Macquarie Equity Research

18 February 2025

Healthcare

Pharma, Biotech & Life Sciences

Indian CRDMO India
Going from strength to strength
Tony
Key Points Dr. Kunal
Dhamesha, MBBS Ren
• India's contract research, development, and manufacturing (CRDMO)
sector is benefiting from secular growth as well as regulatory tailwinds.
• We initiate on Divi's Labs, Suven Pharma, Bluejet Healthcare, and Jun
Choi
Syngene with Outperform ratings.
• Within our regional CDMO coverage of 11 companies, we prefer Indian
and Korean CDMOs with Divi's Labs and Samsung Bio as top picks. Figure 1 - Our Indian CDMO coverage
Bloomberg Mcap
Company CMP (Rs) Rating TP (Rs) TSR
code (Rs bn)

Divis labs DIVI IN 5,924 1,563 OP 7,400 25%

Regional CDMO coverage take: The Asia-Pacific pharmaceutical CDMO Suven Pharma SUVENPHA IN 1,119 280 OP 1,500 35%

sector, valued at over US$50bn in 2023, is projected to deliver an ~11% Syngene SYNG IN 701 280 OP 835 19%

CAGR until 2028, according to a report by market research firm Frost Blue Jet Healthcare BLUEJET IN 754 134 OP 1,000 33%

and Sullivan. India CDMOs are emerging as leaders in small molecule Source: Bloomberg, Macquarie Research, February 2025
development, offering cost-competitive solutions and strong regulatory *Closing price as of 17 Feb 2025
compliance, with significant growth in request for proposals (RFPs). South
Korea, led by Samsung Biologics, dominates the large molecule CDMO Figure 2 - Indian CDMOs to gain
market share
market, particularly in monoclonal antibodies, with plans to expand its
bioreactor capacity significantly by 2032. Chinese CDMOs, once preferred Indian CDMO market share 5%

for their speed and track record, face challenges due to the US Biosecure
Act, leading to a shift of projects to alternative suppliers, slowing their 4%

growth. 3%

Secular and regulatory growth tailwinds: The India CRDMO sector is

at an inflection point, driven by increased pharmaceutical outsourcing
due to drug pricing pressures and geopolitical factors, prompting a global
restructuring of the pharmaceutical supply chain. As per the consultancy
report, the Indian CRDMO industry, currently valued at ~US$7bn, is set to
2018 2023 2028e
deliver a 14% CAGR to ~US$14bn by 2028. Furthermore, we believe that
regulatory tailwinds, such as the US Biosecure Act, could accelerate this Source: Frost & Sullivan, February 2025
growth to a high-teens CAGR, suggesting an industry size of ~US$22bn by
2030E. Figure 3 - Indian CDMOs offer ~2x
growth and ROIC vs regional and
Preference for product-led high-tech CDMOs: Within the listed CRDMO global peers
universe in India, Divi's Laboratories and Suven Pharma stand out as
30%
product-led CDMOs focusing on advanced technologies such as antibody-
drug conjugates (ADCs), peptides and oligonucleotides. We project a faster 25%

top-line CAGR of 20-25% for these product-led CDMOs vs a mid-teens 20%

CAGR for services-led Syngene. 15%

Improvement in profitability and return ratios: We expect a ~1,000bp 10%

improvement in EBITDA margins, and 1.5-2x improvement in ROICs for our

5%
Indian CDMO coverage by FY30E. Our coverage companies have added a
0%
median of 42% to their gross asset base (organic and inorganic) over the Indian Regional Global Indian Regional Global

past two years, which has compressed profitability and return ratios. CDMOs Peers Peers CDMOs Peers Peers

EBITDA CAGR ROIC

Valuations optically high, fundamentally low: India CDMO companies Source: Bloomberg, Macquarie Research, February 2025
trade at an average 2-year forward EV/EBITDA of 20x, compared to 16x
for regional and 15x for global peers. We believe India CDMOs' premium
valuation is justified due as they offer a ~2x EBITDA growth CAGR (next
three years) and ~2x ROIC as compared to global and regional peers. Our
relative preference is Divi's Labs > Suven Pharma > Blue Jet Healthcare >
Syngene.

For important disclosures and analyst certification, refer to page 98 or go to www.macquarie.com/research/disclosures. 1

Macquarie Equity Research Indian CRDMO

Our Regional CDMO coverage

Executive summary
The Asia-Pacific pharmaceutical CDMO sector is expanding rapidly, with a market size of US$50+bn in 2023 per Frost and
Sullivan, and set to deliver an ~11% CAGR until 2028. This growth is fuelled by cost-effective manufacturing, rising outsourcing
trends, and the increasing shift away from China due to geopolitical risks. China remains the largest player, but India and
South Korea are emerging as dominant forces in small molecules and biologics, respectively. Samsung Biologics leads in large
molecule CDMO services, while India companies are the preferred choice for small molecule APIs and intermediates.
Recent US regulatory shifts such as the Inflation Reduction Act (IRA) and the Biosecure Act are accelerating outsourcing
diversification. Drug-pricing reforms in the Inflation Reduction Act (IRA) are increasing cost pressures on US pharma
companies, leading to higher demand for CDMO services. Meanwhile, the US Biosecure Act (stalled for now but its impact
is visible) is pushing US firms away from Chinese suppliers due to national security concerns, benefiting Indian and Korean
CDMOs as alternative supply-chain partners. This shift aligns with the broader "China+1" strategy, which is driving pharma
companies to establish a more diversified and resilient global supply network.
India CDMOs are becoming the preferred choice for small molecule development, driven by cost competitiveness (~30-40%
lower than Western CDMOs), strong regulatory compliance (FDA, EMA approvals), and expertise in active pharmaceutical
ingredients (APIs), Highly potent active pharmaceutical ingredients (HPAPIs), and specialty chemicals. Additionally, India’s
strong track record in generic drugs and API supply positions it as a natural alternative to China, particularly in light of supply-
chain diversification efforts by global pharma firms. India CDMO companies have witnessed strong RFP growth of 100%+ in
the past year owing to pending regulatory changes and geopolitical uncertainty. Hence, we initiate with Outperform ratings on
Indian CDMOs, with our pecking order being Divi's Labs > Suven Pharma > Blue Jet Healthcare > Syngene.
On the large molecule CDMO front, South Korea dominates, with Samsung Biologics leading the global biologics market. The
company boasts a bioreactor capacity exceeding 600 kL and has plans to more than double this capacity to ~1.3 million litres
by 2032. The company has been a primary beneficiary of mix shift away from China in large molecule CDMO segment owing
to its established track record and technological leadership, particularly in the monoclonal antibody (mAB) segment. This
is evident from quick ramp up of its largest plant yet, Plant 4, with a reactor capacity of 240kL. Reflecting growing demand
during the Plant 4 ramp-up, the company has accelerated the timeline for Plant 5, originally scheduled for September 2025,
now targeting operations in April 2025. At this pace, the initiation of Plant 6 construction is also expected within FY25.
Leveraging its expertise in mAB, Samsung Biologics is set to launch its Antibody-Drug Conjugate (ADC) CDMO services in
February 2025, beginning with fill-finish services. This initiative is anticipated to pave the way for new growth opportunities.
Once the preferred CDMO suppliers due to their speed and track record, the Chinese CDMOs are finding it increasingly
challenging to obtain new orders after the introduction of the US Biosecure legislation in Dec 2023/Jan 2024, especially for
products close to or at the commercial stages. WuXi AppTec and WuXi Bio have acknowledged the headwind and sold their
cell & gene therapy and vaccine production facilities in the US and Europe to private equity firms and clients as a result. As it
takes 2-3 years to transfer existing manufacturing processes to new suppliers, we expect projects for drugs losing exclusivity
prior to 2032 to stay put. However, one should start to see projects whose loss of exclusivities (LOE) go beyond 2032 being
transferred out to alternative suppliers outside of China in 2026-28. The Chinese CDMOs will not vanish, but they are no
longer the first choice of their clients, and their growth rates will slow, if not go into reverse.

Figure 4 - S.Bio's order momentum and smooth Figure 5 - RFPs have grown multi-fold according to
capacity ramp-up confirms its position as a top Suven Pharma
Biologics CDMO
RFP growth
(US$ bn) (kL) 2.3x
2.2x
18 Total contract value (cumulative) 700
2.0x
16 Capacity 600
14
500
12
10 400
1.0x 1.0x 1.0x
8 300
6
200
4
100
2
0 0
2019 2020 2021 2022 2023 2024 FY23 FY24 Q1FY24 Q1FY25 H1FY24 H1FY25

Source: Company data, Macquarie Research, February 2025 Source: Company reports, Macquarie Research, February 2025

18 February 2025 2
Macquarie Equity Research Indian CRDMO

Indian CRDMO industry is Indian CRDMO: The fastest-growing CRDMO sector globally
the fastest-growing CRDMO
industry globally.
Indian pharma contract research, development, and manufacturing organisation (CRDMO)
companies are at an inflection point due to the secular growth tailwind of increasing
outsourcing by innovator pharma companies, and the increasing trend of supply chain de-
risking in view of regulatory changes such as the Inflation Reduction Act (IRA) and the US
Biosecure Act. Market research firm Frost & Sullivan projects the Indian CRDMO industry
to reach US$14bn+ by 2028, representing ~14% CAGR. Commercial manufacturing is the
biggest segment within CRDMO, accounting for 55%+ of the sector and the consultancy
expects it to grow at a 14% CAGR through 2028E. The consultancy expects smaller
segments of the industry to grow the fastest, with pre-clinical development at a CAGR of
~16% in the period, followed by Clinical, Development, and Supplies at ~15%, and Discovery
Services at ~12%.
Frost & Sullivan attribute recent growth to increased collaborations and partnerships. Indian
CRDMO companies handled large volume contracts from innovator pharma companies
during the Covid-19 pandemic, establishing themselves as reliable supply partners at lower
costs. Most Indian CRDMO companies currently work with at least 10 large-cap innovator
pharma companies on clinical or commercial projects. (Link to F&S report.)

Figure 6 - F&S forecasts the India CRDMO Industry to have a 14% CAGR,
2023-2028F (in US$bn)

16

14
14
12
13
10 11
8 9
8
6 7
6
4 6
5
4 4
2

0
2018 2019 2020 2021 2022 2023 2024F 2025F 2026F 2027F 2028F

Total

Source: Frost & Sullivan report, February 2025

Figure 7 - Global CRDMO industry in 2023 Figure 8 - Growth rate of global CRDMO industry
by region, 2018-2028F

APAC (ex- RoW, 7%

India, China),
10% 20%

India, 3% 14%
North 13%
11% 11% 11%
America, 42% 10%
9%
7%
China, 13% 5%

North America Europe APAC Overall China India

CAGR (2018-2023) CAGR (2023-2028F)

Europe, 25%
Source: Frost & Sullivan, February 2025
Source: Frost & Sullivan, February 2025

18 February 2025 3
Macquarie Equity Research Indian CRDMO

Figure 9 - India CRDMO industry by function, Figure 10 - Growth rate of India CRDMO by
2018-2028F (in USD bn) function, 2023-2028F
16

14 0.8 16%
15%
0.6 14% 14% 14%
12 13% 12% 13%
12%
10%
10 5.0

8
0.5
0.3
6
0.3 2.5
4 0.2 7.7
1.3
2 4.0 Discovery Preclinical Clinical Commercial Overall
2.3
Development Devlopment Manufacturing CRDMO
0 and Supplies
2018 2023 2028F
Commercial Manufacturing Clinical Development CAGR (2018-2023) CAGR (2023-2028F)
Preclinical Development Discovery

Source: Frost & Sullivan, February 2025 Source: Frost & Sullivan, February 2025

We expect India's share of CDMO driven export growth to increase India's share in global pharma trade
trade in pharma exports to
expand with strong growth
India's pharmaceutical exports have experienced a compound annual growth rate (CAGR)
from the CDMO sector.
of 9% over the past decade (2011-2022). Despite this growth, the country's share of the
global pharmaceutical trade has only modestly increased by ~50bps, reaching 2.3% in 2022
compared to 1.8% in 2011. This limited increase is primarily due to India's export reliance
on low-value generics. Consequently, while drugs manufactured in India constitute ~20% of
global volumes, they account for only 2.3% of the global pharmaceutical trade. However, we
anticipate that robust growth in the CDMO sector will significantly enhance India's share of
pharmaceutical exports through increased value accretion.

Figure 11 - India's pharmaceutical exports and its share in global pharma trade

25 3.0%

2.5%
20

2.0%
15
1.5%
10
1.0%

5
0.5%

0 0.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

India pharmaceutical exports India % share

Source: WTO, February 2025

18 February 2025 4
Macquarie Equity Research Indian CRDMO

Regulatory changes such as Regulatory changes could accelerate growth

the US Biosecure act could
accelerate Indian CRDMO
The Inflation Reduction Act has many tenets to reduce drug pricing in the US. We think
industry growth rate to high-
that the legislation will increase pressure on pharmaceutical companies to reduce costs,
teens CAGR, suggesting a
leading to a greater reliance on CDMOs. Although the US Biosecure Act did not pass in the
market size of US$22bn
previous administration, it has still had notable influence in the industry. Many US-based
pharma companies are looking to de-risk their supply chains by diversifying their outsourced
activities out of China.
In a bull-case scenario, we project the Indian CRDMO sector could more than triple, reaching
approximately US$22 billion by 2030, up from around US$7 billion in 2023. This expectation
is based on 1) Frost and Sullivan forecasts a CAGR of ~14% to 2028; and 2) and additional
growth driven by supply chain de-risking.
We estimate implementation of the US Biosecure Act could divert ~US$17bn of
opportunities from Chinese CDMO companies to other regions over the next 3-5 years.
Assuming 25% of this incremental business shifts to Indian CDMOs, it could add about US
$4bn in the medium term, boosting the market to ~US$22bn in the bull case scenario,
compared to US$18bn in the base case scenario. Our analysis of Bloomberg consensus for
leading Chinese CDMO companies suggests that consensus has already revised down their
revenue expectations by ~US$16bn for the next three years (cumulative).

Figure 12 - Indian CRDMO market could grow to Figure 13 - Consensus has revised down key listed
~US$22bn by FY30e in bull case scenario China CDMO companies' revenue by ~US$13bn
India CRDMO market 2023 (US$bn) 7
Consensus revenue est. revisions (2025e-27e
Indian CRDMO - Normalized growth run rate through 2030e 14% cumulative, US$bn)
Indian CRDMO est market size 2030e (US$bn) - Base case 18
-
China CRDMO market 2023 (US$bn) 25 (1)
China - Normalised growth run rate through 2030e 11% (2)
China CRDMO est market size 2030e (US$bn) 52 (3)

China - estimated growth run rate through 2030e due to Biosecure impact 4-6% (4)

China CRDMO est market size 2030e (US$bn) post Biosecure impact 35 (5)

(6) Cumulative consensus revenue downward

Additional opportunity for Non-chinese CRDMO companies (US$bn) 17
revision of ~US$13bn
Indian CRDMO market share in the additional opportunity 25% (7)

Additional growth for Indian CRDMO (US$bn) 4 (8)

Indian CRDMO market in 2030e (US$bn) - Bull case 22 (9)

Wuxi App-tec Wuxi Bio Asymchem Pharmaron Tigermed
Indian CRDMO market growth through 2030e 18%

Source: Macquarie Research, February 2025 Source: Bloomberg, Macquarie Research, February 2025

18 February 2025 5
Macquarie Equity Research Indian CRDMO

The US Biosecure act US Biosecure Bill stalls for now, but impact still shapes outsourcing strategy
prevents government funded
pharma companies from
Although the US Biosecure Act did not pass in the last administration, its influence on
contracting with certain
the industry is significant. The Act, in its current form, restricts government agencies and
Chinese CDMO companies.
federally funded companies from contracting with certain biotech/CDMO firms. This initially
suggested a limited impact, affecting only federally funded entities. However, the actual
effect is broader due to the extensive funding from agencies like the National Institutes
of Health (NIH) and the Department of Defence, to university researchers and small
biotech companies. These entities develop new molecules and therapies that are often
commercialised by medium-to-large pharmaceutical companies.
Despite the lack of clear guidance from the Biosecure Act on such inventions, medium-to-
large pharmaceutical companies are set to minimise regulatory risks in their supply chains.
Consequently, they are reducing reliance on Chinese CDMO suppliers. A recent Wall Street
Journal article suggests both companies and venture capital funds are actively working to
de-risk supply chains away from Chinese players.
Additionally, US biotech companies are likely to be very cautious about contracting with
other Chinese CDMO firms because the Biosecure Act mandated timely updates to the list
of companies of concern.

Figure 14 - US-based companies account for most Figure 15 - US NIH annual grants from FY2015 to
of the R&D pipeline FY2023

40 70,000
C and S America/ Africa, 1%
Canada, 4% 35
China, 13% 60,000
30
50,000
25
France, 3% 40,000
Germany, 2% USA, 43% 20
30,000
Japan, 3% 15
20,000
10
Rest of Asia- 10,000
5
Pacific, 11%
0 0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Rest of UK, 5% NIH research funds Number of research
Europe, 15% awarded (in USD bn) grants awarded (RHS)

Source: Citeline, February 2025 Source: United For Medical Research, February 2025

Small and biotech companies Small and biotech firms account for large share of NCE approvals by US FDA
account for ~50% of New
drug approval from the US
In 2023, biotech and small pharmaceutical companies were responsible for about 22% of
FDA
global research and development (R&D) expenditure. Despite this relatively modest share of
R&D spending, these companies achieved a significant impact by securing 50% of the new
chemical entity (NCE) approvals granted by the United States Food and Drug Administration
(US FDA). This trend is not a recent development; historical data dating back to 2018
consistently shows a similar pattern, indicating the high efficiency and innovation capacity of
biotech and small pharma firms.
A crucial factor contributing to the success of these companies is the financial support they
receive from federal grants and loans provided by agencies such as the National Institutes
of Health (NIH). These funds are instrumental in advancing their R&D efforts and bringing
new therapies and drugs to market. However, given the geopolitical climate and increasing
scrutiny on supply chain dependencies, we anticipate many of these biotech and small
pharma companies will need to reduce their reliance on Chinese CDMOs. We think this shift
is likely driven by the need to diversify supply chains and mitigate risks associated with
geopolitical tensions and regulatory pressures. By moving away from Chinese CDMOs, these
companies can ensure greater security and stability in their production processes, aligning
with broader strategic objectives and compliance requirements.

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Macquarie Equity Research Indian CRDMO

Figure 16 - Small and biotech companies R&D Figure 17 - FDA Approved NCE by Originator from
spend vs large pharma R&D spend 2018-2028F

350 70

300 69 60
63
58
50 53 14
250 48 10 13 15 50
10 10 11
49 49 12 9
49 46 46 47
200 43 10 12 11 42 44 40 9
38 40 15
9 9 11 8 12 14
34 38 188 191 193 195 8 9 15
150 35 177 184 30 11 13
30 31
151 156 159 10 8 8
14 10 10 9
137 140 4 7
100 20 5 5 6
7 8
2 9 5
5
50 10 5 19 20 22
15 15 17 18
11 13 14
7
0 0
2018 2020 2022 2024F 2026F 2028F 2018 2019 2020 2021 2022 2023 2024F2025F2026F2027F2028F
Large Mid-Size Small Biotech Large Mid-Size Small Biotech

Source: Frost & Sullivan, February 2025 Source: Frost & Sullivan, February 2025

Indian CDMOs well-positioned to capture market share

We forecast India CDMOs' market share in the global CDMO industry to increase to ~5%
by 2028e from current ~3.7% in 2023. Market share gain will be driven by significant cost
advantages due to lower wage costs, robust infrastructure, and strong talent pool. India
supplies ~47% of the US generic drug demand and ~25% of all UK medicines, supported by
extensive regulatory experience and the highest number of US-FDA-approved plants outside
the US. We believe favourable geopolitical dynamics, ease of doing business, and strong IP
protection laws further enhance India's position as a preferred partner for pharmaceutical
R&D and manufacturing. Hence, we expect Indian CDMOs to gain market share in the global
CRDMO industry.

Figure 18 - Indian CDMOs offer meaningful cost Figure 19 - Indian CDMOs are expected to gain
advantage market share
100%
Proportion of Costs, % Indian CDMO market share 5%

4%
70%
3%
60%

50%

40%

USA EUS Rest of EU APAC India 2018 2023 2028e

Source: Frost & Sullivan, February 2025 Source: Frost & Sullivan, February 2025

Our Indian coverage Coverage companies to grow even faster

companies are well
positioned to gain market
We expect our covered CDMO companies, Divi's Labs, Suven, Bluejet, and Syngene to
share.
outperform industry growth due to their superior scale, reliability and long-standing
customer relationships. Most companies under our coverage are witnessing higher 1.5-2x
RFP (request for proposals) and are working on complex products such as ADCs and GLP-1s.
We build solid top-line CAGRs ranging from mid-teens to mid-twenties for our coverage
companies primarily driven by higher growth in their innovator focused business. We believe
product focused CDMOs with high technology focus will witness faster growth.

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Macquarie Equity Research Indian CRDMO

Figure 20 - Number of clients of top 20 global Figure 21 - RFPs have grown multifold according to
pharma companies Suven pharma

RFP growth
16 2.3x
2.2x
14 2.0x

12

10

8
1.0x 1.0x 1.0x
6

0
Divi's Lab Suven Pharma Syngene Blue Jet
Healthcare FY23 FY24 Q1FY24 Q1FY25 H1FY24 H1FY25

Source: Company Reports, Macquarie Research, February 2025 Source: Company reports, Macquarie Research, February 2025

We segment the Indian Indian CDMO segmentation

CRDMO industry based on
Product vs service focus and
The CRDMO industry includes three key players: CRDMOs, CROs, and CDMOs.
high-tech vs low tech.
• CRDMOs offer integrated, end-to-end services across the entire drug discovery,
development, and manufacturing lifecycle. They provide cost-effective, customised
solutions, helping pharmaceutical innovators accelerate drug development, reduce costs,
and access specialised capabilities not available in-house.
• CROs specialise in scientific functions for discovery, preclinical, and clinical stages of
pharmaceutical R&D. CDMOs provide commercialization manufacturing and process/
formulation development (CMC services) for preclinical and clinical stages.
• CDMOs provide drug development and commercial manufacturing services to their
customers. Historically, pharma has often concentrated on selling high-volume products
and used contracts with CDMOs to leverage increased manufacturing capacity.

While most companies try to position themselves as integrated CRDMO players,

their revenue is skewed towards one side of the spectrum either research (service) or
manufacturing (product). Within Indian CRDMO companies, Syngene has the highest
exposure to research services while Divi's Labs and Suven Pharma have the highest exposure
to product manufacturing, and Neuland, Piramal, and Laurus are in between.
We categorise Indian Contract Development and Manufacturing Organisations (CDMOs)
based on two key variables: technology intensity and the focus on products or services.
Within our analysis, Suven Pharmaceuticals and Divi's Laboratories are identified as primarily
product-focused CDMOs, engaging in projects that involve advanced technologies such as
Antibody-Drug Conjugates (ADC) and Glucagon-Like Peptide-1 (GLP-1). Conversely, Syngene
International derives about 60% of its revenue from its service-oriented business model. We
expect product-led, high-tech CDMOs to grow faster and offer higher peak profitability.

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Macquarie Equity Research Indian CRDMO

Suven and Divi's Labs are Figure 22 - Segmentation of listed CDMO players
product focused high-tech
CDMOs within our coverage.

