduce the company to new customers. And this is particularly important at a time when international travel may be constrained for some time to come, especially in the key markets of the U.S. and Europe. During the quarter, our scientists continued to contribute their expertise in the fight against COVID-19. We've commissioned a new RT-PCR testing facility which is approved by the NABL and the ICMR. And as you know, Syngene has been supporting the state government in conducting PCR tests. And so far, we're very proud to have tested more than 100,000 samples. Our scientists were also actively involved in supporting our clients with their COVID research projects. Finally, the expansion of the Hyderabad research facility with additional laboratory capacity reflects the growing business potential for our services. We're currently close to 175 scientists operating out of our Hyderabad facility. And with this expansion, we'll add an additional 90 scientists. So to sum up, I think the third quarter was a good quarter. We've got pretty good visibility on the final quarter of the year, looks to be a very busy one for us, expect to end the year in line with our guidance, there or thereabouts on revenue, pretty much spot on, maybe a notch ahead on profit. The projects coming in from the 3DC collaboration are adding to our IDD portfolio. So let me now hand over to Sibaji, and he'll give you some more specific details on the quarter's financials. Sibaji?

Yes. Thanks, Jonathan, and a very good afternoon to you all. I'm happy to take you through our results for the third quarter and the 9 months ending 31st December 2020. As Jonathan mentioned, we got into the year with the first quarter witnessing the full impact of the pandemic. We are hoping that the pandemic intensity would moderate as the year progressed. But looking at where we are today, the pandemic is still having a significant impact on our key client locations, and countries are moving to various stages of lockdown. With the prospects of vaccination programs on the horizon, we are seeing a light at the end of the tunnel, but we are certainly not there yet. Syngene responded very well to the pandemic and has been operating at near-normal levels since May -- mid-May 2020. With this background, let me now run you through the performance for the third quarter first and then I'll follow-up with the 9 months of the year. The performance for the quarter has been good, and we saw improved growth through the quarter, which is in line with our stated guidance. Revenue from the operations was at INR 585 crores for the quarter, which is up 13% over the same period last year and is an increase of 12% over quarter 2 of the current year. This reflects a strong recovery in the quarter and demonstrates the inherent strength in our business. The performance in this quarter is driven by overall good performance across the business and as we successfully delivered client projects despite pandemic intensity increasing in certain client markets. Margins for the quarter remained steady at 32%. We have observed 150 basis points improvement in direct cost with raw materials and power being at 27% of the revenue now versus 28.5% a year ago. The improvement is partly on account of change in our -- change in mix of our business and also due to the continued improvement in operating effectiveness in both areas of raw material and power cost. You may remember from our commentary in the last quarter that we have moved to renewable sources of power for our operations in our campus in Bangalore. This gives us better pricing, more certainty of supply and helps us drive not only cost control but also sustainability. Let me now take a moment to explain the movement in other cost lines in the P&L. During the quarter, staff costs increased by 16% to INR 176 crores as compared to INR 152 crores in the same period last year. The increase in headcount in our existing and new facilities that went live in the last 12 months has resulted in large part of this increase. The rest of the increase came from the amortization impact of the new ESOP plan rolled out on 1st June 2020, as previously explained. Turning now to other expenses, which comprises of selling expenses, IT cost and other general overheads, they are up 13% year-on-year to INR 79 crores compared to the same period last year. The rise in these expenses is primarily attributed to new ways of doing business during the COVID-19 times and an increase in cost associated with maintaining necessary health and safety protocol. The quarter also saw us complete our quality digitization program and move to a completely online process from a paper-based system. This will strengthen the quality function and will make a meaningful contribution to our goal of becoming any time audit ready. EBITDA was at INR 193 crores and the margin for the quarter was maintained at 32%, which is same as last year. Interest income was down this quarter to INR 17 crores versus INR 20 crores in the same period last year. Overall, we have seen softening of interest rates in the market, and this is reflected in lower interest rates. Depreciation stands at INR 70 crores, which is a 22% increase from INR 57 crores in the same period last year. The increase on a year-on-year basis is mainly owing to the investments in the Hyderabad facility, expansion at our main Bangalore campus and the commencement of the Mangalore commercial API plant in the end of the last financial year. During the quarter, we have expanded our Hyderabad facility by adding 50% more space to the current facility over there. The CapEx for this expansion has been fully booked and is reflected in the reported CapEx figures. Now moving to the impact of our currency hedges. The company recorded an exchange gain of INR 8 crores in the quarter versus a gain of INR 10 crores last year. This reflects the difference between forward rate versus the prevailing spot rate. The hedge rate was above INR 74 per USD 1 as against the spot rate of INR 73.5 per USD 1 during the quarter. The effective tax rate decreased marginally this quarter to 12.3% compared to 13.9% in the same period last year. The decline in the effective