Source: Company reports, Macquarie Research, February 2025

Product focused CDMOs Product focused CDMOs to grow faster

to grow faster than service
focused.
Within our coverage, we anticipate that product-focused, high-tech CDMOs will experience
accelerated growth due to the expansion of the addressable market, higher switching costs
for customers, and significant entry barriers for new entrants. We project a top-line CAGR
over FY24-FY30 in the mid-20% area for Suven (pro forma for the Cohance merger) and
Bluejet Healthcare, the low 20% area for Divi's Laboratories, and the mid-teen % CAGR for
Syngene.
• Suven Pharma boasts a robust Antibody-Drug Conjugate (ADC) platform, which is
expected to drive substantial growth owing to 1) the ADC market enjoying a 30% CAGR;
2) ramping up existing product supplies to leading innovators in the ADC segment; and 3)
the addition of payload as well as linker capabilities. Consequently, we project a 24% top-
line CAGR for the company through FY30E from the FY24 base.
• For Bluejet Healthcare, we forecast a 26% top-line CAGR through FY30E based on FY24
figures, primarily driven by robust growth in its Pharma and contrast media CDMO
businesses. The lipid-lowering drug, for which the company supplies intermediates to its
partner, is experiencing rapid growth. With new capacity in place, we expect its Pharma
CDMO business to witness a robust 57% CAGR through to FY30E.
• For Divi's Laboratories, we project a top-line CAGR of about 20% over FY24-FY30E, driven
by strong traction in its innovator CDMO business, particularly from GLP-1 contracts.
The company supplies key starting materials, building blocks, and fragments for GLP-1
molecules to multiple innovator companies. We anticipate that commercial supplies will
commence soon, offering strong growth in the medium term. Additionally, the company
has commercialised its Plant 3, providing scope for further backward integration, which
could significantly enhance profitability.
• For Syngene, we expect a 14% top-line CAGR through to FY30E, driven by strong growth
in the product segment (Development and Manufacturing Services) followed by Discovery
Services. We forecast a high-teen revenue CAGR over FY24-FY30E for the company's
CMO operations, which accounted for about 40% of its revenue in FY24.

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Macquarie Equity Research Indian CRDMO

Figure 23 - We expect solid top-line CAGR (FY24-FY30E) for our coverage

companies

30%

25%

20%

15%

10%

5%

0%
Blue Jet Suven Pharma Divi's Lab Syngene
Healthcare
Source: Company data, Macquarie Research, February 2025

We expect a solid Solid profitability improvement

~800-1,000bps EBITDA
margin improvement for
We expect low double-digit percentage points EBITDA margin improvement for our coverage
our coverage companies by
CDMO companies. We expect gross margin improvement and operating leverage to
FY30E.
drive EBITDAm improvement. Within our product focused CDMOs, we expect revenue
from manufacturing of complex products such as Peptides, ADCs, and Oligos to grow
at a faster pace. Since these projects offer higher contribution margin, we expect gross
margin improvement for our product focused companies such as Divi's Labs and Suven.
For example, reporting from Cohance (will be merged with Suven) suggests that Innovator
CDMO (Pharma + Spec chem) has ~25% higher gross margin than generic API business.
We expect meaningful improvement in EBITDA margin driven by operating leverage as
utilisation of newly added capacities ramp up.
• Divi's Labs has recently commissioned its Kakinada plant (Unit 3), which is anticipated to
ramp up operations following clearance from regulatory agencies.
• Syngene has recently acquired a biologics manufacturing plant that is yet to commence
commercial activities.
• Bluejet Healthcare has expanded its manufacturing facilities for contrast media and
pharmaceutical intermediates.
• Suven Pharma has recently acquired NJ Bio in the ADC space and Sapala in the
oligonucleotide space, with plans to ramp up operations in the medium term.

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Macquarie Equity Research Indian CRDMO

Figure 24 - We expect meaningful gross margin Figure 25 - We expect significant EBITDAm

expansion for product focused CDMOs improvement for our coverage companies

80% 50%

70% 45%
40%
60%
35%
50% 30%
40% 25%

30% 20%
15%
20%
10%
10% 5%
0% 0%
Divi's Suven Blue Jet Syngene Divi's Suven Blue Jet Syngene

FY24 FY30E FY24 FY30E

Source: Company data, Macquarie Research, February 2025 Source: Company data, Macquarie Research, February 2025

Figure 26 - Cohance business mix Figure 27 - Cohance segment gross margin

100%
90%
80%
58% 57%
67% 70% 70%
60%
50%
40%
42% 43% 30%
33% 30%
20%
10%
FY24 9MFY25 FY24 9MFY25
0%
Revenue contribution Gross profit contribution FY24 9MFY25

CDMO (Pharma + Spec chem) API+ CDMO (Pharma + Spec chem) API+

Source: Company data, Macquarie Research, February 2025 Source: Company data, Macquarie Research, February 2025

Improved utilisation of Return ratios to improve

recently added capacities to
drive ROIC expansion for our
We anticipate that the return ratios of our coverage companies will improve significantly
coverage companies.
due to enhanced asset utilisation, particularly of newly added plants and centres, as well as
improved profitability. Over the past couple of years (FY24-25), our coverage companies
have, on average, increased their gross block by over 40%, which has currently led to a
compression of return ratios. Despite this, product-focused CDMOs are demonstrating
solid return ratios, with pre-tax Return on Invested Capital (ROIC) exceeding 20% in FY24
for Suven Pharma, Bluejet Healthcare, and Divi's Laboratories. We expect ROICs to improve
further, reaching over 30% for product-focused CDMOs such as Divi's Laboratories, Suven
Pharma, and Bluejet Healthcare, and over 20% for the service-focused CDMO Syngene.

18 February 2025 11
Macquarie Equity Research Indian CRDMO

We expect our coverage Figure 28 - We expect meaningful improvement in ROIC for our coverage
companies' ROIC to improve companies
by 1.5-2.0x by FY30E.
70%

60%

50%

40%

30%

20%

10%

0%
Divi's Suven Blue Jet Syngene

FY24 FY30E

Source: Company data, Macquarie Research, February 2025

Figure 29 - Our coverage companies current ROIC Figure 30 - …due to meaningful investments in last
remain compressed... couple of years

Last two years capex as % of FY23 gross block

80% 200%

70% 180%
160%
60%
140%
50%
120%
40%
100%
30%
80%
20% 60%
10% 40%

0% 20%
Divi's Suven Blue Jet Syngene 0%
FY24 5 yr average
Divi's labs Syngene Suven pharma Bluejet
healthcare

Source: Company data, Macquarie Research, February 2025 Source: Company data, Macquarie Research, February 2025

18 February 2025 12
Macquarie Equity Research Indian CRDMO

Indian CDMOs offer 2x Faster growth and higher return ratios justifies valuation premium
EBITDA growth and ROICs
Indian CDMOs are trading at 2-year forward PER of 33x on average vs regional peer average
of 26x and global peer average (ex-region) at 31x. Similarly, Indian CDMOs are trading at an
2-year forward EV/EBITDA of 20x vs. regional peer average of 16x and global peer average
of 15x. We believe the valuation premium to peers is justified given strong top-line and
bottom-line growth prospects of Indian CDMOs with median EPS CAGR (next three years)
at 30% vs. regional peers at 14% (median) and global peers at 7%. Moreover, Indian CDMO
companies have meaningfully higher ROIC at a median of 20% vs. regional peer at 11% and
global peer at 8%.
Please note that Indian companies follow fiscal year starting from April through March,
while Regional and Global peers follow calendar years. Hence, we compare FY27E (year-end
Mar'27) valuations for Indian companies to CY26E (year-end Dec'26) valuations for global
and regional peers.

Figure 31 - CDMO valuation comparisons

CMP Mcap Upside/ EPS EBITDA (in LCY mn) P/E EV/EBITDA Revenue EBITDA EPS
Company BBG Ticker Currency Rating TP ROIC
(LCY) (LCY bn) Downside FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e CAGR CAGR CAGR
Indian CDMO's
Divis labs DIVI IN INR 5,924 1,563 OP 7,400 25% 82 106 133 29,315 39,045 48,597 72 56 45 53 39 32 18% 30% 30% 20%
Suven Pharma SUVENPHA IN INR 1,119 280 OP 1,500 34% 15 18 27 8,590 11,330 15,660 75 61 41 31 24 17 20% 27% 29% 25%
Syngene SYNG IN INR 701 280 OP 835 19% 13 17 22 10,693 12,988 15,863 54 42 31 27 22 19 13% 16% 21% 14%
Blue Jet Healthcare BLUEJET IN INR 754 134 OP 1,000 33% 17 23 29 3,651 5,308 6,668 45 33 26 37 25 20 33% 43% 43% 29%
Laurus Labs LAURUS IN INR 556 292 Not rated NA NA 6 11 16 10,559 14,465 18,334 91 50 35 34 25 19 14% 35% 74% 6%
Piramal Pharma PIRPHARM IN INR 200 260 Not rated NA NA 1 4 6 14,508 19,041 23,416147 45 29 22 16 13 15% 25% 259% 4%
Neuland Labs NLL IN INR 11,534 146 Not rated NA NA 250 345 476 4,103 6,569 8,839 47 34 25 42 26 20 20% 24% 27% 31%
Average /median 76 46 33 35 25 20 18% 27% 30% 20%
Regional peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Asymchem 6821 HK HKD 56 31 Neutral 56 1% 3 4 5 1,353 1,760 2,162 19 15 12 16 12 10 2% -9% 16% 4%
Pharmaron Beijing 3759 HK HKD 16 47 UP 8 -49% 1 1 1 2,916 3,387 3,889 15 15 13 16 14 12 11% 9% 5% 10%
Wuxi Apptec 2359 HK HKD 61 183 Neutral 43 -30% 3 3 4 13,652 15,181 16,614 18 16 15 12 11 10 5% 3% 7% 17%
Wuxi XDC 2268 HK HKD 30 36 Neutral 18 -40% 1 1 1 1,009 1,462 2,026 44 31 22 30 21 15 47% 62% 25% 15%
Wuxi Bio 2269 HK HKD 23 95 Neutral 14 -39% 1 1 1 5,853 6,878 7,942 28 24 20 15 13 11 11% 15% 11% 7%
Samsung bio 207940 KS SKW 1,180,000 83,985 OP 1,260,000 7% 22,785 27,970 32,780 2,462,000 3,006,000 3,493,000 66 53 45 34 28 24 26% 24% 19% 12%
Average/ median 32 26 21 21 16 14 11% 12% 14% 11%
Global Peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Lonza LONN SW CHF 598 43 Not rated NA NA 17 20 24 2,215 2,562 2,969 36 30 25 21 18 16 13% 26% 12% 7%
Siegfried SFZN SW CHF 1,070 5 Not rated NA NA 36 40 45 288 319 354 30 27 24 18 16 15 6% 12% 8% 13%
ICON Plc ICLR US USD 183 15 Not rated NA NA 14 14 16 1,725 1,707 1,867 13 13 11 10 11 10 3% 7% 5% 8%
Charles River CRL US USD 153 8 Not rated NA NA 10 10 11 1,007 977 1,051 15 16 14 10 11 10 0% 2% 2% 8%
Bachem Holding BANB SW CHF 57 4 Not rated NA NA 2 2 3 174 210 297 36 31 23 23 19 14 19% 19% 17% 10%
Polypeptide Group PPGN SW CHF 22 1 Not rated NA NA 0 0 1 21 61 95 -64 67 21 39 14 9 15% -351% -244% -3%
Average/ median 11 31 20 20 15 12 9% 9% 7% 8%

Overall Average 41 35 25 26 19 16

Source: Bloomberg, Macquarie Research, February 2025

Priced as at close 17 February 2025. We use our own estimates for Indian CDMOs and Samsung Bio. We use median for EBITDA CAGR, EPS CAGR and ROIC.

Figure 32 - Indian CDMOs are growing at much faster pace and offer higher returns

35%

30%

25%

20%

15%

10%

5%

0%
Indian Regional Global Indian Regional Global Indian Regional Global Indian Regional Global
CDMOs Peers Peers CDMOs Peers Peers CDMOs Peers Peers CDMOs Peers Peers

Revenue CAGR EBITDA CAGR EPS CAGR ROIC

Source: Bloomberg, Macquarie Research, February 2025

18 February 2025 13
Macquarie Equity Research Indian CRDMO

Figure 33 - Indian CDMOs offer higher growth and higher ROIC at reasonable valuations

EBITDA CAGR (next 3 years) + ROIC vs 2 year Fwd EV/EBITDA

35

30
Divis

25 Wuxi Bio
Neuland
20 Syngene
Wuxi Apptec Blue Jet
Charles River Laurus
15 Suven
ICON Plc Bachem Lonza
Samsung Bio
10 Piramal Wuxi XDC
Pharmaron Beijing
5 Siegfried

0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Source: Bloomberg, Company data, Macquarie Research, February 2025

We use our own forecast for Indian CDMO coverage and Samsung Bio.

18 February 2025 14
Macquarie Equity Research Indian CRDMO

Appendix

The CRDMO industry includes three key players: CRDMOs, CROs, and CDMOs.
• CRDMOs offer integrated, end-to-end services across the entire drug discovery,
development, and manufacturing lifecycle. They provide cost-effective, customised
solutions, helping pharmaceutical innovators accelerate drug development, reduce costs,
and access specialised capabilities not available in-house.
• CROs specialise in scientific functions for discovery, preclinical, and clinical stages of
pharmaceutical R&D. CDMOs provide commercialization manufacturing and process/
formulation development (CMC services) for preclinical and clinical stages.
• CDMOs provide drug development and commercial manufacturing services to its
customers. Historically, pharma has often concentrated on selling high-volume products
and used contracts with CDMOs to leverage increased manufacturing capacity.

While most companies try to position themselves as integrated CRDMO players, their
revenue is skewed towards one side of the spectrum either research or manufacturing.
Within Indian CRDMO companies, Syngene has the highest exposure to research services,
while Divi's Labs has the highest exposure to commercial manufacturing; Suven, Neuland,
and Piramal are in between.

Figure 34 - CDMO value chain

Source: Macquarie research, February 2025

Global CRDMO industry: growing rapidly at scale

According to Frost and Sullivan, the global pharma CRDMO industry was estimated to be
~US$197bn in 2023, recording a CAGR of ~9% since 2018. The industry will continue to grow
at similar pace in the medium-term to reach ~US$300bn by 2028 as per the research report.
Over the past two decades, outsourcing R&D and manufacturing has become a major
trend in the pharmaceutical industry. Companies have shifted from outsourcing non-core
functions like IT and HR to core functions such as R&D and manufacturing. Key drivers
include the following:
• Time-to-market: Outsourcing reduces development cycles and time-to-market, providing
cost savings and significant benefits. CRO/CDMO partners help eliminate bottlenecks and
offer access to advanced technologies.
• Cost advantage: Outsourcing to regions like India and China offers significant cost
benefits, avoiding substantial capital investments and reducing development costs.

18 February 2025 15
Macquarie Equity Research Indian CRDMO

• Risk management: Risk-sharing partnerships lower operational risks, allowing companies

to expand R&D pipelines and increase the chances of product launch.
• Strategic focus: Mature outsourcing relationships evolve into business alliances,
improving processes, resource planning, and reducing business risks.

The CDMO industry comprises discovery, preclinical, development, and commercial

manufacturing services. Traditionally, pharmaceutical companies retained in-house control
over discovery and preclinical stages due to intellectual property (IP) sensitivities while
outsourcing these activities. However, with the emergence of smaller pharmaceutical and
biotech firms and enhanced IP protection protocols at CDMOs, there has been a noticeable
surge in the outsourcing of discovery and pre-clinical services as well.

Figure 35 - Global CRDMO Industry, 2018-2028F (in USD bn)

350

300

250

200

150

100

50

0
2018 2019 2020 2021 2022 2023 2028F
Source: Frost & Sullivan, Macquarie Research, February 2025

Within the global CRDMO industry, Frost & Sullivan estimate that the drug discovery industry
stands at US$13bn in 2023, while the preclinical development industry was at US$10bn. In
line with the growth in the overall research and development (R&D) spending, the discovery
and preclinical services industry is projected to reach a cumulative value of US$37bn in 2028
and comprise 41% of total R&D spend in these areas.
Similarly, Fost & Sullivan expect clinical, development and supplies industry to grow the
US$144bn by 2028 from current levels of ~US$89bn in 2023, implying a 10% CAGR. The
commercial manufacturing segment of the global CDMO industry is expected to increase at
an ~8% CAGR from US$84bn in 2023 to ~US$120bn by 2028.
The growth in CDMO capacity continues to outpace capacity in customers' own facilities, as
large and small players increasingly rely on manufacturing partners to support, complement
and de-risk their journey to market. Large pharmaceutical organisations contribute the
majority share of CDMO revenues due to commercial manufacturing activity. Small biotech
businesses represent a higher proportion of the molecule pipeline, in which outsourcing is
built into business models to conserve capital resources.

18 February 2025 16
Macquarie Equity Research Indian CRDMO

Figure 36 - Global CRDMO industry in 2023 Figure 37 - Growth rate of global CRDMO industry
by region, 2018-2028F

APAC (ex- RoW, 7%

India, China),
10%
20%

India, 3%
North 14%
America, 42% 13%
11% 11% 11%
10%
9%
China, 13%
7%
5%

North America Europe APAC Overall China India

Europe, 25%
CAGR (2018-2023) CAGR (2023-2028F)
Source: Frost & Sullivan, Macquarie Research, February 2025

Source: Frost & Sullivan, Macquarie Research, February 2025

Figure 38 - Global CRDMO industry by function, Figure 39 - Growth Rate of Global CRDMO Industry
2018-2028F (in USD bn) by Functions, 2018-2028F

350
9%
Discovery
300 20 8%
18
250 Preclinical 13%
Development 12%
200 13
144
10
150 Clinical Development 12%
9 89 and Supplies 10%
6
100
51
121 Commercial 7%
50 84
61 Manufacturing 8%
0
2018 2023 2028F 9%
Overall
Commercial Manufacturing Clinical Development 9%
and Supplies
Preclinical Development Discovery CAGR (2018-2023) CAGR (2023-2028F)

Source: Frost & Sullivan, Macquarie Research, February 2025 Source: Frost & Sullivan, Macquarie Research, February 2025

Figure 40 - Global CRDMO industry by modality, Figure 41 - Growth rate of global CRDMO industry
2018-2028F (in USD bn) by modality, 2018-2028F

350 16% 15%

300 14%
11%
12%
250
143
10%
200
8% 7%
150 83 6%
6%
100
4%
41 159
50 113
2%
58
0 0%
2018 2023 2028F Small Molecule Biologics

Small Molecule Biologics CAGR (2018-2023) CAGR (2023-2028F)

Source: Frost & Sullivan, Macquarie Research, February 2025 Source: Frost & Sullivan, Macquarie Research, February 2025

18 February 2025 17
Macquarie Equity Research
18 February 2025

Healthcare

Pharma, Biotech & Life Sciences

Divi's Laboratories India

Initiation: Don't miss the forest for the trees

Dr. Kunal
Key Points Dhamesha, MBBS

• Divi's Labs is the largest CDMO firm in India and works with the
majority of top-20 global innovator-pharma companies on small- DIVI IN Outperform
molecule products. Price (at 18 Feb 2025) INR5,919

• The company's custom synthesis business is set for significant growth 12-month target
12-month TSR (%)
INR7,400
26.4
and poised to triple its top-line and quadruple bottom-line by FY30E. Volatility Index Medium
• We initiate coverage at Outperform with a target price of Rs7,400, Market Cap (Local) (m) 1,571,375
implying a 26% total shareholder return. Market Cap (USD) (m) 18,088
Free Float (%) 48
30-day avg turnover (USD) (m) 31.6

Custom synthesis business to accelerate:The company is set for Investment Fundamentals

significant growth in its custom synthesis business, with products like GLP-1 Year end 31 Mar 2024A 2025E 2026E 2027E
and contrast media active pharmaceutical ingredients (APIs) in qualification. Revenue (bn) 78.5 93.6 112.7 133.0
Revenue growth (%) 1.0 19.3 20.4 18.0
These, along with the ramp-up of Valsartan-Sacubitril, are expected to drive
EBIT (bn) 18.3 25.2 34.2 43.5
a ~28% top-line CAGR over FY24-FY30E. We estimate GLP-1 and contrast EBIT growth (%) (9.6) 38.1 35.5 27.5
media APIs could contribute over US$800mn by FY30E. Additionally, we Reported profit (bn) 16.0 21.9 28.1 35.2
foresee continued growth in the Valsartan-Sacubitril project, based on Divi's Adjusted profit (bn) 16.0 21.9 28.1 35.2
Levetiracetam exports to innovators and generic companies. EPS rep [INR] 60.3 82.4 106 133
EPS rep growth (%) (12.2) 36.7 28.6 25.2
Generic API business to recover: We expect the company's generic EPS adj [INR] 60.3 82.4 106 133
API business to deliver a high-single-digit CAGR through FY27E, with an EPS adj (¢) 60.3 82.4 106 133
EPS adj growth (%) (12.2) 36.7 28.6 25.2
acceleration to c.10% CAGR by FY30E. This growth will be driven by volume
Net debt/equity (%) (29.3) (30.4) (28.5) (31.4)
increases in existing products, new launches, and a gradual recovery in API ROA (%) 12.2 15.5 18.8 20.8
prices. The company currently manufactures 30 APIs and holds the position ROE (%) 12.1 15.3 17.6 19.2
of global leader in 10 of them, attributed to its cost leadership. PER rep (x) 98.2 71.8 55.9 44.6
PER adj (x) 98.2 71.8 55.9 44.6
Mix shift towards custom synthesis ROIC improvement: We forecast the EV/EBITDA (x) 68.3 51.3 38.5 30.9
company's EBITDA margin to expand from ~28% in FY24 to 36%+ in FY27E, P/BV (x) 11.6 10.5 9.3 8.0
Total div yield (%) 1.3 1.3 1.3 1.6
reaching ~40% by FY30E. Concurrently, we foresee the ROIC increasing
from 20% in FY24 to 35%+ in FY30E. We anticipate improvement is largely Quant (rank vs. global sector) 41/1,224
attributed to the custom synthesis business, which we expect to achieve a
28% CAGR and account for two-thirds of the total revenue by FY30E.

Valuation: We value the company using EV/EBITDA multiple of 40x on our

FY27e EBITDA to arrive at our TP of Rs7,400, which is also supported by
our DCF analysis.

Catalysts: Commercial supplies of GLP-1 and contrast media molecules,

launch of generic APIs, Successful backwardi ntegration of exisiting supplies
DIVI IN rel BSE Sensex
performance, & rec history
Investment Thesis and Recommendation
We expect meaningful acceleration in the company's top and bottom-line
driven by a) scale up in custom synthesis projects, b) launches in generic
API business and c) operating leverage. We expect the company's top-line
to more than triple (>3x) and PAT to quadruple (~4x) by FY30e on FY24
base.

Source: FactSet, Macquarie Research, Feb 2025 (all figures in

INR unless noted, TP in INR)

18 February 2025 18
Macquarie Equity Research Indian CRDMO

Key Risks to Investment Thesis Company Description

• Failure to upscale key custom synthesis projects Divi’s, established in 1990, manufactures Active
• Continued price erosion in generic APIs Pharmaceutical Ingredients, supplying high-quality products
to over 95 countries. Custom synthesis for Big Pharma makes
• Compliance issues at manufacturing plants
up 50% of revenue, Generic APIs 40%, and Nutraceutical
• Failure to add/ ramp up Plant III Ingredients 10%. With advanced facilities and strong R&D,
Divi’s ensures cost-effective products.