tax rate is predominantly due to the incremental depreciation impact in the tax books coming from the new units that have gone live, operating losses in the newly set up commercial API plant at Mangalore and the decline in the interest income during the period. A small part of the reduction also came from a reversal of a tax provision from early years, like the one explained in the previous quarter. Profit after tax was up 11% to INR 102 crores as compared to INR 92 crores in the same period last year, reflecting an overall strong performance for the quarter. Now moving to the 9-month results. Revenue from operations for the first 9 months of the year was at INR 1,526 crores, up 9% against the 9 months of the last year. I would like to point out over here that Syngene was a beneficiary of the Service Export Incentive Scheme till last year. This benefit is no longer available to us from the current financial year. Adjusted for this, our underlying revenue from operations grew around 12% year-on-year in the first 9 months. In a challenging year, while we saw a temporary suspension of operations in the early months of the year and almost complete suspension of business travel, we are happy to deliver an underlying growth of 12% in the business for the first 9 months. EBITDA for the first 9 months is up 6% to INR 503 crores, a reflection of the improved operating performance in the business. If we exclude other income, our business EBITDA has improved 10% year-on-year as we made significant changes to our operating models and kept cost down while benefiting from the increased scale of operations. On a 9-month basis, the increased gross block value of our fixed assets has resulted in close to 30% increase in depreciation expense to INR 205 crores versus INR 157 crores in the same period last year. Foreign exchange gain for the 9 months was at INR 12 crores versus INR 15 crores last year. Overall, for the first 9 months, our profit after tax before exceptional gain was at INR 244 crores, which is almost in line with the profit of INR 246 crores in the last year. Let us now move to some of the other items, such as CapEx and cash flow. Our investments for the first 9 months were at USD 53 million as a part of our ongoing CapEx program. Of this, $8 million pertains to the commercial API manufacturing facility, another USD 16 million was invested in Discovery Services, USD 15 million was invested in dedicated centers, USD 7 million in biologics manufacturing facility and a balance of USD 7 million in Development Services and other assets. With this capital expenditure, our fixed assets currently stand at USD 503 million. While our guidance of spending USD 550 million by end of March 2021 still holds, from the point of execution and therefore, accrual in the books of accounts, some part of this will spill over to the next year. It is important to note that our decision to operate multiple shifts in our business means that we have released dormant capacity, which gives us headroom to absorb additional business within the existing infrastructure. Hence, the slight delay in CapEx execution is not likely to have any impact on our ability to support growth of our business. We have deployed innovative digital tools to improve our sales and commercial effectiveness during these times of pandemic. We have also successfully executed client audits and regulatory inspections through digital means, which is helping business continuity even when clients and inspectors are unable to travel. However, in our industry, nothing is as effective as physical connect with the customers. The absence of business travel has been a challenge throughout the year, but we believe this is a temporary situation and as the vaccination program gets widely rolled out, we'll be able to get back to our accustomed level of commercial intensity. I would now like to reflect on the partnership with Deerfield Discovery and Development, also known as 3DC, a premier venture capital funding organization backing innovator companies in the life science space. This commercial partnership will allow us to fully utilize our Integrated Drug Discovery platform. And while I do not advise you to see this as an inflection point from the purpose of your financial model, it is important from the point of evolution of our drug discovery platform. This 3DC partnership puts us at the center of an arrangement between some of the world's best academic institutions, drug innovators and venture capital funds and hence, it's significant. In previous calls, we have discussed the impact of COVID-19 initiatives. To avoid any confusion, I would like to underline that our primary focus has been to help the scientific community battle this pandemic. While the revenues from these initiatives are difficult to predict, we do not expect any of them to fundamentally change the revenue and profit expectations for the year. Before I conclude, let me summarize the results for the company for this quarter. We are tracking in line with our guidance provided at the beginning of the year. Execution factors are in sharp focus in the fourth quarter under the shadow of the continuing pandemic as certain key markets get into a second wave. The commencement of large-scale vaccination programs in this market give us the confidence that the challenges are temporary and normalcy will return soon. Nonetheless, we expect to deliver on PAT guidance, and we remain optimistic about delivering the guidance on revenue growth. At present, we are operating at near-normal levels on all campuses, and the overall cost structure is in good shape with clear signs of efficiencies visible in many lines despite the additional expenditures related to functioning in times of pandemic. As an organization, we continue to make investments across our business, which also include transformative projects in the areas of digitization, automation and process improvement. The benefits of this should accrue in the coming years. Our liquidity position is strong, and our balance sheet continues to be healthy at the end of the period. With this, I complete my commentary on results. We can now open the floor for questions.

[Operator Instructions] The first question is from the line of Alankar Garude from Macquarie.

Sir, my first question is, is there any difference in the nature of conversations you are having with your clients, say, versus what it was in March, April and now? I mean, was there perhaps more urgency then versus what the situation is now? And also, are there, if at all if you could highlight, any structural changes in how clients are thinking about outsourcing, especially to Indian companies?

Yes. Good question. I mean, that's an obvious one. The conversations right at the beginning of last year would have been face-to-face and probably in their offices or in ours and most of the last year, we've all just become virtual and Zoom enabled. That's a sort of superficial answer to how things have changed. With the nature of what we're doing, hasn't really changed. I think one of the things that clients have really appreciated, and I think it's true, particularly with Syngene, we've operated at near 100%, if not 100% normal operations, for the second quarter and the third quarter. So we're there, and we can get work done and deliver for them. And in many cases, and I think this is something that will sort of play out and be more obvious in hindsight, our operations in India have been less impacted by COVID than most of our clients have been in the West, in Europe and the U.S. So we're now at a point where if we're talking to clients, we're in the office, we're operating at normal levels, many of them are still working from home or in lockdowns. So it's becoming a more amplified problem at the client end. Now in the context of outsourcing, that's a reinforcement of the resilience you can put into your operating models if you're a client by having outsourcing plus having your own facilities and doing it on a global basis. If anything, those companies that are operations are heavily centered on the U.S. and heavily centered on Europe have had a more challenging year than those that have had the luxury of having operations all the way around the world, including in India, and have had the ability to dial-up their operations in Asia, whether it be in China or India, to offset some of the limitations in operation that they're facing in the West. So net-net, I think this idea that the intrinsic lesson of COVID is don't do things globally, don't outsource, it's less resilient, actually, the lesson is probably the other way around. Organizations with sophisticated, globalized, well-connected supply chains and partnerships that have sort of a resilience have probably done better. Does that sort of make sense?

No, that's really very helpful, Jonathan. So maybe a small follow-up to that would be -- so do you expect this change to be structural? Do you expect this to persist even after COVID, say, maybe 1, 2 years down the line or that there is a scope that clients are looking at this purely from a near-term perspective?

No, I think it's more longer term. I think the sort of -- the fact that the whole world has done an experiment in work from home, digital working and found it to be pretty effective, it may be a bit frustrating and at times, and all of us have developed a sort of 8 hours on a Zoom's call can give you a headache. But I think it's proven to be particularly effective. So I think that actually shrinks the world, not makes it bigger because we're all that much more connected. The other bit that's maybe a little bit cultural, and I don't know whether you see it in your day-to-day work, people are a little bit more accessible, a little bit more informal. I think we're finding it in all aspects of our business. You can pick up the phone and talk to people, whereas previously we would have probably been battling with diaries and seeing when can we find a spot where we can both meet. So there's some positives coming out of this. Again, I think it's about thinking smartly, about resilience. And I know for many of our clients, as we come to the end of the year, they're looking back and saying, you delivered for us, even in a pandemic as a partner, we were back at work operating 100% and delivering for them. And at times, we were delivering when their local lockdown situation was making it much more difficult for them to get into the office or into the lab. So I think that's been a positive experience for many people.

That's helpful, Jonathan. My second question is to Sibaji-sir. Sir, can you quantify the cost pertaining to the Mangalore facility that is currently being reflected in the third quarter? And also if you could tell us if this would be approximately what percentage of the total OpEx for Mangalore once the plant is fully operational?