Figure 1 - Divi's Revenue estimates Figure 2 - Divi's PAT estimates

250,000 80,000

70,000
200,000
60,000

50,000
150,000
40,000
100,000 30,000

20,000
50,000
10,000

0 0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E FY24 FY25E FY26E FY27E FY28E FY29E FY30E

Total Revenue (Rs mn) PAT (Rs mn)

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

Divi's Laboratories (DIVI IN) INR/(bn) unless otherwise noted

Income Statement Mar FY 2024A 2025E 2026E 2027E Q3/25A Q4/25E Balance Sheet 2024A 2025E 2026E 2027E
Revenue 78.5 93.6 112.7 133.0 23.2 25.8 Cash 39.8 45.6 48.5 62.0
Cost of Goods Sold 31.3 37.7 43.3 50.0 9.2 10.2 Receivables 21.6 23.4 27.0 31.9
Gross Profit 47.2 55.9 69.4 82.9 14.0 15.6 Inventories 31.8 28.1 32.7 37.2
EBITDA 22.0 29.3 39.0 48.6 7.4 8.5 Investments 0.0 0.0 0.0 0.0
Depreciation 3.8 4.1 4.9 5.1 1.0 1.2 Fixed Assets 55.1 67.1 78.2 85.1
Amortisation 0.0 0.0 0.0 0.0 0.0 0.0 Intangibles 0.0 0.0 0.0 0.0
EBIT 18.3 25.2 34.2 43.5 6.4 7.3 Other Assets 6.3 6.5 7.3 8.1
Net Interest Income (0.0) (0.0) (0.0) (0.0) 0.0 (0.0) Total Assets 154.7 170.7 193.7 224.4
Associates 0.0 0.0 0.0 0.0 0.0 0.0 Payables 8.2 9.6 11.0 12.7
Exceptionals 0.0 0.0 0.0 0.0 0.0 0.0 Short Term Debt 0.0 0.0 0.0 0.0
Forex Gains / Losses 0.0 0.0 0.0 0.0 0.0 0.0 Long Term Debt 0.0 0.1 0.1 0.1
Other Pre-Tax Income 3.4 4.0 4.1 4.4 0.8 1.3 Other Liabilities 10.7 11.3 12.8 14.6
Pre-Tax Profit 21.6 29.2 38.3 47.9 7.3 8.7 Total Liabilities 19.0 21.0 24.0 27.4
Tax Expense (5.6) (7.3) (10.1) (12.7) (1.4) (2.1) Shareholders' Funds 135.7 149.6 169.8 197.0
Net Profit 16.0 21.9 28.1 35.2 5.9 6.6 Minority Interests 0.0 0.0 0.0 0.0
Minority Interests 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0
Reported Earnings 16.0 21.9 28.1 35.2 5.9 6.6 Total S/H Equity 135.7 149.6 169.8 197.0
Adjusted Earnings 16.0 21.9 28.1 35.2 5.9 6.6 Total Liab & S/H Funds 154.7 170.7 193.7 224.4
Basic Shares Outstanding 0.3 0.3 0.3 0.3 0.3 0.3 Net Debt / Equity (%) (29.3) (30.4) (28.5) (31.4)
Diluted Shares Outstanding 0.3 0.3 0.3 0.3 0.3 0.3 Interest Cover (x) 608.3 2,400.9 5,708.9 6,412.3
EPS (rep) [INR] 60.3 82.4 106 133 22.2 24.8 ROE (%) 12.1 15.3 17.6 19.2
EPS (adj) [INR] 60.3 82.4 106 133 22.2 24.8 ROA (%) 12.2 15.5 18.8 20.8
Total DPS [INR] 79.6 79.6 79.6 92.9 19.9 19.9 ROIC (%) 15.8 19.7 24.1 26.4
Ratio 2024A 2025E 2026E 2027E Cash Flow Analysis 2024A 2025E 2026E 2027E
Revenue Growth (%) 1.0 19.3 20.4 18.0 - - EBITDA 22.0 29.3 39.0 48.6
EBITDA Growth (%) (6.8) 33.1 33.2 24.5 - - Tax Paid (5.6) (7.3) (10.1) (12.7)
EBIT Growth (%) (9.6) 38.1 35.5 27.5 - - Chgs in Working Cap (21.6) (21.9) (28.1) (35.2)
EPS Growth (adj) (%) (12.2) 36.7 28.6 25.2 - - Net Interest Paid 0.0 0.0 0.0 0.0
Gross Profit Margin (%) 60.1 59.7 61.6 62.4 - - Other 17.8 25.6 22.0 28.4
EBITDA Margin (%) 28.1 31.3 34.6 36.5 - - Operating Cashflow 12.6 25.7 22.8 29.1
EBIT Margin (%) 23.3 26.9 30.3 32.7 - - Acquisitions 0.0 0.0 0.0 0.0
Net Profit Margin (%) 20.4 23.4 25.0 26.5 - - Capex (10.0) (16.0) (16.0) (12.0)
Payout Ratio (%) 132.1 96.6 75.2 70.0 - - Other 0.0 0.0 0.0 0.0
PE (rep) (x) 98.2 71.8 55.9 44.6 - - Investing Cashflow (10.0) (16.0) (16.0) (12.0)
PE (adj) (x) 98.2 71.8 55.9 44.6 - - Dividend (Ordinary) (8.0) (8.0) (8.0) (8.0)
EV/EBITDA (x) 68.3 51.3 38.5 30.9 - - Equity Raised 0.0 0.0 0.0 0.0
EV/EBIT (x) 82.5 59.6 44.0 34.5 - - Debt Movements (0.0) 0.0 0.0 0.0
Price/Book (x) 11.6 10.5 9.3 8.0 - - Other 7.3 4.0 4.1 4.4
Total Div Yield (%) 1.3 1.3 1.3 1.6 - - Financing Cashflow (0.7) (3.9) (3.9) (3.6)
Net Chg in Cash/Debt 1.9 5.8 2.9 13.5
Free Cashflow 2.6 9.7 6.8 17.1
Source: Company data, Macquarie Research Feb 2025

18 February 2025 19
Macquarie Equity Research Indian CRDMO

We expect Divis' bottom-line Initiate with an Outperform rating and TP of Rs7,400

to quadruple by FY30e.
We expect meaningful acceleration in the company's top-line and bottom-line growth driven
by a) scale up in multiple custom synthesis products, b) launches in generic API Business
and c) operating leverage. We expect the company's top-line to more than triple (>3x) by
FY30E and PAT to double (>2x) by FY27E and quadruple (~4x) by FY30E. Strong profitability
improvement will also drive improvement in return ratios. We bake in ROIC to improve from
20% in FY24 to 35%+ by FY30E.
Our revenue, EBITDA and earnings estimates are 6-14% higher than Bloomberg consensus
estimates for FY26/27e. Our bullishness stems from our strong growth expectations for
its custom synthesis business and gradual recovery in its generic API business. Specifically
on its custom synthesis business, we expect multiple growth drivers including GLP-1
manufacturing, contrast media APIs and Valsartan-Sacubitril ramp up.

Figure 3 - Divi's- Macquarie vs consensus estimates

Y/E, Mar (Rs. mn) FY26E FY27E
MQe Consensus % Variation MQe Consensus % Variation
Revenues 112,708 106,170 6% 132,986 123,363 8%
EBITDA 39,045 35,708 9% 48,597 43,487 12%
EBITDAM (%) 34.6% 33.6% 101bps 36.5% 35.3% 129bps
APAT 28,124 25,920 9% 35,211 31,268 13%
EPS (Rs) 106.0 97.4 9% 132.7 116.0 14%

Source: Bloomberg, Macquarie Research, February 2024

Figure 4 - Divi's Revenue estimates Figure 5 - Divi's EBITDA and EBITDA margin

250,000 100,000 45%

90,000 40%
200,000 80,000 35%
70,000
30%
150,000 60,000
25%
50,000
20%
40,000
100,000
15%
30,000
20,000 10%
50,000
10,000 5%
0 0%
0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E
FY24 FY25E FY26E FY27E FY28E FY29E FY30E
EBITDA (Rs mn)-LHS EBITDA Margin (%)-RHS
Total Revenue (Rs mn)

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 20
Macquarie Equity Research Indian CRDMO

Divi's is working on multiple Custom synthesis business: At an inflection point

GLP-1 and contrast media
products
The custom synthesis business which accounts ~50% of total revenue will be primary growth
driver due to multiple ongoing projects potentially culminating in commercial supplies in
the medium term. We expect the company's custom synthesis to double through FY27E
(>2x) and more than quadruple (>4x) by FY30E. The growth in the business will be primarily
driven by a) commercial as well as clinical supplies of GLP-1 products and b) ramp up of
contrast media products, in our view. Apart from these, we also expect low-teens growth in
the company's base business within this segment due to regulatory tailwinds.

Figure 6 - Divi's Custom Synthesis business Figure 7 - Custom Synthesis Business revenue
revenue estimates contribution to increase

% of Total Revenue
180,000 70%

160,000 60%
140,000
50%
120,000

100,000 40%

80,000
30%
60,000
20%
40,000

20,000 10%

0
0%
FY24A FY25E FY26E FY27E FY28E FY29E FY30E
FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Custom Synthesis Business (in mn)

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

We estimate GLP-1 Sizing the GLP-1 opportunity

manufacturing could offer
~US$500mn top-line
Divi's management has suggested that the company has been working with multiple GLP-1
opportunity for Divi's
innovator including the project on commercialised GLP-1. Since, ELi Lilly (not rated) is the
only commercialised GLP-1 innovator currently outsourcing the manufacturing, we deduce
that the company could be working on supplying Tirzepatide fragments and currently
undergoing qualification process. Apart from Tirzepatide, the company has also supplied
smaller peptide fragments to Roche (not rated). We estimate Tirzepatide supply opportunity
could add US$500+mn revenue by FY30e for the company. Our Tirzepatide supply revenue
estimates for Divis labs is based on two approaches a) Substitution approach and b) top-
down approach.

Figure 8 - We estimate Tirzepatide supplies could Figure 9 - Our Tirzepatide revenue estimates imply
generate US$500+mn revenue by FY30e capaciities of 40+kL by FY30e

600 50,000

45,000
500
40,000

400 35,000

30,000
300 25,000

20,000
200
15,000

100 10,000

5,000
0 0
FY25E FY26E FY27E FY28E FY29E FY30E FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

18 February 2025 21
Macquarie Equity Research Indian CRDMO

Eli Lilly's GLP-1 products Substitution approach for Tirzepatide opportunity

have patent protection
running beyond the US
While it is not yet clear whether Divi's Labs is being qualified as an additional supplier or
Biosecure act grandfathering
as replacement for existing supplier such as Wuxi Apptec, we believe it could the latter
deadline of 2032
due to ongoing geopolitical issues. Our assumption is also based on analysis of patents on
Tirzepatide brands Mounjaro and Zepbound, which are going beyond the grandfathering
limit of 2032 in the Biosecure Act. Hence, It is pertinent for the innovator to develop a large
second supplier to gradually substitute Wuxi Apptec.
Wuxi apptec reports its Peptide business as Tides segment. As per the 3QCY24 company
report, Wuxi Apptec had solid peptide synthesiser capacity of 41,000 litres and reported
revenues of ~US$500mn in 9MCY24. The company expects to produce 35,000Kgs of
Peptide API in 2024 suggesting realisation of ~US$22.4k per KG. We use similar production
capacity build up for Divi's over the next five years, similar utilisation as well as realisation to
arrive at our estimate for Tirzepatide manufacturing opportunity for Divis Labs.

Figure 10 - WuXi TIDES - Revenue (in USD mn)

900

800

700

600

500

400

300

200

100

0
2020 2021 2022 2023 2024e 9MCY24

Source: Company Reports, Macquarie Research, February 2025

Figure 11 - WuXi TIDES - Peptide Synthesizer Figure 12 - WuXi TIDES - Peptide product produced
Capacity (in L) (in Kg)

45,000 40,000

40,000 35,000

35,000
30,000
30,000
25,000
25,000
20,000
20,000
15,000
15,000
10,000
10,000

5,000 5,000

0 0
2019 2020 2021 2022 2023 2024e 2019 2020 2021 2022 2023 2024e

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

18 February 2025 22
Macquarie Equity Research Indian CRDMO

Figure 13 - WuXi TIDES - Production per reactor Figure 14 - WuXi TIDES- Realisation per kg (US$/
volume (Kg /L) Kg)

90% 200,000
80% 180,000
70% 160,000
60% 140,000
50% 120,000
40% 100,000
30% 80,000
20% 60,000
10% 40,000
0% 20,000
2020 2021 2022 2023 2024e
0
Source: Company Reports, Macquarie Research, February 2025 2020 2021 2022 2023 2024e

Source: Company Reports, Macquarie Research, February 2025

Eli Lilly's GLP-1 Top-down approach to size Tirzepatide opportunity

manufacutring could offer
~US$500mn top-line
Eli Lilly's Tirzepatide is a novel dual glucose-dependent insulinotropic polypeptide (GIP) and
opportunity for Divi's labs
glucagon-like peptide-1 (GLP-1) receptor agonist composed of 39 amino acids. According to
industry sources, Eli Lilly outsources the manufacturing of various fragments of Tirzepatide
while also maintaining some fragment manufacturing in-house. Crucially, Lilly assembles
these fragments to create the final API and the formulation. Independent research identifies
four distinct fragments of Tirzepatide that could potentially be outsourced.
Using a top-down approach, we begin with the consensus revenue estimate for Eli Lilly's
Zepbound and Mounjaro, assuming the cost of manufacturing the API is in the mid-
single digits percentage of revenue. We attribute 25% of the API cost to the linking of the
fragments, thereby reducing the available opportunity for outsourced manufacturers to a
low single-digit percentage of brand revenues. We further assume that this revenue available
to outsourced manufacturers is equally divided among the four fragments. We project
that Divi's Laboratories will initially commence with the supply of one fragment, eventually
expanding to two fragments with a gradual increase in market share for each fragment
through FY30e.

Figure 15 - Tirzepatide consensus sales estimate Figure 16 - 4 fragments of Tirzepatide (synthesized

(in USD mn) through SPPS)

60,000

50,000

40,000

30,000

20,000

10,000

Source: Chavda, Vivek P., et al. "Tirzepatide, a new era of dual-targeted

0 treatment for diabetes and obesity: a mini-review." Molecules 27.13 (2022):
CY23 CY24e CY25e CY26e CY27e CY28e CY29e CY30e
4315.; Macquarie Research, February 2025
Source: Visible Alpha, Macquarie Research, February 2025

18 February 2025 23
Macquarie Equity Research Indian CRDMO

Divi's has been supplying Supply to other GLP-1/GIP innovator: An additional upside to our estimates
raw materials, basic building
blocks and fragments to
Divi's Labs management during the recent earnings call suggested that the company is
other GLP-1 innovators as
also working with multiple GLP-1 innovator on their developmental GLP-1/GIP pipeline.
well
We believe successful outcome on any of these molecules could represent an additional
upside for the company. According to data from Fierce Biotech (link), there are 43 GLP/GIP
molecules in the pipeline. Apart from GLP-GIP receptor agonist there are multiple other
molecules in the pipeline targeting obesity indication.

Figure 17 - GIP/GLP molecules in development Figure 18 - Anti-obesity pipeline excl. GLP-GIP

20 45
18 40
16
35
14
30
12
25
10
20
8

6 15

4 10

2 5
0 0
Phase I Phase II Phase III Approved and Phase I Phase II Phase III Approved and
Marketed
Marketed

Source: FierceBiotech, Macquarie Research, February 2025

Source: FierceBiotech, Macquarie Research, February 2025

18 February 2025 24
Macquarie Equity Research Indian CRDMO

The company ahs been Contrast media API supply: Another medium-term growth opportunity
working with multiple
innovator companies on
The company is currently supplying 3 iodine based contrast media APIs to Innovator
contrast media APIs
companies. The company is working on adding 3-4 more products in this segment. This will
include both Iodine based (used in CT scan and X-rays) and Gadolinium based compounds
(used in MRIs). The company exported US$50+mn contrast media APIS in FY24 and we
expect it to grow to ~US$300+mn by FY30e driven by increased volumes in existing
products and supply of new products.
The company currently supplies API for Iohexol and Iopromide and we expect it could add
one more Iodine based API. The company management has suggested that they are working
with multiple innovator companies for Gadolinium based compounds and those projects are
currently in the qualification stages. Hence, we build in meaningful revenue from gadolinium
based API supplies starting from FY26E gradually ramping up through FY30E.

Figure 19 - Divi's - Contrast Media API Exports Figure 20 - Divi's contrast media sales split

350 100%

300 80%

250
60%
200
40%
150

100 20%

50 0%
FY24A FY25E FY26E FY27E FY28E FY29E FY30E
0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E Gadolinium-based APIs Iodine-based APIs

Contrast Media API Exports (in USD mn)

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

Contrast media market overview

Contrast media are chemical agents designed to enhance the contrast of diagnostic imaging
modalities, thereby aiding in disease diagnosis. Once administered into the human body,
these agents are selectively and temporarily absorbed by different tissues. Due to their
inherent properties, contrast media improve the visualisation of tissues and organs in
imaging studies. According to company reports, global contrast media market is estimated
to be ~US$6bn growing at mid-to-high-single digit.
Current size and segmentation of contrast media by imaging modality
Contrast media can be categorized into three primary segments based on the imaging
modality they are used for:
• X-ray / Computed Tomography (CT) contrast agents: Predominantly iodine-based.
• Magnetic Resonance Imaging (MRI) contrast agents: Predominantly gadolinium-based.
• Ultrasound (USG) agents: Stabilised microbubble-based.

18 February 2025 25
Macquarie Equity Research Indian CRDMO

Figure 21 - Iodinated contrast media agents lead Figure 22 - Geographical segmentation of contrast
the market media market

Rest of the
Microbubble, World, 15%
(Ultra-sound agents), 2%
Iodinated, USA, 29%
South-East
(Xray/CT contrast Asia, 3%
agents), 74%
Japan, 6%

Gadolinium,
(MRI contrast
agents), 24%

EU 5, 23%

China, 24%

Source: IMS IQVIA, Macquarie Research, February 2025

Source: IMS IQVIA, Macquarie Research, February 2025

Figure 23 - Estimated market share of Iodinated Figure 24 - Estimated market share of Gadolinium
contrast media products based Contrast media products

Others
Others Gadodiamide
Iobitridol
Gadopentetic acid
Iopromide

Iohexol Gadoteridol Gadoteric acid

Iomeprol Gadobenic acid

Gadoxetic acid
Ioversol

Iodixanol
Iopamidol Gadobutrol

Source: IMS IQVIA, Macquarie Research, February 2025 Source: IMS IQVIA, Macquarie Research, February 2025

18 February 2025 26
Macquarie Equity Research Indian CRDMO

We expect the company's Valsartan-Sacubitril opportunity or risk?

supply of Valsartan-Sacubitril
to innovator will continue to
We believe Valsartan-Sacubitril supply continues to represent a growth opportunity for the
increase
company, albeit at a slower pace than witnessed in the last couple of years. While there
is uncertainty around patent expiry of the innovator brand Entresto, there is unanimous
verdict from the street that post the patent expiry for Entresto, exports from Divi's will
slump. However, we believe Valsartan-Sacubitril will continue to grow beyond patent expiry
driven by a) increasing outsourcing from innovator as part of product lifecycle management,
b) potential buying from generic players.
According to third-party exports data, the company started supplying Valsartan-Sacubitril
API to Innovator in FY22. Since then, its exports have increased meaningfully from ~4 tonnes
in FY22 to ~134 tonnes by FY24 and it continues to ramp up through FY25E. We expect
continued tonnage ramp up through FY30E. However, we build decline in pricing by beyond
FY26E due to potential generic entry.

Figure 25 - Divi's- Valsartan Sacubitril revenue Figure 26 - Our estimate of Valsartan-Sacubitril

estimates (in USD mn) API volumes (in tonnes) 100

250 600

500
200

400
150

300

100
200

50
100

0 0
FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY22A FY23A FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

API Volumes for product How does product lifecycle management projects work?
lifecycle management
projects keep increasing
Our analysis of Divi's Labs' portfolio reveals that product lifecycle management projects
initially from innovator later
indicate sustained volume growth for APIs well beyond patent expiries in developed markets
on by generic companies
such as the US and Europe. Additionally, the realisation or selling price for these molecules
remains largely stable. Given that the Valsartan-Sacubitril API supply project is considered a
product lifecycle management project, we forecast continued growth in supply tonnage with
only a modest reduction in realisation initially post-patent expiry.
We examined Divi's Labs' portfolio to understand lifecycle projects, focusing on products
like Levodopa, Carbidopa, and Levetiracetam. Levetiracetam, which became generic in 2009,
provides insight into recent trends. Our analysis of third-party export data indicates that the
volume of Levetiracetam exports from Divi's to the innovator continued to rise post-2014,
with only a modest reduction in pricing, particularly after patent expiries. Furthermore, the
company is increasingly supplying the Levetiracetam API to generic players.

18 February 2025 27
Macquarie Equity Research Indian CRDMO

Figure 27 - Divi's- Levetiracetam volume supplied Figure 28 - Divi's- Levetiracetam volume supplied
to Innovator (in 000's Kg) to players excluding Innovator supplies (in 000's
Kg)
250
350

200
300

250
150

200
100
150

50 100

50
0
CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23 0
CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23
Source: Company Reports, Macquarie Research, February 2025
Source: Company Reports, Macquarie Research, February 2025

Divi's realisation for Figure 29 - Divi's -Levetiracetam realisation (in USD/ Kg)
Levetiracetam API supplies
has experienced only a
140
modest decline, despite the
molecule having been generic 120
for over 15 years.
100

80

60

40

20

0
CY14 CY15 CY16 CY17 CY18 CY19 CY20 CY21 CY22 CY23

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 28
Macquarie Equity Research Indian CRDMO

Generic API business is Generic API business: Growth recovery in the medium-term
stabilising after a couple of
years of steep price erosion
The company's generic API business excluding nutraceutical supplies accounted for ~40%
of the company's revenue in FY24. We build the company's generic API business to grow at
mid single digits through FY27E driven by volu growth in existing products and new product
launches partially offset by weak pricing environment in the API market. However, we expect
growth recovery beyond FY27E and build in a ~10% CAGR through FY30E (from FY24).
Divi's cost leadership in generic APIs sets it apart from other companies. The company has
a selective portfolio of 30 products of which it remains global market leader in 10 products.
The company strong team of 600 scientists specialises in developing innovative processes
and optimising them to maintain a competitive leadership position. The company has strong
product pipeline as highlighted below.

Figure 30 - Divi's- Generic Business Revenue (in Rs Figure 31 - Divi's- Generic Filing Pipeline
mn)
US DMF filing year DMF approval status EU CEP issue year

70,000
Lacosamide 2021 Yes 2023
60,000
Orlistat 2021 Yes

50,000 Ticagrelor 2022 Yes 2023

40,000 Irbesartan 2023

Venlafexine Yes 2023

30,000
Quetiapine 2024
20,000
Iohexol 2023 Yes 2024

10,000
Rivaroxaban 2024

0 Losartan 2024
FY22 FY23 FY24 FY25E FY26E FY27E FY28E FY29E FY30E
Source: Company Reports, Macquarie Research, February 2025
Source: Company Reports, Macquarie Research, February 2025

18 February 2025 29
Macquarie Equity Research Indian CRDMO

The company supplies Nutraceutical business: Steady growth

nutraceutical product
intermediates and APIs
The company's nutraceutical API supply business acocunted for ~10% of its FY24 revenue.
We expect the business to deliver at 10% CAGR (FY24-30E), in line with management
guidance. We expect volume growth in existing product to be the primary growth driver.
The company manufactures its nutraceutical products at an integrated manufacturing
facility housed in its Unit II plant. The company is a major supplier to leading food, dietary
supplements, and feed manufacturers globally. The company's product portfolio includes
a complete range of essential carotenoids such as Beta Carotene, Astaxanthin, Lycopene,
and Canthaxanthin, as well as finished forms like Lutein and various vitamins (A, D3, D2, E
Acetate, and A Palmitate). The Nutraceutical Facility is regularly audited by regulatory and
statutory authorities, including the USFDA.

Figure 32 - Divi's-Nutraceutical business revenue (in Rs mn)

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0
FY21 FY22 FY23 FY24 FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 30
Macquarie Equity Research Indian CRDMO

Business mix shift towards Mix shift towards custom synthesis to improve profitability and ROIC
high margin custom
synthesis business to drive
We expect the company's EBITDAm to improve from ~28% in FY24 to 36%+ in FY27E
marign and ROIC expansion
and ~40% in FY30E. We expect improvement in EBITDA to be driven by a) gross margin
improvement of >200bps owing to mix shift towards custom synthesis business, and b)
operating leverage. We also expect the company's ROIC to improve from current 20% in
FY24 to 35%+ in FY30E.
Our expectation of gross margin improvement is primarily driven by a ~28% revenue CAGR
(FY24-30E) in its custom synthesis business, contributing ~70% of total revenue by FY30E.
Additionally, we expect ramp up in its recently commissioned Unit 3 to bring modest gross
margin improvement owing to backward integration and operating leverage benefits as
utilisation improves.
Divi’s Labs has successfully commissioned Phase 1 of its new manufacturing facility, Unit
3, in Kakinada, Andhra Pradesh, in the third quarter of fiscal year 2025. The company has
made an initial investment of INR15 billion to operationalise Phase 1 of Unit 3. Additionally,
300 acres of land have been reserved for future expansion. Pending regulatory approvals for
the new plant, the company is utilising it to free up capacities in its existing Units 1 and 2 by
transferring non-GMP manufacturing to Unit 3.

Figure 33 - Divi's- Revenue by Business Segments (Rs mn)

250,000

200,000

150,000

100,000

50,000

0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E

Generic API Custom Synthesis Nutraceuticals

Source: Company Reports, Macquarie Research, February 2025

Figure 34 - Divi's Gross Profit and Margin estimates Figure 35 - Divi's EBITDA and EBITDA margin
estimates
160,000 65%
100,000 45%
140,000 64%
90,000 40%
120,000 63%
80,000 35%
100,000 62% 70,000
30%
80,000 61% 60,000
25%
50,000
60,000 60% 20%
40,000
40,000 59% 15%
30,000
20,000 10%
20,000 58%
10,000 5%
0 57%
FY24 FY25E FY26E FY27E FY28E FY29E FY30E 0 0%
FY24 FY25E FY26E FY27E FY28E FY29E FY30E
Gross Profit (Rs mn)- LHS Gross Margin (%)- RHS
EBITDA (Rs mn)-LHS EBITDA Margin (%)-RHS

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 31
Macquarie Equity Research Indian CRDMO

Figure 36 - The company has added 50%+ PPE in Figure 37 - Ramp up in capacity utilisation to drive
the last three years meaningful ROIC expansion

18,000 25%
40%
16,000
20% 35%
14,000

12,000 30%
15%
10,000 25%
8,000
10% 20%
6,000
15%
4,000 5%
10%
2,000

0 0% 5%
FY22 FY23 FY24 FY25e guided
0%
Capital expenditure (Rsmn)
FY24 FY25E FY26E FY27E FY28E FY29E FY30E
PPE addition as % of preceding year's gross block (%) - RHS
Source: Company Reports, Macquarie Research, February 2025

Company reports, Macquarie research February, 2025

18 February 2025 32
Macquarie Equity Research Indian CRDMO

Initiate with an Outperform rating with a TP of Rs7,400

We value the stock at ~40x EV/EBITDA on FY27E EBITDA to arrive at a target price of
Rs7,400. Our TP is also supported by our DCF analysis. We believe a premium valuation to
domestic as well as global peers is justified given a) ~2x faster top-line and EBITDA growth
(next three years CAGR), and b) ~2x the ROIC vs regional and global peer average with ample
room to improve further. We have also employed a Discounted Cash Flow (DCF) analysis to
value the stock.

Figure 38 - We use DCF to arrive at our TP of Rs7,400

Free cash flows FY24A FY25e FY26e FY27e FY28e FY29e FY30e FY43e
Revenue (Rsmn) 78,450 93,598 112,708 132,986 161,350 194,958 229,169 942,694
YoY growth 1% 19% 20% 18% 21% 21% 18% 6.0%
EBIT (Rsmn) 18,250 25,209 34,166 43,546 56,005 70,477 85,058 396,079
EBIT Margin 23% 27% 30% 33% 35% 36% 37% 42.0%
Change in working capital -4,200 3,742 -6,126 -6,811 -10,341 -12,546 -13,807 -16,729
Capex (Rsmn) (10,030) (16,000) (16,000) (12,000) (12,000) (12,000) (12,000) (24,964)
FCF (Rsmn) 3,050 10,744 7,865 18,247 24,062 32,639 42,459 274,389
Terminal value (Rsmn) 6,557,094
Discount rate 10%
NPV of FCF 10,744 7,162 15,134 18,175 22,452 26,599 1,268,717
EV (Rsmn) 1,925,341
Net debt (Rsmn) (39,770)
Total value of equity (Rsmn) 1,965,111
Equity value per share (Rs) 7,400
No of shares (mn) 266
Current share price Rs) 5,924
Upside/Downside 24.9%

Source: Company Reports, Macquarie Research, February 2025

Closing Price as of Feb 17, 2025

Figure 39 - Divi's labs offer 2x growth vs. regional and global peers along with 2x ROIC

35%

30%

25%

20%

15%

10%

5%

0%
Divi's Labs Regional Peers Global Peers Divi's Labs Regional Peers Global Peers Divi's Regional Peers Global Peers

Revenue CAGR EBITDA CAGR ROIC

Source: Bloomberg, Macquarie Research, February 2025

18 February 2025 33
Macquarie Equity Research Indian CRDMO

Figure 40 - CDMO Valuation Comps

CMP Mcap Upside/ EPS EBITDA (in LCY mn) P/E EV/EBITDA Revenue EBITDA EPS
Company BBG Ticker Currency Rating TP ROIC
(LCY) (LCY bn) Downside FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e CAGR CAGR CAGR
Indian CDMO's
Divis labs DIVI IN INR 5,924 1,563 OP 7,400 25% 82 106 133 29,315 39,045 48,597 72 56 45 53 39 32 18% 30% 30% 20%
Suven Pharma SUVENPHA IN INR 1,119 280 OP 1,500 34% 15 18 27 8,590 11,330 15,660 75 61 41 31 24 17 20% 27% 29% 25%
Syngene SYNG IN INR 701 280 OP 835 19% 13 17 22 10,693 12,988 15,863 54 42 31 27 22 19 13% 16% 21% 14%
Blue Jet Healthcare BLUEJET IN INR 754 134 OP 1,000 33% 17 23 29 3,651 5,308 6,668 45 33 26 37 25 20 33% 43% 43% 29%
Laurus Labs LAURUS IN INR 556 292 Not rated NA NA 6 11 16 10,559 14,465 18,334 91 50 35 34 25 19 14% 35% 74% 6%
Piramal Pharma PIRPHARM IN INR 200 260 Not rated NA NA 1 4 6 14,508 19,041 23,416147 45 29 22 16 13 15% 25% 259% 4%
Neuland Labs NLL IN INR 11,534 146 Not rated NA NA 250 345 476 4,103 6,569 8,839 47 34 25 42 26 20 20% 24% 27% 31%
Average /median 76 46 33 35 25 20 18% 27% 30% 20%
Regional peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Asymchem 6821 HK HKD 56 31 Neutral 56 1% 3 4 5 1,353 1,760 2,162 19 15 12 16 12 10 2% -9% 16% 4%
Pharmaron Beijing 3759 HK HKD 16 47 UP 8 -49% 1 1 1 2,916 3,387 3,889 15 15 13 16 14 12 11% 9% 5% 10%
Wuxi Apptec 2359 HK HKD 61 183 Neutral 43 -30% 3 3 4 13,652 15,181 16,614 18 16 15 12 11 10 5% 3% 7% 17%
Wuxi XDC 2268 HK HKD 30 36 Neutral 18 -40% 1 1 1 1,009 1,462 2,026 44 31 22 30 21 15 47% 62% 25% 15%
Wuxi Bio 2269 HK HKD 23 95 Neutral 14 -39% 1 1 1 5,853 6,878 7,942 28 24 20 15 13 11 11% 15% 11% 7%
Samsung bio 207940 KS SKW 1,180,000 83,985 OP 1,260,000 7% 22,785 27,970 32,780 2,462,000 3,006,000 3,493,000 66 53 45 34 28 24 26% 24% 19% 12%
Average/ median 32 26 21 21 16 14 11% 12% 14% 11%
Global Peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Lonza LONN SW CHF 598 43 Not rated NA NA 17 20 24 2,215 2,562 2,969 36 30 25 21 18 16 13% 26% 12% 7%
Siegfried SFZN SW CHF 1,070 5 Not rated NA NA 36 40 45 288 319 354 30 27 24 18 16 15 6% 12% 8% 13%
ICON Plc ICLR US USD 183 15 Not rated NA NA 14 14 16 1,725 1,707 1,867 13 13 11 10 11 10 3% 7% 5% 8%
Charles River CRL US USD 153 8 Not rated NA NA 10 10 11 1,007 977 1,051 15 16 14 10 11 10 0% 2% 2% 8%
Bachem Holding BANB SW CHF 57 4 Not rated NA NA 2 2 3 174 210 297 36 31 23 23 19 14 19% 19% 17% 10%
Polypeptide Group PPGN SW CHF 22 1 Not rated NA NA 0 0 1 21 61 95 -64 67 21 39 14 9 15% -351% -244% -3%
Average/ median 11 31 20 20 15 12 9% 9% 7% 8%

Overall Average 41 35 25 26 19 16

Source: Bloomberg, Macquarie Research, February 2025

Closing price as of Feb 17, 2025. We use our own estimates for Indian CDMOs and Samsung Bio. We use median for EBITDA CAGR, EPS CAGR and ROIC.

18 February 2025 34
Macquarie Equity Research Indian CRDMO

Appendix

Divi's Laboratories is a prominent pharmaceutical company based in India, known for its
extensive work in the Active Pharmaceutical Ingredients (APIs) and intermediates segment.
Established in 1990 by Dr. Murali K. Divi, the company has grown to become one of the
leading players in the global pharmaceutical industry, with a strong focus on research and
development, manufacturing, and supply of high-quality pharmaceutical products.

Key Milestones in Divi's Laboratories' History

• 1990: Founded by Dr. Murali K. Divi, initially focusing on developing processes for APIs and
intermediates.
• 1995: Commissioned its first manufacturing facility in Hyderabad, India, marking the
beginning of its large-scale production capabilities.
• 2002: Established its second manufacturing facility in Visakhapatnam, further expanding its
production capacity and capabilities.
• 2003: Went public with an Initial Public Offering (IPO), listing its shares on the Indian stock
exchanges.
• 2010: Achieved significant milestones in regulatory approvals, including certifications from
the US FDA, EU GMP, and other international regulatory bodies.
• 2015: Expanded its research and development efforts, focusing on niche areas such as
peptides and nutraceuticals, enhancing its product portfolio.
• 2020: Celebrated 30 years of operations, with a strong presence in over 95 countries and a
robust pipeline of products catering to various therapeutic segments.

Business Model and Operations

Divi's Laboratories operates through two main business segments:

1. Generic APIs: Manufacturing and supplying generic APIs to pharmaceutical companies
worldwide. The company is known for its cost-efficient production processes and high-
quality standards, making it a preferred supplier for many global pharmaceutical firms.
2. Custom Synthesis: Providing custom synthesis and contract manufacturing services
to innovator pharmaceutical companies. This segment involves developing and
manufacturing APIs and intermediates as per the specific requirements of clients, often
for new drug entities under development.

Divi's Laboratories, a leading pharmaceutical company, operates two main manufacturing

facilities in India. The company has recently commissioned its Plant 3. The original facilities
are known for their large-scale production capabilities, adherence to stringent regulatory
standards, and commitment to quality.

1. Hyderabad Facility

• Location: Hyderabad, Telangana, India

• Commissioned: 1995
• Key Features:
Þ The Hyderabad facility was the first manufacturing plant established by Divi's
Laboratories.
Þ It focuses on the production of Active Pharmaceutical Ingredients (APIs) and
intermediates.
Þ The facility is equipped with state-of-the-art technology and infrastructure to support
large-scale manufacturing.
Þ It has received certifications from various international regulatory bodies, including the
US FDA and EU GMP.

2. Visakhapatnam Facility

18 February 2025 35
Macquarie Equity Research Indian CRDMO

• Location: Visakhapatnam, Andhra Pradesh, India

• Commissioned: 2002
• Key Features:
Þ The Visakhapatnam facility is the second major manufacturing plant of Divi's
Laboratories.
Þ It significantly expanded the company's production capacity and capabilities.
Þ The facility produces a wide range of APIs and intermediates, catering to both generic
and custom synthesis segments.
Þ It is designed to meet the highest standards of safety, quality, and environmental
sustainability.
Þ Like the Hyderabad facility, it has received approvals from several international
regulatory authorities.
Þ
• Research and Development: Both facilities are supported by advanced R&D centers that
focus on process innovation, new product development, and continuous improvement of
existing processes.
• Quality Assurance: Divi's Laboratories places a strong emphasis on quality assurance and
compliance. Both facilities adhere to strict quality control measures to ensure the highest
standards of product quality and safety.
• Environmental Sustainability: The company is committed to sustainable manufacturing
practices. Both facilities incorporate eco-friendly processes and technologies to minimize
their environmental impact.

Figure 41 - Divi's FY24 Geographic Revenue split Figure 42 - Divi's Lab shareholding pattern

North
India
America
13%
17%
RoW
5%

Asia Public Promoter &

13% 48% Promoter
Group
52%

Europe
52%

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

18 February 2025 36
Macquarie Equity Research Indian CRDMO

Key Quant Findings Alpha Model Decomposition

The quant model currently holds a strong positive view on The Macquarie Alpha is decomposed into its sector and
Divi's Laboratories. The strongest style exposure is Price market relative factor & styles exposures (a higher/better
Momentum, indicating this stock has had strong medium percentile is coded in green, whilst lower in red).
to long term returns which often persist into the future.
Percentile
The weakest style exposure is Valuations, indicating this relative to
stock is over-priced in the market relative to its peers.
sectors market
Factors / Styles (/1224) (/1021) Core factors in definition

ALPHA 97% 92% Built from the styles below

Macquarie Alpha Model: Key rankings VALUE 40% 17% Book, CF, Yield, Earnings Multiples

The Macquarie Quant’s flagship Alpha model is a dynamic ANALYST 76% 77% Revisions (Earnings, Recommendations)
multi-factor model based on a staple of quant factors such MOMENTUM 99% 95% Price Momentum
as value, momentum, revisions, quality, and risk.
GROWTH 29% 27% EPS, Sales (Forecast, Historic)
Global Market (Country) Sector
PROFITABILITY 83% 71% ROE, Margin, Asset Turnover
Pharma, Biotech
Whole Universe India
& Life Sciences QUALITY 92% 87% Accruals, Earn Stability, Cash Conversion
Macquarie Alpha
1061/17780 81/1021 41/1224 CAPITAL 75% 49% Investment/Capex, Net share issuance
Model
LIQUIDITY 97% 95% Size, Turnover, Analyst Coverage
Fundamental
9414/17780 589/1021 688/1224
(Consensus) *
LOW RISK 67% 82% Beta, Volatility, Earn.Cert, Leverage

TECHNICAL 7% 5% MACD, RSI, Bollinger, Williams R, etc

* based on Total Shareholder Return = Consensus Price target / Current Price

Current and Historical Alpha Model Rank Factors driving the Alpha Model vs peers
The chart shows the Macquarie Alpha model market ranking For the comparable firms this chart shows the key underlying
against the company’s peers and over recent history. styles and their contribution to the current overall raw Alpha
score.
100%

Most Attractive
75% Sun Pharmaceutical

Lupin
50%
Cipla

25% Divi's Laboratories

Least Attractive Dr. Reddy's Labs

0% Biocon
Piramal Biocon Dr. Reddy's Divi's Cipla Lupin Sun
Enterprises Labs Laboratorie Pharmaceut
Piramal Enterprises
s ical

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0

5 Year Ago 3 Year Ago 1 Year Ago Current
VALUE PROFITABILITY MOMENTUM LOW RISK & LIQUIDITY ALPHA
GROWTH ANALYST QUALITY & CAPITAL

Drivers of Stock Return

Macquarie Style Returns over last year
Breakdown of 1-year total return (local currency) into returns
from dividends, changes in forward earnings estimates and Recent performance to Macquarie style factors
the resulting change in earnings multiple. Monthly Factor Long-Short Returns for

Last 5 Last 10
Jan - Dec - Nov - Oct - Sep - Aug - Jul - Jun - May - Apr - Mar - Feb - Years Years
Asia Ex JP
25 24 24 24 24 24 24 24 24 24 24 24 (ann) (ann)
Sun Pharmaceutical

Lupin ALPHA 1% 7% 1% -1% -19% 5% -2% 6% 0% 2% 3% -3% 6% 5%

Cipla VALUE 1% 5% 1% -2% 1% 3% -2% 0% 3% 3% 0% -6% 6% 4%

Divi's Laboratories ANALYST 3% 6% 0% 2% -7% 1% -3% 4% -2% 1% 3% 4% 14% 10%

Dr. Reddy's Labs MOMENTUM -1% 4% 2% 1% -23% 3% -2% 9% 2% 0% 3% -6% 4% 2%

Biocon
GROWTH 0% 5% 2% -1% 0% -2% 0% 1% -2% 0% 2% 5% -1% 0%

Piramal Enterprises
PROFITABILITY 1% 4% 0% -3% -3% 3% -2% 1% 1% 1% -1% -1% -6% -2%

-80% -30% 20% 70% QUALITY 1% 4% 1% -1% -1% 0% -4% 1% 1% 2% 0% 1% -2% 0%

Dividend Return Multiple Change Forecast Earnings 1Yr Total Return
Change CAPITAL -1% 1% 1% -1% 1% 1% -1% -2% 1% 3% 0% -2% 0% -3%

LIQUIDITY 0% -1% 2% -3% -13% 4% -1% 5% 1% 0% 1% -6% -2% 0%

LOW RISK -1% 4% 2% -3% -9% 4% 3% 3% 0% 2% 1% -7% -2% -2%

Source (all charts): FactSet, Refinitiv, and Macquarie Quant. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global
Quantitative Team: [email protected]. Explanation for items on this page can be found at https://www.macquarieinsights.com/rp/d/r/p/OTUyMzg1

18 February 2025 37
Macquarie Equity Research
18 February 2025

Healthcare

Pharma, Biotech & Life Sciences

Suven Pharmaceuticals India

Initiation: India CDMO tech leader

Dr. Kunal Jun
Key Points Dhamesha, MBBS Choi

• Suven Pharma is set to benefit from high-growth cutting-edge CDMO SUVENPHA IN Outperform
segments and its proven track record to drive traditional business. Price (at 18 Feb 2025) INR1,088
• The company has a solid antibody-drug conjugate (ADC) CDMO 12-month target
12-month TSR (%)
INR1,500
37.8
platform and is building capabilities in the Oligonucleotide segment. Volatility Index Medium
• We initiate at Outperform, with its earnings (+Cohance) set to grow Market Cap (Local) (m) 277,018
sixfold (~6x) by FY30E off a FY24 base. Market Cap (USD) (m) 3,189
Free Float (%) 40
30-day avg turnover (USD) (m) 3.5

Building a high-tech product led CDMO: Suven is set to merge with Investment Fundamentals
Cohance in an all-stock deal (deal close in 1QFY26) to create a high- Year end 31 Mar 2024A 2025E 2026E 2027E
tech CDMO platform focusing on high-growth segments like ADCs, while Revenue (bn) 23,922 26,250 35,217 44,578
reinforcing its small molecules CDMO business. We expect the top and Revenue growth (%) (10.7) 9.7 34.2 26.6
EBIT (bn) 6,541 7,242 9,454 13,667
bottom line to grow ~4x and ~6x (FY24-30E) owing to a) rapid growth in EBIT growth (%) (24.6) 10.7 30.5 44.6
ADCs and Oligos segments ; b) accelerated addition of commercial as well Reported profit (bn) 4,987 5,791 7,208 10,600
as Ph-3 molecules to its portfolio; and c) recovery in Spec chem and API+ Adjusted profit (bn) 4,987 5,791 7,208 10,600
segments. EPS rep [INR] 12.8 14.9 18.5 27.2
EPS rep growth (%) (26.4) 16.1 24.5 47.1
Leading player in ADC segment: Suven holds a global leadership in EPS adj [INR] 12.8 14.9 18.5 27.2
Camptothecin-based ADC, where it supplies payloads for two commercial EPS adj (¢) 12.8 14.9 18.5 27.2
EPS adj growth (%) (26.4) 16.1 24.5 47.1
products, accounting for one-third of total ADC market value. With the
Net debt/equity (%) (13.4) (1.4) (8.8) (18.4)
addition of Auristatin platform, it could address 80%+ of the clinically active ROA (%) 18.1 17.8 20.2 24.2
ADC pipeline. We expect its ADC segment to deliver a ~45% CAGR through ROE (%) 17.1 17.1 17.8 21.5
to FY30E. PER rep (x) 85.0 73.2 58.8 40.0
PER adj (x) 85.0 73.2 58.8 40.0
Ramp up in capacity utilisation to improve profitability: Suven has EV/EBITDA (x) 53.9 48.2 36.5 26.4
nearly doubled its gross block with organic and inorganic capacity additions. P/BV (x) 13.3 11.2 9.4 7.6
Total div yield (%) 0.0 0.0 0.0 0.0
Improved capacity utilisation of new assets is set to expand EBITDA
margins by ~1,000bps and increase ROCE to 30%+ by FY30E from ~20% in Quant (rank vs. global sector) 108/1,224
FY24.
Jun Choi's view on Suven: Suven has positioned itself in the highly
attractive ADC segment, which is validated by Samsung Bio's recent
announcement of its interest in this area. While Samsung Bio is preparing
to enter the segment, its primary focus remains on antibody (mAb)
production, which aligns with its core expertise.