Yes. So I'll repeat what I said, I think, in the last call. Mangalore OpEx is diluting our margin by close to 2 percentage points, that at the OpEx level. And the depreciation, you can calculate because we have spent some $75 million and we are amortizing it over a period of 18 years.

And broadly, this would be what percentage of the total cost once -- maybe in FY '22, once the plant is fully operational, this would be roughly what percentage of the total cost related to Mangalore, the OpEx cost I'm asking?

Can you repeat the question? You want to understand what would be Mangalore OpEx as a percentage of total OpEx? Is that the question?

Sir, my question is, now the cost which is being attributed to Mangalore as of now, as of the third quarter, approximately what it would be as a percentage of the total OpEx for Mangalore once the plant is completely operational? So essentially, what part of the Mangalore cost is being reflected in the P&L as of now?

Participants, please stay connected. We seem to have lost the line for the management. Please stay connected while we reconnect the lines. Ladies and gentlemen, thank you for patiently holding your lines. We have the lines for the management reconnected. Over to you, sir.

Sir, do you want me to…

Do we still have Alankar on the call?

Yes, sir. You want me to repeat the question, sir?

No, no, I understand. If you're asking the -- saying what percentage of our OpEx would be from Mangalore, it will be close to 3% when the operations are fully there.

Okay. So actually, my question was slightly different, but maybe I can take it off-line, sir, no worries.

[Operator Instructions] Now the next question is from the line of Tarang from Old Bridge Capital.

Congratulations on your collaboration with 3DC. Just to get a better sense, what led 3DC to choose Syngene to collaborate with? And in terms of competitive intensity, is Syngene the only partner that 3DC has for its Integrated Drug Discovery projects? And how does it really benefit Syngene qualitatively in establishing credentials in this space and maybe from a medium- to long-term perspective, getting more business?

Yes. Good set of questions. Really, with -- over the last few years, you've seen us continue to deliver what we -- I think of, say, as functional services almost sort of point-and-shoot. The client is very clear on what they want. We're very good at delivering it. And we deliver components of the discovery sort of value chain that they then reintegrate back into all of the other work they do. So we maybe do some stand-alone chemistry or we do some biology, but we deliver those. And then if the client takes that data that's generated, they synthesize it, they think it through, they make decisions on it and they take that back into their own sort of research and development processes. So that's the core of what companies like ours have always done, and it's the core of the business. What's becoming alongside that, so it's not an either or. It is the opportunity for us to do -- drive more of the science, do more of the ideation, do more of the added value interpretation, think through the scientific problems and almost get paid for suggesting a solution rather than executing the solution. And that's really what the Integrated Drug Discovery platform does. It allows us essentially to bring together all of the disparate bits that we have in the company, but bring them together in a way that looks a little bit like a biotech company that works on behalf of other clients who own the IP and sort of come up with the original sort of scientific questions or challenges. But we do, in this model, increasingly more of that innovative ideation piece alongside delivering all of the work and the experimental data. So for me, it's a good indicator of the maturing in this just a bit of the sophistication of the type of science that we're capable of doing at Syngene. So to your question of why would 3DC choose us? Well, because we're pretty good. We've got a good track record. We've demonstrated over a number of years with a number of other clients that at -- the science that we can do within Syngene is indistinguishable and every bit as good as they can do in their own labs in the West or they could do with other collaborative partners. So we're scientifically capable. I think we also have some advantages around scale. So we can flex quickly and reach a scale that few other companies can, and particularly, few startup companies can do. So we can move from 0 to 50 to 100 to 200 scientists on a problem much quicker than many of our partners can, and that's important to them. And alongside scale, I think we've also got speed and cost efficiency. So we can make a dollar go further and faster than some of our clients can in their own laboratories or with other partnerships. Put all of those things together, and you've got sort of the recipe that makes sense for a company like 3DC to partner with us. They're free to deal with a whole bunch of other partners. In fact, part of this model is that they will cast their net very, very wide in academic relationships and in finding that very, very early stage good signs. I think if the model is successful, you'll find us positioned as their predominant and largest operational partner. So once we move things into formal projects, then we're very much set up to be central to that, and that's the spirit of the collaboration. But it's one of what I hope to be many. So we've pointed out not because I think it's going to be easy for you to put into your Excel model and that it won't be a hockey stick in next quarter or in the quarter after that's revenue. It will just be baked into the performance of our Discovery Services division. But it is significant in that it's a real symbol of us moving up the value chain and with what is a very premier partner. So that alone, I think, will help over the coming years, and I would say, it's years, not weeks and months, will open doors for many other people who will see if you're working with organizations like Deerfield and then traditionally, companies like Amgen and BMS and some of our other strategic partners, they reflect very well on the capabilities that we must have, and that opens doors. So a bit of a long answer, but I think you wanted more of a qualitative description than a specific set of bullet points.