Valuation: We value the stock at 37x EV/EBITDA on FY27E EBITDA to

arrive at our target price of Rs1,500, which is supported by our DCF
analysis. SUVENPHA IN rel BSE Sensex
performance, & rec history
Catalysts: Successful close of merger, Growth in commercial molecule
portfolio, Rapid growth in niche segments such as ADC and Oligos

Investment Thesis and Recommendation

Suven Pharma is poised to capitalise on high-growth, tech-intensive
CDMO segments like ADCs and Oligos, while leveraging its proven track
record to drive growth in its small molecule and Spec chem CDMO
businesses. We expect its bottomline to witness ~6x growth by FY30E Source: FactSet, Macquarie Research, Feb 2025 (all figures in
INR unless noted, TP in INR)
from the FY24 base.

18 February 2025 38
Macquarie Equity Research Indian CRDMO

Key Risks to Investment Thesis Company Description

• Inability to add more commercial projects on Pharma Suven Pharma specializes in advanced CDMO services, with
CDMO business significant capabilities in ADCs and oligonucleotides. The
• Slower recovery in Specialty Agri chem business company has strengthened its portfolio by acquiring NJ
Bio and Sapala. Suven operates multiple state-of-the-art
• Adverse plant issues
manufacturing plants, ensuring high-quality production.
Key segments include pharmaceuticals, biotechnology, and
specialty chemicals, positioning Suven for robust growth in
the evolving market.

Figure 1 - Suven + Cohance revenue YTD FY25 Figure 2 - We expect Suven's bottom-line to grow
~6x by FY30e

Pharma CDMO, 30,000

API+, 48% 44% 25,000
20,000
15,000
10,000
5,000
0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E
Specialty chemical, 8%
PAT (Rs mn)

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie research, February 2025

Suven Pharmaceuticals (SUVENPHA IN) INR/(bn) unless otherwise noted

Income Statement Mar FY 2024A 2025E 2026E 2027E Q3/25A Q4/25E Balance Sheet 2024A 2025E 2026E 2027E
Revenue 23,922 26,250 35,217 44,578 6,764 8,613 Cash 9,440 3,632 6,819 12,717
Cost of Goods Sold 8,006 8,269 10,874 13,046 1,925 2,995 Receivables 6,469 6,562 8,804 10,699
Gross Profit 15,916 17,981 24,343 31,533 4,839 5,618 Inventories 5,986 6,300 8,452 10,253
EBITDA 7,680 8,590 11,330 15,660 2,565 2,632 Investments 0.0 0.0 0.0 0.0
Depreciation 1,139 1,348 1,876 1,994 409.0 327.3 Fixed Assets 14,355 23,611 24,252 26,049
Amortisation 0.0 0.0 0.0 0.0 0.0 0.0 Intangibles 728.0 728.0 728.0 728.0
EBIT 6,541 7,242 9,454 13,667 2,156 2,305 Other Assets 1,764 1,764 1,764 1,764
Net Interest Income (406.0) (454.4) (261.3) (113.1) (108.0) (148.4) Total Assets 38,742 42,597 50,820 62,209
Associates 0.0 0.0 0.0 0.0 0.0 0.0 Payables 2,418 2,649 3,822 4,916
Exceptionals 0.0 0.0 0.0 0.0 0.0 0.0 Short Term Debt 0.0 0.0 0.0 0.0
Forex Gains / Losses 0.0 0.0 0.0 0.0 0.0 0.0 Long Term Debt 5,272 3,105 2,947 2,643
Other Pre-Tax Income 833.0 858.9 417.8 579.5 194.0 234.9 Other Liabilities 0.0 0.0 0.0 0.0
Pre-Tax Profit 6,968 7,647 9,610 14,133 2,242 2,392 Total Liabilities 7,690 5,754 6,769 7,559
Tax Expense (1,981) (1,856) (2,403) (3,533) (561.0) (597.9) Shareholders' Funds 31,052 36,843 44,050 54,650
Net Profit 4,987 5,791 7,208 10,600 1,681 1,794 Minority Interests 0.0 0.0 0.0 0.0
Minority Interests 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0
Reported Earnings 4,987 5,791 7,208 10,600 1,681 1,794 Total S/H Equity 31,052 36,843 44,050 54,650
Adjusted Earnings 4,987 5,791 7,208 10,600 1,681 1,794 Total Liab & S/H Funds 38,742 42,597 50,820 62,209
Basic Shares Outstanding 380.8 380.8 380.8 380.8 380.8 380.8 Net Debt / Equity (%) (13.4) (1.4) (8.8) (18.4)
Diluted Shares Outstanding 389.7 389.7 389.7 389.7 389.7 389.7 Interest Cover (x) 16.1 15.9 36.2 120.8
EPS (rep) [INR] 12.8 14.9 18.5 27.2 4.3 4.6 ROE (%) 17.1 17.1 17.8 21.5
EPS (adj) [INR] 12.8 14.9 18.5 27.2 4.3 4.6 ROA (%) 18.1 17.8 20.2 24.2
Total DPS [INR] 0.0 0.0 0.0 0.0 0.0 0.0 ROIC (%) 18.9 20.4 19.5 25.5
Ratio 2024A 2025E 2026E 2027E Cash Flow Analysis 2024A 2025E 2026E 2027E
Revenue Growth (%) (10.7) 9.7 34.2 26.6 - - EBITDA 7,680 8,590 11,330 15,660
EBITDA Growth (%) (20.6) 11.9 31.9 38.2 - - Tax Paid (1,981) (1,856) (2,403) (3,533)
EBIT Growth (%) (24.6) 10.7 30.5 44.6 - - Chgs in Working Cap 0.0 176.4 3,221 2,601
EPS Growth (adj) (%) (26.4) 16.1 24.5 47.1 - - Net Interest Paid 0.0 0.0 0.0 0.0
Gross Profit Margin (%) 66.5 68.5 69.1 70.7 - - Other (5,699) (311.8) (6,530) (5,319)
EBITDA Margin (%) 32.1 32.7 32.2 35.1 - - Operating Cashflow 0.0 6,599 5,619 9,409
EBIT Margin (%) 27.3 27.6 26.8 30.7 - - Acquisitions 0.0 7,918 0.0 0.0
Net Profit Margin (%) 20.8 22.1 20.5 23.8 - - Capex (2,607) (2,557) (2,430) (3,674)
Payout Ratio (%) 0.0 0.0 0.0 0.0 - - Other 0.0 (15,835) 0.0 0.0
PE (rep) (x) 85.0 73.2 58.8 40.0 - - Investing Cashflow (2,607) (10,475) (2,430) (3,674)
PE (adj) (x) 85.0 73.2 58.8 40.0 - - Dividend (Ordinary) 0.0 0.0 0.0 0.0
EV/EBITDA (x) 53.9 48.2 36.5 26.4 - - Equity Raised 0.0 0.0 0.0 0.0
EV/EBIT (x) 63.3 57.1 43.8 30.3 - - Debt Movements 0.0 (2,167) (157.8) (304.4)
Price/Book (x) 13.3 11.2 9.4 7.6 - - Other 0.0 2,167 157.8 (1,145)
Total Div Yield (%) 0.0 0.0 0.0 0.0 - - Financing Cashflow 0.0 0.0 0.0 (1,450)
Net Chg in Cash/Debt (2,607) (3,876) 3,189 4,286
Free Cashflow (2,607) 4,042 3,189 5,735
Source: Company data, Macquarie Research Feb 2025

18 February 2025 39
Macquarie Equity Research Indian CRDMO

Suven is focusing on high Transforming in to a high growth, tech led Product CDMO
growth CDMO segments
such as ADC, Oligos,
Suven Pharma has transformed itself from a traditional small molecule CDMO company to
PROTACs.
a technology-driven CDMO company focusing on high growth areas such as ADCs, Oligo and
PROteolysis Targeting Chimera (PROTACs). The company has been adding to its capabilities
in these areas through organic as well as inorganic route while continuing to grow its
core small molecules CDMO business. We expect these niche technology segments offer
meaningful growth due to: a) fastest growth in these segments vs overall CDMO market; b)
increasing TAM by addition of niche capabilities; and c) strong relationship with innovator
pharma companies working in these segments. We expect the company's revenue (proforma
Suven + Cohance) to grow fourfold (~4x) by FY30E on FY24 base.

Cohance merger and NJ Bio brings a solid ADC platform

Suven's merger with Cohance Life Sciences and its recent acquisition of NJ Bio has brought a
solid ADC platform to the company. We expect ADC business to be a primary growth driver
for the combined entity as we build in a ~45% top-line CAGR in ADC business, primarily
driven by: a) rapidly expanding ADC market; b) ramp up in existing molecule supplies; c)
commercialisation of pipeline molecules by partners.

Figure 3 - Suven ADC +NJ Bio revenue estimate Figure 4 - Suven-Cohance merger and NJ Bio
acquisition
40,000
Cohance NJ Bio

35,000
Announcement date Feb 29, 2024 Dec 7, 2024
30,000

Cohance shareholders will be issued

25,000 Suven pharma shares at the ratio of 11
US$49.4mn for buying 49.4% stake from
shares of Suven (face value Rs 1) for
existing minority shareholders+US$15mn
20,000 Deal value (US$mn) every 295 shares of Cohance (face value
primary equity infusion; will be mainly
of Rs 10). Post merger, Advent group
used for capex
holds 66.7% while public shareholders
15,000 retain 33.3% in Suven.

10,000 56% with a call and put options to acquire

Stake acquired (%) 100%
additional stake
5,000
Cash/ stock All Stock Cash
0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E Deal close Expected in Q1FY26 Q3FY25

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 40
Macquarie Equity Research Indian CRDMO

What are Antibody Drug Conjugates (ADCs)?

ADC is composed of antibody, cytotoxic payload and chemical linker. It combines both the
advantages of highly specific targeting ability and highly potent killing effect to achieve
accurate and efficient elimination of cancer cells, which has become one of the hotspots
for research and development of anticancer drugs. An ideal ADC drug remains stable in
blood circulation, reaches the therapeutic target accurately, and eventually releases the
cytotoxic payloads in the vicinity of the targets (e.g. cancer cells). Currently, the company
has capabilities to supply both cytotoxic payload and linker.

Figure 5 - The structure and characetristics of an ADC

Source: Fu, et al., 2022

Newer generation ADCs have Antibody-Drug Conjugates (ADCs) have made substantial progress by building on the
higher efficacy and lower side experiences of earlier generations and integrating advanced biotechnologies. First-
effects. generation ADCs used traditional chemotherapy agents with unstable linkers, resulting in
limited efficacy and higher toxicity. Second-generation ADCs incorporated more potent
cytotoxins like microtubule inhibitors and utilised chimeric or humanised antibodies
for better targeting, but still faced issues with random coupling methods leading to
inconsistency. The advent of site-specific coupling technology in third-generation ADCs has
provided a broader therapeutic window and greater flexibility for personalised treatment.
These advancements have significantly improved tumour targeting, circulation stability, and
anticancer activity. The future of ADCs looks promising with ongoing enhancements in their
components and coupling techniques, highlighting their vast potential in cancer therapy.
While ADCs are primarily known for targeted cancer therapies, their high specificity and
controlled drug delivery mechanisms are now being explored for non-oncology indications.
By combining monoclonal antibodies (mAbs) with potent payloads, ADCs enable precise drug
delivery, minimising systemic toxicity. Emerging applications include autoimmune diseases
(targeting immune cells in conditions like rheumatoid arthritis and lupus), infectious diseases
(delivering antimicrobial agents to specific pathogens), and neurodegenerative disorders
(targeting amyloid plaques in Alzheimer’s disease). Additionally, ADCs are being studied for
ophthalmic diseases (such as age-related macular degeneration) and fibrosis treatments,
opening new possibilities beyond oncology. These advancements position ADCs as a versatile
therapeutic platform for precision medicine in multiple disease areas.

18 February 2025 41
Macquarie Equity Research Indian CRDMO

Figure 6 - Generations of ADC Drugs technologies

Source: Fu, Z., Li, S., Han, S. et al. Antibody drug conjugate: the “biological missile” for targeted cancer therapy. Sig Transduct Target Ther 7, 93 (2022).

18 February 2025 42
Macquarie Equity Research Indian CRDMO

ADC drugs have witnessed ADC market is expected to grow multifold

their sales jump to ~US
$10+bn in 2023 vs US$2bn in
Frost & Sullivan's analysis indicates that the global Antibody-Drug Conjugate (ADC) market
2018
has grown significantly, from US$2bn in 2018 to US$$10+bn in 2023, with a compound
annual growth rate (CAGR) of ~39%. The market is projected to continue expanding at a
CAGR of ~30%, reaching $65+bn by 2030. Ramp up in existing molecules as well as approval
of new molecules is set to drive this rapid growth.
Since the first ADC entered clinical trials in the 1980s, advancements in biopharmaceutical
technology and a deeper understanding of diseases have driven substantial progress in this
field. ADCs have notably improved in safety and efficacy, with 16 ADCs currently approved
for market use by the US FDA. In 2023, the top-five ADC drugs by global sales were Enhertu,
Kadcyla, Adcetris, Padcev, and Trodelvy, each surpassing US$1bn in sales. HER2-targeted
ADC drugs dominated the market, capturing ~46% of the market share.

Figure 7 - Global ADC Market size and Forecast, 2018- 2030e (in USD bn)

70

60

50

40

30

20

10

0
2018 2019 2020 2021 2022 2023 2024 2025e 2026e 2027e 2028e 2029e 2030e

Source: Company Reports, Macquarie research, February 2025

Figure 8 - Global ADC sales by Drug name, 2023 Figure 9 - Global ADC Sales by Target, 2023

Others, 7%
Others, 16%
Enhertu, 24% CD79b, 9%

Trodelvy, 11%
TROP2, 11%
HER2, 46%

Padcev, 11%
Kadcyla, 22% Nectin-4, 11%

Adcetris, 16%

CD30, 16%

Source: Frost & Sullivan, February 2025 Source: Frost & Sullivan, February 2025

18 February 2025 43
Macquarie Equity Research Indian CRDMO

Majority of large pharma Rapidly expanding ADC pipeline

companies are now investing
in ADCs
The ADC drug pipeline is rapidly expanding with molecules under clinical development
jumping from 9 in 2006 to 279 as of September 2024. Additionally, there are 316 discovery
programs which would drive further growth in clinical pipeline. The company expects this
pipeline to expand to 800+ molecules in clinical trials and 500+ discovery program by 2029.
There are 16 approvals by the US FDA.

Figure 10 - ADC drug pipeline has expanded Figure 11 - ...and expected to growth further
rapidly...
600
300
500

250
400

200
300

150 200

100 100

50 0
Pre-clinical Phase I Phase II Phase III

0 2020 2024 2029e

Source: Frost & Sullivan, February 2025

Source: Frost & Sullivan, February 2025

*2024 YTD

ADC segment has witnessed ADC CDMO market on track to grow multifold
high proportion of
outsourcing due to
Frost and Sullivan estimates the ADC CDMO market will grow ~7x to ~US$11bn by 2030
technological complexity.
from US$1.5bn in 2022. The production and preparation of Antibody-Drug Conjugates
(ADCs) involve intricate processes, presenting unique challenges in manufacturing, quality
control, non-clinical research, and clinical trials. These complexities have driven a growing
demand for outsourcing in both production and research stages. According to Frost &
Sullivan, the outsourcing rate for ADC production is ~70%, compared to 34% for other
biopharmaceuticals. Notably, 13 out of the 15 globally approved ADC drugs have been
manufactured by outsourcing service providers, often involving multiple providers.

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Macquarie Equity Research Indian CRDMO

Figure 12 - ADC CDMO market to grow multifold Figure 13 - ADC outsourcing is high due to
complexity
Global ADC CDMO Market Size (in USD bn)
12
100%
10 90%
80%
8 70%
60%
6 50%
40%
4 30%
20%
2
10%
0%
0 ADC Other Biopharma
2018 2022 2026e 2030e
Outsourcing In-sourcing
Source: Frost & Sullivan, February 2025

Source: Frost & Sullivan, February 2025

Outsourcing proportion refers to the actual outsourced market size/ the

theoretical market size that related enterprises could outsource

Out of the 15 globally Figure 14 - Approved ADC Globally and Outsourcing status
approved ADCs, 13 have Drug Name Company Outsourcing status
Whether Outsourced to Multiple Suppliers
had their manufacturing Mylotarg Pfizer/ Wyeth N -
outsourced either fully or Adcetris Seagen/Takeda Y Y

partially to CDMOs. Kadcyla Genentech/ Roche Y Y

Besponsa Pfizer/ Wyeth N -
Lomoxiti Astrazeneca Y Y
Polivy Genentech/ Roche Y N
Padcev Astellas/Seagen Y Y
Enhertu AstraZeneca/ Daiichi Sankyo Y Y
Trodelvy Gilead Y Y
Blenrep GlaxoSmithKline Y Y
Akalux Rakuten Medical Y NA
Zynlonta ADC Therapeutics Y Y
Aidixi RemeGen Y NA
Tivdak Genmab/Seagen Y N
ELAHRE ImmunoGen/Huadong Medicine Y NA

Source: Frost & Sullivan, Macquarie research, February 2025

Suven has added a strong Suven's primary focus on Payload; NJ Bio adds Linker and Bioconjugation
linker and bioconjugation segments
platform to complement its
payload franchise
Earlier, Suven only focused on payload segment (through Cohance), but with addition of NJ
Bio, the company also has capabilities in linker and bioconjugation segments. Further, the
company can now provide end-to-end services from discovery to commercialisation.
According to the company, payload, linker and bioconjugation segments constitute c.50% of
the ADC CDMO market. We anticipate that this segment will grow at a comparable rate to
the overall ADC CDMO market, which is projected to have a compound annual growth rate
(CAGR) of around 30%. Specifically, we expect Suven's ADC business revenue to increase at a
CAGR of ~45%, driven by several factors: the ramp-up in supplies for existing commercialised
molecules, the addition of Auristatin-based payloads to the platform, and the enhancement
of linker capabilities through the acquisition of NJ Bio.

18 February 2025 45
Macquarie Equity Research Indian CRDMO

Figure 15 - NJ Bio acquisition offers complementary capabilities in ADC

Source: Company Reports, Macquarie Research, February 2025

Figure 16 - ADC CDMO market split (in USD bn) Figure 17 - Suven's addressable market to grow
3 >4x

2 6.0
1.36 6

1 0.61
5
0.43
0.31 2.73
0
2024 4
Payload/ Linker
mAB segment, and
Bioconjugation, 3
1.38
1.36 Combined
1.9
2 SAM $1.4bn
1.36
adds linker
1 0.61 and
0.43 bioconj.) 1.37

0 0.31
2024 2030e

Payload Linkers Bioconjation

Source: Company Reports, Macquarie research, February 2025

Source: Company Reports, Macquarie research, February 2025

18 February 2025 46
Macquarie Equity Research Indian CRDMO

ADC payloads are agents Payload is the most critical part of an ADC
that drive the desired
outcomes
The cytotoxic payload, often referred to as the "warhead," becomes active after the ADC is
internalised into cancer cells. Since only about 2% of an ADC reaches the targeted tumour
sites following intravenous administration, the compounds used as payloads must be highly
potent, with IC50 values in the nanomolar and picomolar range. These compounds also
need to be stable under physiological conditions and possess functional groups available
for conjugation with the antibody. Suven's differentiation here is chemical synthesis of
camptothecin-based payload with the highest purity and long stability.
Early ADCs used traditional chemotherapeutic agents as their cytotoxic payloads, but
these were not potent enough to produce a significant anticancer effect. Additionally, the
structural conformation of an antibody limits the amount of payload that can be carried by
the ADC construct. Currently, the cytotoxic payloads used in ADCs mainly include potent
tubulin inhibitors, DNA-damaging agents, and immunomodulators. (Fu, et al., 2022).

Figure 18 - Payloads used in ADCs

Categories Names Mechanisms Potency (IC50 or EC50)
Promote tubulin polymerizationand target at the β subunits of tubulin
Auristatins 0.05-0.1nM
dimer to perturb microtubule growth

Tubulin inhibitors Block the polymerization of tubulin dimer and inhibit the formation of
Maytansinoids 0.05–0.1 nM
mature microtubules

Tubulysins Inhibit tubulin polymerization 0.1–1 nM

DNA double strand break: bind with DNA in the minor groove and cause
Calicheamicins 0.1–1 nM
strand scission

DNA alkylation: bind to the minor groove of DNA and alkylate the
Duocarmycins 1–10 pM
nucleobase adenine at the N3 position

DNA damaging agents Topoisomerase I inhibitor: bind to the topoisomerase I and DNA complex
Exatecans and prevent DNA re-ligation and therefore causes DNA damage which 1-10 nM
results in apoptosis

Pyrrolobenzodiaz Crosslinking of DNA: produce DNA interstrand cross-links with high

0.1-1 pM
epines efficiency in both naked DNA and in cells.

Potent stimulation of innate and adaptive immunity as well as their

TLR agonists ~1 μM
effects on the tumor microenvironment
Immunomodulators
Promote activation of type I interferons and other inflammatory
STING agonists ~100nM
cytokines

Source: Macquarie Research, February 2025

18 February 2025 47
Macquarie Equity Research Indian CRDMO

Within approved ADCs, Camptothecin based payloads: a core competency

Camptothecin based ADCs
account for 1/3 of market
Suven Pharma (Cohance Lifesciences) was the first company to develop a synthetic route
value
for the large-scale production of camptothecin-based payloads. The company remains the
primary global supplier of camptothecin-based payloads. We believe that camptothecin-
based payloads will be the primary growth drivers in the ADC business due to: a) sales ramp-
up of existing products through label expansion, b) on-boarding of new customers, and c)
moving up the value chain for designer payloads utilising NJ Bio's capabilities.
Camptothecin is a naturally occurring alkaloid derived from the Chinese tree Camptotheca
acuminata, and it exerts its anti-cancer effects by inhibiting the enzyme topoisomerase I.
This inhibition leads to DNA damage and ultimately cell death, particularly in rapidly dividing
cancer cells. Common derivatives of camptothecin used in ADCs include SN-38 (the active
metabolite of irinotecan) and exatecan. These derivatives are often preferred due to their
improved solubility, stability, and therapeutic index compared to the parent compound.
The company is the sole supplier of payloads (SN-38 and S-trione) to two key innovator
companies (Innovator 1 and Innovator 2) which together account for one-third of total ADC
drug sales currently.

Suven's partners are Meaningful ramp up in existing supplies

witnessing rapid sales growth
for their products
As there are only two ADCs currently approved with camptothecin-based payload, we
believe the company supplies payload/ payload intermediate for Enhertu and Trodelvy. These
products together account for ~33% of total ADC based drug sales globally (Figure 8)
We expect Suven's existing payload supplies to their partners (Innovator 1 and Innovator
2) to ramp up ~4x through 2030e as sales of grow. According to VisibleAlpha consensus,
Enhertu sales are expected to grow >5x by FY30 on FY23 base. Similarly, Trodelvy sales are
expected to grow ~3x by 2030 on 2024 base.

Figure 19 - Enhertu sales (in USD mn) Figure 20 - Trodelvy sales ( in USD mn)

10,000 3,000

9,000
2,500
8,000

7,000
2,000
6,000

5,000 1,500

4,000
1,000
3,000

2,000
500
1,000

0 0

Source: Visible alpha, Copany reports, Macquarie Research, February 2025 Source: Visible alpha, Copany reports, Macquarie Research, February 2025

Figure 21 - Currently FDA approved indications for Enhertu and Trodelvy

Product Indication FDA approval date
Enhertu a. Unresectable or metastatic HER2-positive (IHC 3+ or ISH positive) breast cancer May 6, 2022
b. Unresectable or metastatic HER2-low (IHC 1+ or IHC 2+/ISH-) breast cancer Aug 6, 2022
c. Unresectable or metastatic non-small cell lung cancer (NSCLC) Aug 12, 2022
d. Unresectable or metastatic HER2-positive (IHC 3+) solid tumors Apr 6, 2024

e. Locally advanced or metastatic HER2-positive (IHC 3+ or IHC 2+/ISH positive) gastric

Jan 27, 2025
or gastroesophageal junction (GEJ) adenocarcinoma

Trodelvy a. Previously treated Triple-negative breast cancer Apr 22, 2020

b. First treatment of Triple-negative breast cancer Apr 7, 2021
c. HR+/ HER2-Metastatic breast cancer Feb 3, 2023

Source: FDA, Macquarie Research, February 2025

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Macquarie Equity Research Indian CRDMO

Suven's partners are We expect growth in these molecules (Enhertu and Trodelvy) to be driven from sales ramp
conducting multiple up in existing indications, addition of indications through label expansion and launch in new
additional clinical studies for geographies post successful trials. Innovator 1 is currently conducting 15 clinical studies
label expansion for Enhertu. Of these 15 clinical trials, seven are Phase 3, one Phase 2 and seven Phase
1 studies. Additionally, Enhertu is awaiting approval for two indications in China. Similarly,
Innovator 2 is conducting 9 additional clinical trials for Trodelvy including five phase 3 and
four Phase 2 studies.

Figure 22 - Enhertu Clinical Trials in progress Figure 23 - Trodelvy Clinical Trials in progress

8 6

7
5
6
4
5

4 3

3
2
2
1
1

0 0
Phase I Phase II Phase III Regulatory Phase Phase II Phase III

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

One of the Innovator Additional products at existing partners to drive further growth
partnered with Suven has
multiple ADCs in pipeline
We believe Suven would continue to supply payload intermediate to Enhertu Innovator
with same camptothecin
for four of its ADC pipeline molecule which uses Deruxtecan, same payload as Enhertu.
based payload
Innovator company is conducting 30 clinical studies for these molecules including 12 phase
3, 7 phase 2 and 11 phase 1 studies.
The company's pipeline molecule Dato-DXd (Datroway) was recently approved by the
US FDA for the treatment of adult patients with unresectable or metastatic, hormone
receptor (HR)-positive, human epidermal growth factor receptor 2 (HER2)-negative (IHC 0,
IHC 1+ or IHC 2+/ISH-) breast cancer who have received prior endocrine-based therapy and
chemotherapy for unresectable or metastatic disease

Figure 24 - Partner Innovator's ADC pipeline clinical trials

12

10

0
Datroway HER3-DXd 1-DXd DS-6000 (R-DXd)

Phase I Phase II Phase III Regulatory phase

Source: Company Reports, Macquarie Research, February 2025

New customers and NJ Bio's capabilities to bolster growth

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Macquarie Equity Research Indian CRDMO

The company is actively collaborating with multiple innovator companies to supply

camptothecin-based payloads. These payloads constitute approximately 40% of Antibody-
Drug Conjugates (ADCs) currently undergoing clinical trials (where the payload is disclosed),
presenting a significant opportunity to onboard a diverse clientele.
These new payloads are under qualification process and supplies could start in near-
term. Recent disclosure from the company suggests that the company has added three
customers and new products in ADC segment. Our analysis of exports data suggests
that the company has supplied small quantities of camptothecin based payload/paylod
intermediates to companies such as Seagen (acquired by Pfizer (not rated) last year), and
to CDMOs such as Seripharm, Veranova LP and Galena Pharma. Additionally, the company
will be offering access to 2,000 camptothecin based derivatives which could drive more
customers on boarding for Suven + NJ Bio.

Suven has also developed Adjacent payloads could add to growth momentum
Auristatin based paylaod
platform and are currently
Beyond Camptothecin-based payloads, the company is also working on Auristatin-based
under qualification stage
payloads. The auristatins are synthetic analogues based off the natural product dolastatin
10 and are currently being used in the marketed ADCs Brentuximab Vedotin (Adcetris),
Enfortumab Vedotin (Padcev), and Polatuzumab Vedotin (Polivy). Auristatins are potent
microtubule-disrupting agents and have many synthetic analogues available. Since they are
pentapeptides, auristatins are highly modular and can be attached to antibodies using all
types of linkers and linking strategies.
Common derivatives like Monomethyl auristatin E (MMAE) and Monomethyl auristatin F
(MMAF) are used for their high potency and targeted delivery to cancer cells, minimising
damage to healthy tissues and enhancing the therapeutic index of the treatment. As per
export data, the company has supplied small quantity of MMAE to Selvita services, a CDMO
based out of Poland.

Figure 25 - Suven could address ~70% of current ADC pipeline through

Camptothecin and Auristatin chemistry

ADC pipeline by payload types

100%
90%
80%
Directly Addressable by

70%
60%
50%
40%
30%
Suven

20%
10%
0%
Total Preclinical Clinically active Added in 2024
Topoisomerase I inhibitor payloads Tubulin inhibitor payloads Other payload mecanism

Source: Beacon intelligence

NJ Bio acquisition inceases Linker capabilities from NJ Bio to add to growth momentum
Suven's TAM in ADC segment
by ~7x
In December 2024, Suven Pharma (Cohance Lifesciences) acquired a 56% stake in NJ Bio, a
CRDMO specialising in ADC and related technologies. NJ Bio provides cutting-edge solutions
across the ADC value chain and has successfully served over 150 customers, delivering more
than 500 projects over the past five years. NJ Bio has developed an extensive library of 550+
payload-linkers and offers ‘Express Conjugation’ service that allows to establish proof of
concept for a novel ADC. Additional investments are being made towards R&D for novel
payload linkers and new technologies.
We project NJ Bio's revenue to grow sevenfold (7x) by FY30E on FY25E estimates of ~US
$32mn. This growth is expected to be primarily driven by the enhanced utilisation of NJ Bio's
capabilities through Suven's commercial ADC platform. Moreover, we also expect meaningful

18 February 2025 50
Macquarie Equity Research Indian CRDMO

improvement in NJ Bio's profitability as the business scales. NJ Bio's profitability has already
expanded to mid-teens levels vs. earlier expectation of ~10% in CY24.

Linkers are critical in ADC

Linkers connect the antibody and the cytotoxic payload and are a key component in the
function of ADCs. The linker imparts the following characteristics to ADCs: (1) high stability in
the circulation; and (2) specific release of payload in the target tissue. NJ Bio has developed
an extensive library of payload linkers.
Types of linkers: Linkers are divided into cleavable and non-cleavable types. Cleavable linkers
have a biological weak point that releases a metabolite either by reduction, hydrolysis, or
proteolysis. Common cleavable linkers are MC-Val-Cit-Pabc, disulfides (e.g., SPDB, SPP), and
hydrazone for pH-sensitivity. Many cleavable linkers use a self-immolating mechanism to
release the intact payload. It is important to note that the pKa of the leaving group will be
important to drive the self-immolation.

Figure 26 - NJ Bio Revenue expectation FY25E- Figure 27 - ADC linker market is expected to grow
FY30E rapidly

20,000 2

18,000 1.8

16,000 1.6

14,000 1.4

12,000 1.2

10,000 1

8,000 0.8

6,000 0.6

4,000 0.4

2,000 0.2

0 0
FY25E FY26E FY27E FY28E FY29E FY30E 2024e 2030e

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie research, February 2025

Affordable, customizable and expert bioconjugation

NJ Bio provides specialised bioconjugation services, leveraging expertise in protein and

synthetic chemistry. These services involve the precise coupling of biomolecules, such
as antibodies, proteins, and enzymes, with various chemical entities, nanoparticles, or
surfaces. The experts at NJ Bio design, optimise, and perform custom conjugation reactions,
producing tailored bioconjugates with enhanced functionality and stability.
These bioconjugation services are crucial for applications in ADCs, diagnostics, drug
development, targeted therapies, and research, enabling the creation of novel tools, assays,
and therapeutic agents. NJ Bio ensures the successful integration of biological and chemical
components, helping clients achieve specific objectives in their projects. The company offers
thee types of bioconjugation services, Express, Standard and Customised.

18 February 2025 51
Macquarie Equity Research Indian CRDMO

Figure 28 - Comparison of bioconjugation services

Feature Express Conjugation Standard Conjugation Custom Conjugation

Early discovery and proof of concept Larger scale mAb conjugations and other Lead optimization and preclinical
Purpose
(only for ADCs) protein bioconjugates development
Turnaround Time 3 to 4 weeks Not specified Not specified
Larger quantities for toxicology
Required Antibody 5 to 10 mg of mAb Larger quantities of antibody
studies

Limited to approved linker-payloads Broader range of validated linker- Custom selection of payloads, linker
Linker-Payload Options (e.g., SMCC-DM1, MC-Val-Cit-PAB- payloads (e.g., DGN549, Tesirine, DM21C, technologies, and site-specific
MMAE, MC-MMAF, DXd(1), CL2A-SN38) SPDB-DM4) conjugation

Small scale (2 to 5 mg of well-

Scale Medium to large scale Large scale
characterized ADC)
Quickly assess ADC targets using Validates target antigen or bioconjugate Maximizes stability, increases
Key Benefits stochastic lysine- or cysteine-based in vivo; allows testing of different hydrophilicity, optimizes PK and
conjugation mechanisms of action release kinetics

Screen murine antibody candidates in Assess payloads with different MOAs in Improve therapeutic index (TI) by
Example Use Case vitro with approved linker-payloads to larger in vivo studies to optimize ADC testing site-specific conjugation,
support selection criteria selection modifying linker-payload hydrophilicity

Cell-based functional assays In vitro stability testing in mouse/human Animal PK analyses, in vitro and in vivo
Additional Services (cytotoxicity, internalization, and serum; cell line validation (e.g., antigen stability, cell-based assays for lead
binding assays) numbers) optimization

Source: Macquarie Research, February 2025

18 February 2025 52
Macquarie Equity Research Indian CRDMO

Sapala's core competency Sapala acquisition offers entry into rapidly growing Oligonucleotide market
in basic building blocks for
Oligonucleotides
In June 2024, Suven Pharma announced a definitive agreement to acquire a controlling stake
in Hyderabad-based Sapala Organics Private Limited. Sapala specialises in oligonucleotide
drugs and nucleic acid building blocks, including specialised amidites, nucleosides, and drug
delivery compounds and has one of the most comprehensive list of capabilities among its
peers. In fact, the company is the only supplier of Tricyclo DNA globally. We expect Sapala's
revenue to deliver a ~45% CAGR (FY24-30E). We expect strong top-line growth to be driven
by rapid market growth and market share gains due to its strong backward integration and
strong purity profile.
Sapala operates with an innovator customer base across the US, EU, and Japan, partnering
with clients on their New Chemical Entity (NCE) programs throughout the project lifecycle.
The company has a strong presence in Japan, contributing ~20% to total sales from FY21 to
FY24.
Sapala employs over 250 individuals, with an R&D team consisting of more than 100
members, including over 20 PhDs. The company's R&D lab and pilot manufacturing unit
span 6,000 sq. mt. in Hyderabad, located near existing Cohance units, and are equipped with
17 fully operational labs. Financially, Sapala projects sales for FY24 to exceed Rs670mn,
maintaining adjusted EBITDA margins of over 45%.

Figure 29 - Sapala revenue forecast (in Rs mn) Figure 30 - Comparison of Sapala building block
capabilities with peers
9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Source: Company Reports, Macquarie research, February 2025

Source: Company Reports, Macquarie research, February 2025

What are oligonucleotides?

Oligonucleotides are short sequences of nucleotides (RNA or DNA) that are synthetically
manufactured and designed to bind to specific genetic sequences. These molecules are
crucial tools in genetic research, diagnostics, and therapeutic applications due to their
ability to modulate gene expression, detect genetic mutations, and serve as targeted drug
therapies. Details of key areas of application of oligonucleotides are in appendix.
Sapala primarily operates in the nucleic acid and oligo building blocks sector, which are
essential starting materials in the manufacturing of oligonucleotide drugs. The company
forecasts this market to enjoy a 25%+ revenue CAGR, reaching an estimated value of around
US$4bn by FY29, up from US$1bn in FY24. The anticipated growth in this market will be
driven by an expanding pipeline of oligonucleotide drugs and an increase in commercialised
molecules. Suven Pharma forecasts that the number of marketed oligo-based drugs will
quadruple to 65 molecules by 2029, from the current 17 molecules in 2024. Moreover,
the company expects AMidite and Gainac segments to grow significantly faster than the
oligoneucleotide market itself where it has multi-kilo sclae synthesis capacity.
The company is capable of synthesising a spectrum of modified amidites and nucleosides
with excellent purity and high level of backward integration (15+ steps). This strong

18 February 2025 53
Macquarie Equity Research Indian CRDMO

backward integration should help drive market-share gains. Additionally, the company is
augmenting its capacity by adding a cGMP facility which could also help it with forward
integration into oligonucleotide drug substance manufacturing.

Figure 31 - Oligonucleotides market to grow at Figure 32 - 4x new Oligo drugs to hit market
~25% CAGR by 2029, clinical pipeline also expected to see
consistent addition
5

In- market
4

Phase III-NDA
3
Phase II

2
Phase I

1
Pre-clinical

0 0 100 200 300 400 500 600

FY24 FY29e
2022 2029e

Source: Company Reports, Macquarie research, February 2025

Source: Company Reports, Macquarie research, February 2025

18 February 2025 54
Macquarie Equity Research Indian CRDMO

The company has been Small molecule CDMO business poised for growth
rapidly adding to its
commercial and Ph3
Suven Pharma features a strong small molecule CDMO business. The company currently
portfolio
supplies intermediates for 16 commercialised molecules, which includes supplies for 12
molecules under its own business and 4 molecules intermediates by Cohance. We expect
Suven +Cohance small molecule CDMO (ex-ADC) business revenue to grow at mid-teens
CAGR through to FY30E driven by: a) ramp up in existing molecules; and b) addition of new
molecule intermediate supplies.
The company has an active pipeline of 100+ projects across Phase 1-3. The company has
a robust pipeline with 9 molecules in phase 3 translating to 15 intermediates. Of these, 2
Phase 3 read-outs have been positive and the company expects commercial supplies to
start soon. The company has strong customer base with 14 of the top-20 large innovator
companies contributing >80% of revenue in this segment.

Figure 33 - Small molecule CDMO revenue est. Figure 34 - Suven Pharma Phase III pipeline

18,000 16

16,000 14

14,000 12

12,000 10

8
10,000
6
8,000
4
6,000
2
4,000
0
2,000 FY23 9MFY25

0 Phase III molecules Phase III intermediate

FY24 FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie research, February 2025 Source: Company Reports, Macquarie research, February 2025

Figure 35 - Suven Pharma CDMO revenue (in Rs mn) Figure 36 - Historical ex-ADC revenue for Cohance
FY20-24
9,000
1,400
8,000

7,000 1,200

6,000
1,000
5,000
800
4,000

3,000 600

2,000
400
1,000
200
0
FY20 FY21 FY22 FY23 FY24
0
FY20 FY21 FY22 FY23 FY24
Source: Company Reports, Macquarie research, February 2025
Source: Company Reports, Macquarie Research, February 2025

18 February 2025 55
Macquarie Equity Research Indian CRDMO

Recovery in agrichem market Spec chemical business: An opportunistic adjacency

is underway
Suven and Cohance's specialty chemical business contributes ~15% of combined entity's
revenue in FY24. This business has witnessed meaningful decline in the past couple of years
owing to de-stocking and price erosion in agrochemical sector. However, the company has
started witnessing green shoots with concerted business development efforts. We build a
modest 7% revenue CAGR through FY30E off a FY24 base. The growth in this segment will
be driven by ramp up in existing products and intermediate supply for new products. The
company partners with global agri chem innovators such as Corteva (not rated), Syngenta
(not rated) and Nisso Shoji (not rated). We believe the company will supply intermediate for
a recently approved product for its customer. The company could also look to move up the
value chain in the business offering further growth upside.

Figure 37 - We estimate Suven+ Cohance Spec Chem Revenue will grow at ~7%
CAGR

6,000

5,000

4,000

3,000

2,000

1,000

0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 56
Macquarie Equity Research Indian CRDMO

The company focuses on low API+ business to support product lifecycle

volume, complex generic APIs
and becomes a cost leader
API+ encompasses Suven's generic formulations and Cohance's merchant API and pellet
business, collectively accounting for about 45% of the proforma revenue (Suven + Cohance).
Specifically, Cohance's API business contributes around 37% of the proforma revenue. We
project a top-line CAGR of 11% for this business from FY24 to FY30, which is slightly lower
than the 12% CAGR observed over the past four years (FY20-24). We expect higher products
validation in the next 18-24 months, including addition of 7 products in FY25 to be primary
growth driver.
Cohance specialises in low- to mid-volume APIs with low competitive intensity, leveraging
backward integration to build a deep-cost position and maintain a competitive edge. The
company ranks among the top-three global players in market share in eight out of its top-10
molecules. Cohance adds only 7-8 products annually to its development pipeline, focusing on
molecules where it can achieve global cost leadership.
Suven's formulations and other businesses included in API++ represent approximately 7%
of proforma revenue in FY24. The company develops generic products primarily for the US
market, which are launched by its partner, Rising Pharma. Suven receives cost-plus profit
sharing on commercialised products.

Figure 38 - API+ business revenue estimates Figure 39 - API+ business historical revenue (Rsmn)

25,000 12,000

10,000
20,000

8,000
15,000

6,000

10,000
4,000

5,000
2,000

0 0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E FY20 FY21 FY22 FY23 FY24

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

Figure 40 - Merchant API market (in EURbn)

140

120

100

80

60

40

20

0
2023 2024e 2025e 2026e 2027e 2028e

Source: Company Reports, Macquarie Research, February 2025

18 February 2025 57
Macquarie Equity Research Indian CRDMO

Profitability improvement in sight due to mix shift

We expect Suven's profitability to improve due to mix shift towards Pharma CDMO business.
Additionally, we expect improvement in Pharma CDMO business profitability as well due
to mix shift towards higher margin ADC and Oligo businesses growing faster than small
molecule CDMO business. We build ~10+ pp EBITDAm improvement by FY30E off a FY24
base. This improvement will be primarily driven by ~800+bps gross margin improvement
through business mix shift and rest from operating leverage.

Figure 41 - Suven + Cohance Gross profit estimate Figure 42 - Suven- EBITDA and EBITDA margin
(FY24-FY30E)
70,000 76%
40,000 50%
60,000 74%
35,000 45%
50,000 72% 40%
30,000
35%
40,000 70%
25,000 30%
30,000 68% 20,000 25%

15,000 20%
20,000 66%
15%
10,000 64% 10,000
10%
5,000 5%
0 62%
FY24 FY25E FY26E FY27E FY28E FY29E FY30E 0 0%
FY24 FY25E FY26E FY27E FY28E FY29E FY30E
Gross Profit (Rs mn)- LHS Gross Margin (%)- RHS
EBITDA (Rs mn)-LHS EBITDA margin (%) - RHS

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie research, February 2025

Figure 43 - Suven+Cohance revenue YTD FY25 Figure 44 - Suven+Cohance revenue FY30e

API +, 23%

API+
42% Pharma
CDMO
Spec Chem,
48%
6%

Pharma
CDMO, 71%

Specialty
chemicals
10%

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

18 February 2025 58
Macquarie Equity Research Indian CRDMO

Pharma CDMO is high margin business as Cohance's disclosure suggests that its CDMO
business (Pharma + Spec chem) accounted for 42% of gross profit in FY24 against 33% of
revenue. This implies Cohance's pharma + Spec chem CDMO gross margin of 80%+ and
API+ gross margin of ~54%. Hence, we expect mix shift towards CDMO business to drive
meaningful gross margin improvement.

Figure 45 - Cohance Lifesciences segment revenue Figure 46 - CDMO segment gross margins are
and gross profit mix significantly higher

100%
90%
80%
58% 57%
67% 70% 70%
60%
50%
40%
42% 43% 30%
33% 30%
20%
10%
FY24 9MFY25 FY24 9MFY25
0%
Revenue contribution Gross profit contribution FY24 9MFY25

CDMO (Pharma + Spec chem) API+ CDMO (Pharma + Spec chem) API+

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

Return ratios to improve

We expect merged entity's return ratios to improve gradually as acquired assets start
contributing towards bottom-line. We expect Proforma (Suven + Cohance) ROCE (ROCE) to
improve from 19% in FY24 to 30%+ by FY30E. The company has a strong balance sheet with
net cash of Rs6.5bn offering addition upside from inorganic growth.

Figure 47 - Suven-ROCE (FY24-FY30E) Figure 48 - Net Cash (in Rs mn)

35% 8,000

30% 7,000

6,000
25%
5,000
20%
4,000
15%
3,000
10%
2,000

5% 1,000

0% 0
FY24 FY25E FY26E FY27E FY28E FY29E FY30E FY20 FY21 FY22 FY23 FY24 H1FY25

Source: Company Reports, Macquarie research, February 2025 Source: Company Reports, Macquarie research, February 2025

18 February 2025 59
Macquarie Equity Research Indian CRDMO

Valuation

We value the stock at 37x EV/EBITDA on FY27E EBITDA to arrive at our target price of
Rs1,500, which is also supported by our DCF analysis. We believe the premium valuation
multiple is justified given solid growth prospects and improving return ratios.