Yes, for sure. Just a second question. If I look back maybe the last 3 years, and I understand why it's happened till now. But just -- so if I look at the last 3 years, I mean, the employee cost, right, your quarterly run rate has gone up from anywhere between INR 90 crores to INR 95 crores to anywhere between INR 160 crores to INR 165 crores, and it's visible in terms of your scientists and so on and so forth. But how should we see this going forward now? And consequently, how should we see the revenues coming in from this because we haven't seen a similar trajectory on the top line?

Yes. Some of that's about building capability to enable future growth. Again, I think our business has grown over quite long cycles. It's not a quarter-to-quarter sprint. So if we're building these deep-seated capabilities, you could invest for many, many quarters before you start to see a return on that. But again, on the people cost bit, there's a couple of things that's going there. In one element of our business, particularly in those where we've got FTE contracts, hiring new people is actually the unit of growth. So long may that continue, and I hope that our headcount numbers continue to grow as they have done in recent years because they're a direct revenue generator in terms of how that business model works. The thing that I was just talking about with the Integrated Drug Discovery, that sort of platform and then also into our development and manufacturing, there it's more about maturing capability, bringing in people with more seasoned industry veterans, bringing in people with real innovative skills. So it's smaller numbers of people, but they are sort of in some ways a more selective sort of resource. But again, I don't really see people as a cost. I see them as an asset. We're a science innovation business. We're fundamentally based on intellectual capital. And therefore, investing in people is the first and probably primary investment that we make. So I don't necessarily see it as a cost line but as an asset development.

Okay. And should we see this trend continue the way it has in the past?

Yes. Well, what I'm sort of hinting at is I hope so on the basis that, that's a unit of growth. As for particular guidance, somebody will ask the question, they do every third quarter. So the answer to the question, which you didn't ask but is implied is, what's the outlook for the next financial year? We'll cover that as we do every year in April at our full year results. It's a little bit too early in the year for me to be giving you guidance in terms of revenue costs and other things for next year. And then I also think, given that we're in the pandemic situation, it's great that the vaccines are starting to roll out, but that's an enormous global vaccination program. It will take I would imagine most of the coming year for it to get to scale on a global basis. So I think it would be very wise to look at these things quarter-by-quarter. And that was partly what I was alluding to in my introductory comments. Fourth quarter for us looks -- we've got very good visibility. We've got to execute. We're on track to hit our guidance pretty much for the year. For next year, I'll give you guidance in April. But we really need to see what the impact from the second wave in Europe and the U.S. is. And that's not flagging a warning. It's just saying it's clearly unknowable by anybody at the moment what those implications are.

The next question is from the line of Charulata Gaidhani from Dalal & Broacha Stock Broking.

My question pertains to the order book currently. How do you see the order book moving over the next 4 quarters?

Okay. Again, I think I just covered that in the last question, which is -- isn't that just another form of what's the financial guidance for the year ahead. Very happy to talk to you about that in April. In general, I think there's good demand in the marketplace across all of the sort of divisional areas that we work in, whether it's Discovery Services, development, manufacturing or the dedicated centers. The only one that I think you could -- if you read some of the big pharma companies, if you read their statements, there's a little bit of softness in the clinical trial starting bit. Now that's not a big part of our business. We're not a clinical CRO. But if you think about it, most of the world's hospitals are running over 100% capacity coping with COVID. So there's a general slowness around the whole of the industry globally on starting of new clinical trials. So any businesses that are linked to that may have a bit of a slower start to the year, but then I suspect quite a strong catch up as we come out of COVID-19 towards the latter part of this calendar year and things start to normalize, if that's how it plays out. So I think it probably normalizes over the year ahead. But it might be a little bit slow, followed by quite an accelerated ramp-up later. Our only exposure to that, as I said, it's not massive, but a little bit in our clinical stage manufacturing services that sit within our development business. Beyond that, I think it's too soon to call anything out. Happy to talk to you more at the full year results in April.