Figure 49 - CDMO valuation comparisons

CMP Mcap Upside/ EPS EBITDA (in LCY mn) P/E EV/EBITDA Revenue EBITDA EPS
Company BBG Ticker Currency Rating TP ROIC
(LCY) (LCY bn) Downside FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e CAGR CAGR CAGR
Indian CDMO's
Divis labs DIVI IN INR 5,924 1,563 OP 7,400 25% 82 106 133 29,315 39,045 48,597 72 56 45 53 39 32 18% 30% 30% 20%
Suven Pharma SUVENPHA IN INR 1,119 280 OP 1,500 34% 15 18 27 8,590 11,330 15,660 75 61 41 31 24 17 20% 27% 29% 25%
Syngene SYNG IN INR 701 280 OP 835 19% 13 17 22 10,693 12,988 15,863 54 42 31 27 22 19 13% 16% 21% 14%
Blue Jet Healthcare BLUEJET IN INR 754 134 OP 1,000 33% 17 23 29 3,651 5,308 6,668 45 33 26 37 25 20 33% 43% 43% 29%
Laurus Labs LAURUS IN INR 556 292 Not rated NA NA 6 11 16 10,559 14,465 18,334 91 50 35 34 25 19 14% 35% 74% 6%
Piramal Pharma PIRPHARM IN INR 200 260 Not rated NA NA 1 4 6 14,508 19,041 23,416147 45 29 22 16 13 15% 25% 259% 4%
Neuland Labs NLL IN INR 11,534 146 Not rated NA NA 250 345 476 4,103 6,569 8,839 47 34 25 42 26 20 20% 24% 27% 31%
Average /median 76 46 33 35 25 20 18% 27% 30% 20%
Regional peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Asymchem 6821 HK HKD 56 31 Neutral 56 1% 3 4 5 1,353 1,760 2,162 19 15 12 16 12 10 2% -9% 16% 4%
Pharmaron Beijing 3759 HK HKD 16 47 UP 8 -49% 1 1 1 2,916 3,387 3,889 15 15 13 16 14 12 11% 9% 5% 10%
Wuxi Apptec 2359 HK HKD 61 183 Neutral 43 -30% 3 3 4 13,652 15,181 16,614 18 16 15 12 11 10 5% 3% 7% 17%
Wuxi XDC 2268 HK HKD 30 36 Neutral 18 -40% 1 1 1 1,009 1,462 2,026 44 31 22 30 21 15 47% 62% 25% 15%
Wuxi Bio 2269 HK HKD 23 95 Neutral 14 -39% 1 1 1 5,853 6,878 7,942 28 24 20 15 13 11 11% 15% 11% 7%
Samsung bio 207940 KS SKW 1,180,000 83,985 OP 1,260,000 7% 22,785 27,970 32,780 2,462,000 3,006,000 3,493,000 66 53 45 34 28 24 26% 24% 19% 12%
Average/ median 32 26 21 21 16 14 11% 12% 14% 11%
Global Peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Lonza LONN SW CHF 598 43 Not rated NA NA 17 20 24 2,215 2,562 2,969 36 30 25 21 18 16 13% 26% 12% 7%
Siegfried SFZN SW CHF 1,070 5 Not rated NA NA 36 40 45 288 319 354 30 27 24 18 16 15 6% 12% 8% 13%
ICON Plc ICLR US USD 183 15 Not rated NA NA 14 14 16 1,725 1,707 1,867 13 13 11 10 11 10 3% 7% 5% 8%
Charles River CRL US USD 153 8 Not rated NA NA 10 10 11 1,007 977 1,051 15 16 14 10 11 10 0% 2% 2% 8%
Bachem Holding BANB SW CHF 57 4 Not rated NA NA 2 2 3 174 210 297 36 31 23 23 19 14 19% 19% 17% 10%
Polypeptide Group PPGN SW CHF 22 1 Not rated NA NA 0 0 1 21 61 95 -64 67 21 39 14 9 15% -351% -244% -3%
Average/ median 11 31 20 20 15 12 9% 9% 7% 8%

Overall Average 41 35 25 26 19 16

Source: Bloomberg, Macquarie Research, February 2025

Priced as at close 17 February 2025. We use our own estimates for Indian CDMOs and Samsung Bio. We use median for EBITDA CAGR, EPS CAGR and ROIC.

18 February 2025 60
Macquarie Equity Research Indian CRDMO

Figure 50 - We use DCF to arrive at our TP of Rs 1,500

Free cash flows (in Rs mn) FY24A FY25e FY26e FY27e FY28e FY29e FY30e FY43e
Revenue 23,922 26,250 35,217 44,578 56,251 70,546 87,313 416,859
YoY growth (%) -11% 10% 34% 27% 26% 25% 24% 5.0%
EBIT 6,541 7,242 9,454 13,667 19,254 26,685 34,393 162,117
EBIT Margin (%) 27% 28% 27% 31% 34% 38% 39% 39%
Change in working capital (852) (176) (3,221) (2,601) (3,008) (4,530) (5,790) (27,645)
Capex (2,607) (2,557) (2,430) (3,674) (4,412) (5,129) (5,777) (12,506)
FCF 2,361 4,099 3,316 5,968 9,189 12,735 16,850 93,943
Terminal value 1,915,957
Discount rate (%) 10%
NPV of FCF 4,004 2,948 4,831 6,770 8,541 10,287 361,609
EV 587,672
Net debt (3,257)
Total value of equity 584,415
Equity value per share 1,500
No of shares (mn) 390
Current share price (Rs) 1,119
Upside/Downside 34.0%

Source: Company Research, Macquarie Reports, February 2025

Closing Price as of Feb 17, 2025

Appendix

Suven pharma description and key milestones

Suven Pharmaceuticals Limited is a Hyderabad-based Contract Development and

Manufacturing Organization (CDMO) that provides integrated services to global
pharmaceutical and fine chemical companies. The company specializes in Custom
Synthesis, Process R&D, Scale-Up, and Contract Manufacturing of intermediates, APIs, and
formulations. It has built a strong reputation for working with leading innovator companies,
leveraging its chemistry capabilities, regulatory expertise, and scalable infrastructure. Suven
Pharma aims to become India’s most admired CDMO by 2029 through a focused strategy of
expanding its business and technological capabilities.

Key Milestones in Suven Pharma’s Journey

• 2019 - Suven Pharmaceuticals was demerged from Suven Life Sciences Limited to create
a standalone CDMO business.
• 2020 - The company made a strategic shift to expand beyond a domestic player and
cater to global pharmaceutical innovators.
• 2021 - Strengthened its R&D capabilities and diversified its service portfolio, focusing on
intermediates, APIs, and formulations.
• 2022 - Expanded its global footprint by increasing partnerships with Big Pharma
companies and deepening its technological capabilities.
• 2023 - Faced industry headwinds due to inflationary pressures, COVID-19 normalization,
and supply chain disruptions but continued investing in infrastructure and customer
engagements.
• September 2023 - Appointment of Dr. V. Prasada Raju as Managing Director and Mr.
Annaswamy Vaidheesh as Executive Chairman to steer the company’s next growth phase.
• FY24 Initiatives:
Þ Opened a new state-of-the-art R&D facility in Genome Valley, Hyderabad.
Þ Increased Request for Quotations (RFQs) by 25%, strengthening customer
relationships.
Þ Recrafted Specialty Chemicals CDMO as a separate business unit for sharper focus.
Þ Optimized cost structure through process improvements.

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Macquarie Equity Research Indian CRDMO

Þ Completed multiple regulatory and customer audits, including an FDA inspection at

the Pashamylaram facility.

• February 2024 - Merger with Cohance Lifesciences announced, expanding Suven’s CDMO
footprint and capabilities in advanced pharmaceutical solutions, including ADCs and
HPAPIs.

Figure 51 - Suven plants/ facilities

Facility location Products Total reactor volume Reactor size GL/SS R&D
API/ Advanced intermediate/
Vizag, AP 706 KL 3000 - 12,000 L 45 NA
CMO
Parshamylaram, Telangana API & Formulations 406 KL 50-6000 L GL/SS 45 Yes
Intermediate facility, GMP 300 CM reactors, 665 KL
Suryapet, Telangana
intermediates GL/SS

Discovery & Anlayitcal R&D, Kilo lab, 30L CM reactors,

Jeedimetla, Telangana
process research 27 KL GL/SS
Genome valley, Hyderabad R&D NA NA NA NA

Source: Company Reports, Macquarie research, February 2025

Suven + Cohance merger details

Overview
• Suven Pharmaceuticals announced the merger with Cohance Lifesciences as a strategic
move to expand its CDMO business, capabilities, and global presence.
• The merger will leverage synergies between Suven and Cohance, strengthening their
combined expertise in pharmaceuticals, specialty chemicals, and advanced drug delivery
platforms.
• The transaction has received shareholder approval received (99.99% in favor); Final NCLT
hearing on February 18; Merger expected to be effective in Q1FY26, subject to regulatory
approvals (incl DoP)
• The merger process is expected to take 12-15 months from February 29, 2024.

Cohance Lifesciences overview

• Cohance Lifesciences is one of India’s leading and diversified CDMO and merchant API
platforms.
• The company serves global pharmaceutical and specialty chemical customers with strong
chemistry capabilities, including ADC (Antibody-Drug Conjugate) payloads, HPAPIs (High
Potency Active Pharmaceutical Ingredients), and complex synthetic routes.
• Cohance is backward-integrated, providing cost advantages and supply chain resilience.

Strategic rationale for the merger

• Enhanced CDMO Portfolio: Suven Pharma aims to become a top-tier global CDMO by
adding Cohance’s speciality chemicals, HPAPIs, and ADC capabilities to its existing pharma
services.
• Scaling Manufacturing & R&D: The combined entity will have a significant increase in
manufacturing capacity, covering intermediates, APIs, and complex formulations.
• Leveraging market growth: The global pharmaceutical CDMO market is projected to
deliver a CAGR of 7.3% from 2024-2033, reaching $295.95 billion by 2033, per F&S. The
merger positions Suven to capture a larger share of this opportunity.
• China+1 Strategy Advantage: Increasing geopolitical tensions with China and the U.S.
Biosecure Act are leading global innovators to shift outsourcing to India. Suven and
Cohance will capitalise on this trend.
• API+ Expansion: Cohance’s merchant API business (API++) focuses on low-to-mid-volume
APIs with low competition, which will boost Suven’s API market penetration.

Key business synergies

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Macquarie Equity Research Indian CRDMO

• Antibody-Drug Conjugates (ADC) leadership:

Þ Cohance is a pioneer in ADC payload synthesis, having developed a synthetic route for
large-scale production.
Þ Partnered with two large global innovator pharmaceutical companies.
Þ Two ADC commercial products are growing significantly, and one product has entered
early Phase III trials.
Þ Ongoing development of new ADC platforms.
• Merchant API (API++) business growth:
Þ Focus on complex APIs and Onco APIs with strong backward integration.
Þ Positioned to return to double-digit growth after a downcycle in the API market.
Þ Five new product validations completed in March 2024.

Figure 52 - Cohance merger will enhance Suven's positioning in the CDMO landscape

Source: Company reports, Macquarie research February 2025

Figure 53 - Cohance plant/ facilities

Facility name Location Capacity US FDA last inspection Other regulatory clearance

API Unit 1 AP, India 120 reactors, > 520Kl capacity 2019 EDQM, Korea-FDA, PMDA, COFEPRIS, ANVISA, MOH, CDSCO, WHO GMP

API Unit 2 AP, India 46 reactors, > 140Kl capacity NA EDQM

API Unit 3 Gujrat, India 68 reactors, > 420Kl capacity 2023 EDQM, PMDA-Japan, COFEPRIS-Mexico, Korea- FDA, ANVISA- Brazil
1.8bn OSDs and 350MT Pellets EU GMP, MHRA, Health Canada, EU GMP, PMDA- Japan, MOH- Russia,
FDF Unit 1 Telangana, India 2019
per annum WHO GMP, DCGI, Saudi-FDA, Taiwan-FDA
60 reactors, > 40Kl capacity,
API Unit 4 Telangana, India 2019 EDQM
Unit with Oncology facility
API Unit 5 AP, India 49 reactors, > 130Kl capacity NA GMP
FDF Unit 2 Telangana, India 480MT Pellets per annum NA WHO GMP

Source: Company Reports, Macquarie research, February 2025

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Figure 54 - Suven Pharma shareholding pattern Figure 55 - Suven pharma shareholding Post-
merger

Public
Promoter & 33%
Public Promoter
50% Group
50%

Promoter /
Advent
67%

Source: Company Reports, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

Figure 56 - Cohance revenue split (FY24) Figure 57 - Cohance - Customer mix (%)

Top 5
customers
Pharma
24%
CDMO

API 6-10
Spec chem
customers
CDMO Others 11%
65%

Formulations

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

NJ Bio description and acquisition details

The 56% stake acquisition in NJ Bio was a combination of purchasing shares from existing
minority shareholders and infusing growth equity capital. Specifically, Suven spent US
$49.4mn to buy a 49.4% stake from the existing minority shareholders and made a primary
equity infusion of US$15mn. The primary equity infusion will primarily be used for capital
expenditures, including the expansion of GMP suites at the existing Princeton facility.
Based on the growth outlook for the business, the deal is valued at a low to mid-teen EV /
CY25 EBITDA. Additionally, the company expects that this acquisition will be EPS accretive
within two years.
Strategic rationale
• Leadership in a high-growth market: The ADC outsourcing market, currently valued
at $2.7 billion, is projected to grow at an annual rate exceeding 25%. This acquisition
strategically positions Suven Pharma (Cohance Lifesciences) as a key player in one of the
fastest-growing segments of the Pharma CDMO landscape.
• Comprehensive ADC chemistry capabilities: The acquisition extends Suven’s current
ADC offerings by incorporating expertise across payload chemistry, payload-linker
synthesis, bioconjugation, and ADC-specific analytical platforms.

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Macquarie Equity Research Indian CRDMO

• Founder and team have deep domain expertise: The acquired entity is led by a founder
and senior team with decades of experience in ADCs and multiple industry accolades,
enhancing Suven's domain expertise.
• Strategic US presence: The state-of-the-art 80,000sf R&D and manufacturing facility in
Princeton, coupled with a highly talented pool of technical experts, provides Suven with a
nearshore presence. This enables flexible dual location solutions for customers across the
US and India.
• Enhanced cross-selling opportunities: The acquisition combines complementary
customer bases across small-to-mid biotech and large pharma, creating significant cross-
selling potential.
• Creation of a unique tech-focused CRDMO: Suven becomes one of the few CRDMOs
with a footprint in both the US and India, and a presence across major new modalities
such as ADCs, Nucleic Acid Chemistry, and mRNA.

Manufacturing and operations

• Headquartered in Princeton, NJ, USA (a key ADC innovation hub). 80,000sf of lab space
and GMP suites in Princeton with ~100 employees (including 80+ scientists).
• Also has India operations: 6,500sf space in Mumbai ; ~40 employees involved in creating
payload-linker library and R&D innovation work

Oligonucleotide therapies basics

Oligonucleotide therapies are a class of precision medicines that use short synthetic strands
of nucleotides (DNA or RNA sequences) to modulate gene expression or protein synthesis.
These therapies are designed to target specific genetic sequences and can either silence,
modify, or replace dysfunctional genes, making them highly effective for genetic disorders,
rare diseases, and certain cancers.

Mechanism of Action

Oligonucleotide-based drugs function by binding to target RNA or DNA sequences,

influencing cellular mechanisms such as:
• Gene silencing (e.g., siRNA, antisense oligonucleotides)
• RNA splicing modulation
• Gene activation
• mRNA translation inhibition

Key yypes of oligonucleotide therapies

• Antisense Oligonucleotides (ASOs) – Bind to mRNA to block translation or modify splicing,
preventing disease-causing proteins. (Example: Spinraza for Spinal Muscular Atrophy)
• Small Interfering RNA (siRNA) – Induces RNA interference (RNAi) to degrade specific
mRNA, stopping disease-related protein production. (Example: Onpattro for amyloidosis)
• mRNA Therapeutics – Use modified mRNA to instruct cells to produce therapeutic
proteins. (Example: COVID-19 mRNA vaccines)
• Aptamers – Single-stranded nucleic acids that bind to proteins or other biomolecules to
modulate their function. (Example: Macugen for macular degeneration)
• CRISPR-based Gene Editing – Uses guide RNA (gRNA) to direct genetic modifications for
permanent gene corrections. (Example: Casgevy for sickle cell disease)

Advantages of oligonucleotide therapies

• Highly specific – Targets precise genetic sequences, reducing off-target effects.
• Versatile – Can be used for rare genetic diseases, neurological disorders, cancer, and
metabolic conditions.
• Scalable manufacturing – Advances in solid-phase synthesis and enzymatic production
make large-scale production feasible.

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Macquarie Equity Research Indian CRDMO

Figure 58 - ADC drugs approved by FDA

ADC drugs approved by FDA (as of October 2023)
No. ADC name Brand name Company Target Payload Indication Launch year
2000
Acute myeloid leukemia
1 Gemtuzumab ozogamicin (GO) Mylotarg Pfizer/ Wyeth CD33 Calicheamicin Relaunched in
(AML)
2017
Seagen Genetics,
Hodgkin lymphoma, large
2 Brentuximab vedotin (SGN- 35) Adcetris Millennium & CD30 MMAE 2011
cell lymphoma
Takeda
Genentech/
3 Trastuzumab emtansine Kadcyla HER2 DM1 HER2+ breast cancer 2013
Roche

4 Inotuzumab ozogamicin Besponsa Pfizer/ Wyeth CD22 Calicheamicin Acute lymphoblast leukemia 2017

Pseudomanas Relapsed or refractory hairy

5 Moxetumomab pasudotox Lomoxiti Astrazeneca CD22 2018
exotoxin cell leukemia (HCL)
Genentech/ Diffuse large B-cell
6 Polatuzumab vedotin-piiq Polivy CD79b MMAE 2019
Roche lymphoma
Astellas/Seagen Advanced or metastatic
7 Enfortumab vedotin Padcev Nectin-4 MMAE 2019
Genetics urothelial cancer
AstraZeneca/
8 Fam-Trastuzumab deruxtecan (DS-8201) Enhertu HER2 Dxd Metastatic breast Cancer 2019
Daiichi Sankyo
Triple-negative breast
9 Sacituzumab govitecan Trodelvy Immunomedics Trop-2 SN-38 2020
cancer (mTNBC)
Relapsed or refractory
10 Belantamab mafodotin-blmf Blenrep GlaxoSmithKline BCMA MMAF 2020
multiple myeloma
11 Cetuximab saratolaca Akalux Rakuten Medical EGFR IRDye700DX Head and neck cancer 2020

12 Loncastuximab tesirine-lpyl Zynlonta ADC Therapeutics CD19 SG3199 Large B-cell lymphoma 2021

13 Disitamab vedotin Aidixi RemeGen HER2 MMAE HER2+ gastric carcinoma 2021
14 Tisotumab vedotin-tftv Tivdak Seagen Tissue factor MMAE Cervical Cancer 2021
15 Mirvetuximab soravtansine-gyxn ELAHRE* ImmunoGen Frα DM4 Ovarian Cancer 2022
AstraZeneca/
16 Datopotamab Deruxtecan Datroway Trop-2 Dxd HR+/HER2– Breast Cancer 2025
Daiichi Sankyo

Source: Macquarie Research, February 2025

Figure 59 - No. of annual ADCs approved by FDA

0
2011 2013 2017 2018 2019 2020 2021 2022 2025*

Source: Company Reports, Macquarie Research, February 2025

* Till date

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Macquarie Equity Research Indian CRDMO

Key Quant Findings Alpha Model Decomposition

The quant model currently holds a reasonably positive The Macquarie Alpha is decomposed into its sector and
view on Suven Pharmaceuticals. The strongest style market relative factor & styles exposures (a higher/better
exposure is Quality, indicating this stock is likely to have a percentile is coded in green, whilst lower in red).
superior and more stable underlying earnings stream. The
Percentile
weakest style exposure is Valuations, indicating this stock relative to
is over-priced in the market relative to its peers.
sectors market
Factors / Styles (/1224) (/1021) Core factors in definition

ALPHA 91% 84% Built from the styles below

Macquarie Alpha Model: Key rankings VALUE 34% 6% Book, CF, Yield, Earnings Multiples

The Macquarie Quant’s flagship Alpha model is a dynamic ANALYST 79% 79% Revisions (Earnings, Recommendations)
multi-factor model based on a staple of quant factors such MOMENTUM 98% 91% Price Momentum
as value, momentum, revisions, quality, and risk.
GROWTH 30% 27% EPS, Sales (Forecast, Historic)
Global Market (Country) Sector
PROFITABILITY 93% 88% ROE, Margin, Asset Turnover
Pharma, Biotech
Whole Universe India
& Life Sciences QUALITY 97% 98% Accruals, Earn Stability, Cash Conversion
Macquarie Alpha
2527/17780 163/1021 108/1224 CAPITAL 94% 96% Investment/Capex, Net share issuance
Model
LIQUIDITY 84% 74% Size, Turnover, Analyst Coverage
Fundamental
0/17780 0/1021 0/1224
(Consensus) *
LOW RISK 42% 50% Beta, Volatility, Earn.Cert, Leverage

TECHNICAL 4% 3% MACD, RSI, Bollinger, Williams R, etc

* based on Total Shareholder Return = Consensus Price target / Current Price

Current and Historical Alpha Model Rank Factors driving the Alpha Model vs peers
The chart shows the Macquarie Alpha model market ranking For the comparable firms this chart shows the key underlying
against the company’s peers and over recent history. styles and their contribution to the current overall raw Alpha
score.
100%

Most Attractive
75% Blue Jet Healthcare

Suven Pharmaceutical…
50%
Jubilant Pharmova

25% Alkem Laboratories

Least Attractive Ipca Laboratories

0% Eris Lifesciences
Syngene Eris Ipca Alkem Jubilant Suven Blue Jet
Internationa Lifesciences Laboratorie Laboratorie Pharmova Pharmaceut Healthcare
Syngene Internationa…
… s s ical…

-3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0
5 Year Ago 3 Year Ago 1 Year Ago Current
VALUE PROFITABILITY MOMENTUM LOW RISK & LIQUIDITY ALPHA
GROWTH ANALYST QUALITY & CAPITAL

Drivers of Stock Return

Macquarie Style Returns over last year
Breakdown of 1-year total return (local currency) into returns
from dividends, changes in forward earnings estimates and Recent performance to Macquarie style factors
the resulting change in earnings multiple. Monthly Factor Long-Short Returns for

Last 5 Last 10
Jan - Dec - Nov - Oct - Sep - Aug - Jul - Jun - May - Apr - Mar - Feb - Years Years
Asia Ex JP
25 24 24 24 24 24 24 24 24 24 24 24 (ann) (ann)
Blue Jet Healthcare

Suven Pharmaceutical… ALPHA 1% 7% 1% -1% -19% 5% -2% 6% 0% 2% 3% -3% 6% 5%

Jubilant Pharmova VALUE 1% 5% 1% -2% 1% 3% -2% 0% 3% 3% 0% -6% 6% 4%

Alkem Laboratories ANALYST 3% 6% 0% 2% -7% 1% -3% 4% -2% 1% 3% 4% 14% 10%

Ipca Laboratories MOMENTUM -1% 4% 2% 1% -23% 3% -2% 9% 2% 0% 3% -6% 4% 2%

Eris Lifesciences
GROWTH 0% 5% 2% -1% 0% -2% 0% 1% -2% 0% 2% 5% -1% 0%

Syngene Internationa…
PROFITABILITY 1% 4% 0% -3% -3% 3% -2% 1% 1% 1% -1% -1% -6% -2%

-100% -50% 0% 50% 100% QUALITY 1% 4% 1% -1% -1% 0% -4% 1% 1% 2% 0% 1% -2% 0%

Dividend Return Multiple Change Forecast Earnings 1Yr Total Return
Change CAPITAL -1% 1% 1% -1% 1% 1% -1% -2% 1% 3% 0% -2% 0% -3%

LIQUIDITY 0% -1% 2% -3% -13% 4% -1% 5% 1% 0% 1% -6% -2% 0%

LOW RISK -1% 4% 2% -3% -9% 4% 3% 3% 0% 2% 1% -7% -2% -2%

Source (all charts): FactSet, Refinitiv, and Macquarie Quant. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global
Quantitative Team: [email protected]. Explanation for items on this page can be found at https://www.macquarieinsights.com/rp/d/r/p/OTUyMzg1

18 February 2025 67
Macquarie Equity Research
18 February 2025

Healthcare

Pharma, Biotech & Life Sciences

Blue Jet Healthcare India

Initiation: Upwards and onwards

Dr. Kunal
Key Points Dhamesha, MBBS

• Blue Jet Healthcare is rapidly moving up the value chain in its core
contrast media business, fuelling significant top- and bottom-line BLUEJET IN Outperform
growth. Price (at 18 Feb 2025) INR754.40

• We expect Pharma CDMO business to grow significantly with the ramp- 12-month target
12-month TSR (%)
INR1,000
32.6
up of existing molecules and the addition of new molecules. Volatility Index High
• We initiate at Outperform, with our Rs1,000 target price implying a 33% Market Cap (Local) (m) 130,862
total shareholder return. Market Cap (USD) (m) 1,506
Free Float (%) 14
30-day avg turnover (USD) (m) 2.7

Moving up value chain in contrast media to capture better economics: Investment Fundamentals
Blue Jet has come a long way in contrast-media intermediate business, from Year end 31 Mar 2024A 2025E 2026E 2027E
supplying basic building blocks to key intermediates, thereby increasing Revenue (bn) 7,116 9,975 14,467 17,666
Revenue growth (%) (1.3) 40.2 45.0 22.1
realisation by ~3x. Now the company is moving one more step towards
EBIT (bn) 2,011 3,398 5,037 6,344
iodination of key intermediate which could further increase realisation EBIT growth (%) 3.7 69.0 48.2 25.9
by ~4x that of advanced intermediate. Additionally, Blue Jet has also Reported profit (bn) 1,735 2,900 3,971 5,059
commissioned its capacity for Gadolinium-based contrast media. Hence, we Adjusted profit (bn) 1,735 2,900 3,971 5,059
expect a strong top-line CAGR of 16% for the segment over FY24-30E. EPS rep [INR] 10.0 16.7 22.9 29.2
EPS rep growth (%) 8.4 67.1 36.9 27.4
Pharma CDMO business in high growth phase: The Pharma CDMO EPS adj [INR] 10.0 16.7 22.9 29.2
business is in a high growth phase; we project it to achieve a 57% top- EPS adj (¢) 10.0 16.7 22.9 29.2
EPS adj growth (%) 8.5 67.1 36.9 27.4
line CAGR. This growth is primarily driven by the increasing supply of key
Net debt/equity (%) (10.0) (3.2) (9.2) (24.7)
intermediates for Bempedoic acid, a lipid-lowering drug, to an innovator ROA (%) 20.9 29.2 33.5 31.1
company. According to Visible Alpha consensus, sales of the innovator ROE (%) 22.7 29.3 29.8 28.3
product is estimated to grow by ~6-7x by 2030E from the 2023 base. PER rep (x) 75.4 45.1 33.0 25.9
PER adj (x) 75.4 45.1 33.0 25.9
To support this growth, the company has recently established a 120kL
EV/EBITDA (x) 54.6 34.9 23.6 18.8
capacity for intermediate manufacturing facility. P/BV (x) 15.5 11.5 8.5 6.4
Total div yield (%) 0.0 0.0 0.0 0.0
Profitability and return ratios to improve: We build ~800bps EBITDAm
improvement for the company through FY30E on the FY24 base, driven Quant (rank vs. global sector) 7/1,224
by a shift towards higher-margin Pharma CDMO business. Additionally, we
expect meaningful expansion in ROIC to around 50% from the current 29%,
as the utilisation of recently added capacities increases.

Valuation: We value the stock at ~26x EV/EBITDA on FY27E EBITDA

to arrive at our target price of Rs1,000, which is also supported by DCF
analysis.

Catalysts: Ramp up in Pharma intermediate segment, launch of Iodinated

BLUEJET IN rel BSE Sensex
contrast media molecule, launch and ramp up of gadolinium-based performance, & rec history
contrast-media project, and backward integration on contrast-media value
chain.

Investment Thesis and Recommendation

We anticipate Blue Jet's PAT and EBITDA to grow by >5x by FY30E
on FY24 base, driven by higher realisations in contrast media from
advanced intermediates supply, rapid growth in Pharma CDMO from
existing molecules ramp-up, and operating leverage from higher capacity Source: FactSet, Macquarie Research, Feb 2025 (all figures in
utilisation. INR unless noted, TP in INR)

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Macquarie Equity Research Indian CRDMO

Key Risks to Investment Thesis Company Description

• Adverse regulatory outcome on new products Blue Jet Healthcare Limited is a specialty pharmaceutical
• Inability to ramp up newer products company operating across three high-growth business
segments: contrast media intermediates, high-intensity
• Adverse outcome of plant inspections
sweeteners, and pharma intermediates & APIs.

Figure 1 - BlueJet's revenue estimates (in Rs mn) Figure 2 - Blue Jet's PAT in (Rs mn)

30,000 10,000

9,000
25,000
8,000

7,000
20,000
6,000

15,000 5,000

4,000
10,000
3,000

2,000
5,000
1,000

0 0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

Blue Jet Healthcare (BLUEJET IN) INR/(bn) unless otherwise noted

Income Statement Mar FY 2024A 2025E 2026E 2027E Q3/25A Q4/25E Balance Sheet 2024A 2025E 2026E 2027E
Revenue 7,116 9,975 14,467 17,666 3,184 3,079 Cash 847.1 367.5 1,412 5,039
Cost of Goods Sold 3,144 4,436 6,439 7,757 1,444 1,358 Receivables 1,769 2,494 3,183 3,533
Gross Profit 3,972 5,539 8,028 9,909 1,740 1,721 Inventories 1,298 1,995 2,604 2,827
EBITDA 2,292 3,591 5,308 6,668 1,240 1,213 Investments 0.0 0.0 0.0 0.0
Depreciation 280.9 192.3 270.6 324.1 47.5 63.8 Fixed Assets 2,962 4,770 5,999 7,175
Amortisation 0.0 0.0 0.0 0.0 0.0 0.0 Intangibles 2.0 2.0 2.0 2.0
EBIT 2,011 3,398 5,037 6,344 1,193 1,149 Other Assets 3,710 3,062 4,185 4,808
Net Interest Income (1.6) (0.6) 0.0 0.0 (0.2) 0.0 Total Assets 10,588 12,690 17,384 23,384
Associates 0.0 0.0 0.0 0.0 0.0 0.0 Payables 303.0 505.9 904.0 1,302
Exceptionals 0.0 0.0 0.0 0.0 0.0 0.0 Short Term Debt 0.0 0.0 0.0 0.0
Forex Gains / Losses 0.0 0.0 0.0 0.0 0.0 0.0 Long Term Debt 3.8 0.0 0.0 0.0
Other Pre-Tax Income 288.6 441.2 257.5 402.3 147.4 55.9 Other Liabilities 1,829 831.7 1,158 1,700
Pre-Tax Profit 2,298 3,839 5,294 6,746 1,340 1,205 Total Liabilities 2,136 1,338 2,061 3,002
Tax Expense (563.4) (939.0) (1,324) (1,686) (335.1) (301.2) Shareholders' Funds 8,452 11,352 15,323 20,382
Net Profit 1,735 2,900 3,971 5,059 1,005 903.7 Minority Interests 0.0 0.0 0.0 0.0
Minority Interests 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0
Reported Earnings 1,735 2,900 3,971 5,059 1,005 903.7 Total S/H Equity 8,452 11,352 15,323 20,382
Adjusted Earnings 1,735 2,900 3,971 5,059 1,005 903.7 Total Liab & S/H Funds 10,588 12,690 17,384 23,384
Basic Shares Outstanding 173.2 173.5 173.5 173.5 173.5 173.5 Net Debt / Equity (%) (10.0) (3.2) (9.2) (24.7)
Diluted Shares Outstanding 173.5 173.5 173.5 173.5 173.5 173.5 Interest Cover (x) 1,257.1 5,309.8 NM NM
EPS (rep) [INR] 10.0 16.7 22.9 29.2 5.8 5.2 ROE (%) 22.7 29.3 29.8 28.3
EPS (adj) [INR] 10.0 16.7 22.9 29.2 5.8 5.2 ROA (%) 20.9 29.2 33.5 31.1
Total DPS [INR] 0.0 0.0 0.0 0.0 0.0 0.0 ROIC (%) 24.6 33.7 34.4 34.2
Ratio 2024A 2025E 2026E 2027E Cash Flow Analysis 2024A 2025E 2026E 2027E
Revenue Growth (%) (1.3) 40.2 45.0 22.1 - - EBITDA 2,292 3,591 5,308 6,668
EBITDA Growth (%) 4.6 56.6 47.8 25.6 - - Tax Paid (563.4) (939.0) (1,324) (1,686)
EBIT Growth (%) 3.7 69.0 48.2 25.9 - - Chgs in Working Cap (131.7) 1,568 1,697 255.7
EPS Growth (adj) (%) 8.5 67.1 36.9 27.4 - - Net Interest Paid 0.0 0.0 0.0 0.0
Gross Profit Margin (%) 55.8 55.5 55.5 56.1 - - Other 815.4 (3,076) (3,395) (511.4)
EBITDA Margin (%) 32.2 36.0 36.7 37.7 - - Operating Cashflow 2,413 1,144 2,287 4,726
EBIT Margin (%) 28.3 34.1 34.8 35.9 - - Acquisitions 0.0 0.0 0.0 0.0
Net Profit Margin (%) 24.4 29.1 27.4 28.6 - - Capex (1,722) (2,000) (1,500) (1,500)
Payout Ratio (%) 0.0 0.0 0.0 0.0 - - Other 0.0 0.0 0.0 0.0
PE (rep) (x) 75.4 45.1 33.0 25.9 - - Investing Cashflow (1,722) (2,000) (1,500) (1,500)
PE (adj) (x) 75.4 45.1 33.0 25.9 - - Dividend (Ordinary) (0.0) 0.0 0.0 0.0
EV/EBITDA (x) 54.6 34.9 23.6 18.8 - - Equity Raised 0.0 0.0 0.0 0.0
EV/EBIT (x) 62.2 36.9 24.9 19.7 - - Debt Movements 0.0 (3.8) 0.0 0.0
Price/Book (x) 15.5 11.5 8.5 6.4 - - Other (3,552) (4,379) (5,506) (5,365)
Total Div Yield (%) 0.0 0.0 0.0 0.0 - - Financing Cashflow (3,552) (4,383) (5,506) (5,365)
Net Chg in Cash/Debt (2,861) (5,239) (4,719) (2,139)
Free Cashflow 690.7 (856.3) 786.5 3,226
Source: Company data, Macquarie Research Feb 2025

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Blue Jet Healthcare: Well positioned in its key segments

Blue Jet Healthcare is a speciality pharmaceutical company operating across three high-
growth business segments: contrast media intermediates, high-intensity sweeteners, and
pharma intermediates & APIs. In 9MFY25, contrast media intermediates contributed 44% of
revenue, high-intensity sweeteners 15%, and pharma intermediates & APIs 41%.
• Contrast media business: It focuses on iodine-based agents, is expanding into
gadolinium-based agents, competing with Deccan Chemicals and Arvee Laboratories in
India, while Starry from China remains a major global competitor.
• High-intensity sweeteners: Blue Jet has five decades of expertise in saccharin, leveraging
full backward integration for cost leadership, competing with Anhui Jinhe Industrial and
Tate & Lyle.
• Pharma intermediates & APIs: It serves cardiovascular, oncology, and CNS segments,
facing competition from Divi’s Laboratories, Neuland Laboratories, and Laurus Labs. Its
CDMO-driven model, strong customer lock-ins, and cost-efficient manufacturing make it a
unique and high-margin player in the pharmaceutical supply chain

Figure 3 - Blue Jet segment revenue 9MFY25 Figure 4 - Blue Jet historical segment revenue
(Rsmn)
Others
2%
8,000

7,000

Pharma 6,000
intermediates Contrast media
intermediates 5,000
and API
39% 44% 4,000

3,000

2,000

1,000

0
High intensity FY20A FY21A FY22A FY23A FY24A
sweetners
15% Contrast media intermediates High intensity sweetners

Pharma intermediates and API Others

Source: Company Reports, Macquarie Research, February 2025
Source: Company Reports, Macquarie Research, February 2025

Figure 5 - Blue Jet- Historical EBITDA margin Figure 6 - Blue Jet Historical ROIC

3,000 45% 160%

40%
2,500 140%
35%
120%
2,000 30%

25% 100%
1,500
20%
80%
1,000 15%
60%
10%
500
5% 40%

- 0%
20%
FY20A FY21A FY22A FY23A FY24A

EBITDA (Rs mn)- LHS EBITDA margin (%)- RHS 0%

FY20A FY21A FY22A FY23A FY24A

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

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Well entrenched player in contrast media supply chain

Blue Jet supplies contrast media intermediates to leading innovators such as GE Healthcare,
Bracco, Bayer, and Guerbet. Collectively, these companies represent over 75% of the
contrast media market. Blue Jet has established long-standing relationships with these
industry leaders, with Bracco being a customer for approximately 25 years, Guerbet for
around 15 years, and GE Healthcare for about 10 years.
Having solidified its position in the iodine-based contrast media intermediates segment, the
company is now advancing up the value chain by expanding its capacity to supply advanced
intermediates for iodine-based contrast media and developing intermediates for gadolinium-
based contrast media. We expect the company's contrast-media segment revenue to deliver
a ~16% CAGR through FY30E from a FY24 base. We expect new projects, which should start
contributing to top-line in 4QFY25, to drive ~80% of the growth. We build in a 6% top-line
CAGR (FY24-30E) from existing products which is in line with market growth.

Figure 7 - Blue Jet's Contrast media segment Figure 8 - Blue Jet's historical contrast media
revenue (Rs mn) revenue (Rs mn)

14,000 6,000

12,000
5,000

10,000
4,000

8,000
3,000
6,000

2,000
4,000

1,000
2,000

0 0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E FY20A FY21A FY22A FY23A FY24A

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

The company supplies 19 intermediates for contrast media agents. In the next few quarters,
it will start manufacturing an advanced intermediate (iodinated ABA-HCL) and another
for Gadolinium-based contrast media. Additionally, 8-9 advanced intermediates are in the
validation stage with innovators, a process that usually takes 3-4 years. We anticipate
a ~16% topline CAGR (FY24-30E) driven by moving up the value chain and adding new
molecules.

Figure 9 - Blue Jet's contrast media intermediates portfolio

S. No Products End API Diagnostic category
1 5-Nitro Isophthalic Acid Iohexol X-ray, CT
2 5-Nitroisophthalic Acid Dimethyl Ester (NIPA-DME) Ioversol X-ray, CT
3 5-Amino-N,N'-bis (2,3-dihydroxypropyl) isophthalamide (ABA-HCl) Iohexol / Iodixinol X-ray, CT
4 5-Amino-N,N'-bis(2,3-Dihydroxypropyl)-2,4,6-Triiodoisophthalamide Iohexol, Ioversol X-ray, CT
5 5-Amino Isophthalic Acid Iopamidol X-ray, CT
6 2-Amino-1,3 propanediol Iopamidol X-ray, CT
7 5-Amino-2,4,6-triiodoisophthaloyl dichloride (ATIPA Dichloride) Iopamidol X-ray, CT
8 (S)-(-)-2-Acetoxypropionyl chloride Iopamidol X-ray, CT
9 5-Amino-N,N'-bis (1,3-dihydroxypropyl) isophthalamide (1,3-ABA) Iopamidol X-ray, CT
10 5-Nitroisophthalic acid monomethyl ester (NIPA-MME) Iopromide X-ray, CT
11 5-Nitro-N-Methylisophthalamic Acid (Half Amide) Iotalamic Acid X-ray, CT
12 5-Nitro-N-Hydroxyethylisophthalamic Acid Iobitridol X-ray, CT
13 5-Hydroxyisophthalic Acid Iomeprol X-ray, CT
14 3-Aminobenzoic Acid Iodipamide X-ray, CT
Gadoteric Acid Gadobutrol, Gadobenic Acid
15 1,4,7,10-Tetraazacyclododecane (Cyclen) X-ray, MRI
Gadoteridol, Gadoxetic Acid
16 Pentanedioic 2-Bromo,1,5-Dibutylester (BGB) Gadopiclenol X-ray, MRI
17 1,5-dimethyl 2-bromopentandioate New Chemical entity X-ray, CT
18 (S)-2-Acetoxy Propionic Acid Iopamidol X-ray, CT
19 5-Amino Isophthalic Acid Dimethyl Ester (AIPA DME) Iopamidol X-ray, CT

Source: Bluejet healthcare RHP, Macquarie Research, February 2025

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Moving up in value chain to improve realisation

The company commenced its operations in 1997 with the manufacturing of a fundamental
building block for contrast media agents, known as Nitro Isophthalic Acid (NIPA). Since then,
it has ascended the value chain and currently manufactures 19 intermediates. The largest
contributor to the top-line revenue is ABA HCl (5-Amino-N,N'-bis(2,3-dihydroxypropyl)
isophthalamide), which accounted for over 80% of the contrast media segment revenue in
FY24. Notably, the value realisation for ABA HCl has improved ~3x compared to NIPA.
The company is now in the process of supplying Iodinated ABA HCl to an innovator, which
is expected to enhance value realisation by ~12x compared to NIPA. This advancement is
anticipated to drive substantial top-line growth and improve gross margins.

Figure 10 - Bluejet healthcare is moving up the value chain in contrast media segment

Source: Company reports, Macquarie Research, February 2025

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Macquarie Equity Research Indian CRDMO

Figure 11 - The company's historical realisations on contrast media

intermediates

Source: Volza, Macquarie Research, February 2025

New molecule on Gadolinium contrast media

The company has established a 37kL capacity facility to manufacture an advanced

intermediate for a Gadolinium-based contrast agent (GBCA) that has recently been
introduced to the market. This new agent offers significant advantages over traditional
GBCAs, primarily due to its higher relaxivity, which results in a lower dose requirement.
Specifically, it enables effective imaging at half the usual gadolinium dose (0.05 mmol/kg
compared to 0.1 mmol/kg for other agents).
The reduced gadolinium exposure addresses potential safety concerns, especially for
patients with impaired kidney function. Furthermore, the macrocyclic structure of this
new agent provides greater stability and safety, thereby minimising the risk of gadolinium
retention in the brain, bones, and other tissues. This new agent received a market
authorisation (MA) from the European Commission on 11 December 2023, from the US FDA
September 2022.

Contrast media market overview

The global contrast media market, valued at about US$5.9 billion in FY23, is expected
to deliver a 6-7% CAGR over FY23-26E as per the company's DRHP filing. The market is
primarily segmented into iodinated contrast media (74%), used for X-ray and CT imaging,
and gadolinium-based contrast media (24%), used for MRI imaging. A smaller portion (2%)
comprises micro bubble-based agents used in ultrasound imaging.

The industry is highly concentrated, with four major players - GE Healthcare (~27%), Bracco
(~20%), Bayer (~17%), and Guerbet (~11%) - holding over 75% of the market share. These
companies benefit from long-term contracts and strong relationships with diagnostic
equipment manufacturers, ensuring their dominance.

Despite a temporary decline post-COVID-19 due to supply chain disruptions, the market has
returned to pre-pandemic levels, driven by increasing imaging procedures, advancements in
diagnostic techniques, and an ageing global population .

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Figure 12 - Iodinated contrast media agents lead Figure 13 - Innovator market share in Contrast
the market Media Agent Market

Microbubble, GE
Others
(Ultra-sound agents), 2% Healthcare
25%
Iodinated, 27%
(Xray/CT contrast
agents), 74%

Gadolinium,
(MRI contrast
agents), 24%
Guerbet
11%

Bracco
20%
Bayer
17%

Source: IMS IQVIA, Macquarie Research, February 2025 Source: IMS IQVIA, Macquarie Research, February 2025

Figure 14 - Estimated market share of Iodinated Figure 15 - Estimated market share of Gadolinium
contrast media products based Contrast media products

Others
Others Gadodiamide
Iobitridol
Gadopentetic acid
Iopromide

Iohexol Gadoteridol Gadoteric acid

Iomeprol Gadobenic acid

Gadoxetic acid
Ioversol

Iodixanol
Iopamidol Gadobutrol

Source: IMS IQVIA, Macquarie Research, February 2025 Source: IMS IQVIA, Macquarie Research, February 2025

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Pharma intermediate/API segment to accelerate growth

Blue Jet’s pharma intermediates and APIs division collaborates with both innovator and
generic pharmaceutical companies to supply intermediates for new chemical entities
(NCEs) and APIs for chronic therapeutic areas. As of 1HFY24, the company’s portfolio
encompassed 20 products, of which 8 were part of the CDMO model. As of 1HFY24,
Blue Jet had established relationships with over 40 clients in India and 16 international
customers across the US, EU, South America, and Asia. Its customer base includes Hovione
Farmaciência, Olon SpA, Esperion Therapeutics, and Bial-Portela & CA.
Looking ahead, Blue Jet has secured 3-4 significant contracts, including TosMIC and Vanillic
Acid, which could serve as a turning point for this segment. We expect the full revenue
impact from these agreements to materialise in the medium term, potentially driving a 15x
growth in this segment’s revenue between FY2024-30E.

Figure 16 - Blue Jet's Pharma intermediates segment revenue in (Rs mn)

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E
Source: Company Reports, Macquarie Research, February 2025

Figure 17 - Blue Jet's Pharma intermediates and API portfolio

S. No Product Categories Products End API Therapeutic Category
1 Methyl Anthranilate Ambroxol and perfumes Anti-mucolytic
2 2-Carbomethoxy Benzene Sulphonamide (CBS) Flutriafol Fungicides
3 5-Cyanophthalide Escitalopram Anti-depressant
4 Mica Ester (M-70) Cefexime Antibiotic
5 Para Amino Benzoic Acid (PABA) Benzocaine Anaesthetics
6 4-Acetamidobenzoic Acid (PACBA) Inosine pranobex Antiviral
7 4-Sulfobenzoic acid potassium salt (PSBA)* Probenecid Uricosurics
Pharma Intermediates 4-(acetylamino) benzoic Acid- 1-(dimethylamino)-2-
8 Inosine pranobex Antiviral
propanol*
9 4-(Aminomethyl) Benzoic Acid* Chidamide Oncology
10 4-Fluro-1,2-Phenylenediamine* Chidamide Oncology
11 3,5-Dinitrobenzotrifluoride* Nilotinib Oncology
12 1,4-Butane Sultone* Pharma excipient (also used for remdesivir) Antiviral
13 Vanillic Acid* Opicapone, etamivan, brovanexine Anti-Parkinson
14 TosMIC* Bempedoic acid Lipid lowering
15 Docusate Sodium Suspension Laxative
16 Calcium Docusate Laxative
17 INDOL-3-ACETIC ACID New chemical entity (NCE) molecule CNF
API
18 Vanilline Acetate Etamivan Anti-Parkinson
19 Trans-3(3-Pridyl)-Acrylic Acid Chidamide Oncology
20 Methyl Iodide Flucanazole Anti inflamatory

Source: Bluejet healthcare RHP, Macquarie Research, February 2025

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Intermediate supplies to Esperion Therapeutics to drive meaningful growth

The company supplies TosMIC, a critical intermediate for Bempedoic acid, a novel non-statin
cholesterol-lowering drug, and has recently expanded its capacity by 120kL. Currently, the
company is the primary supplier of this intermediate to Esperion. Additionally, the company
has secured supply contracts with prominent Indian pharmaceutical companies, including Dr.
Reddy’s (DRRD IN, Outperform), Sun Pharma (SUNP IN, Outperform), and Aurobindo Pharma
(ARBP IN, Outperform). We anticipate that the ramp-up in TosMIC supply will be a primary
driver of top-line growth in the Pharma intermediate/API segment.
We project that intermediate supplies will increase c.4x by FY30E from the FY25E base.
This projection is conservative, considering that a) end product sales are expected to grow
6-7x, and b) the intermediate requirement factor is ~1.2x, meaning about 1.2 tonnes of
intermediate is needed to manufacture 1 tonne of the final API. Our revenue expectations
from the product intermediate supply translate to a capacity requirement of over 300
tonnes by FY30E for Bluejet. We believe the current capacity is approximately 200 tonnes,
and the company can further increase capacity through de-bottlenecking and yield
improvement.

Figure 18 - Our estimates for Bempedoic acid Figure 19 - Our estimates for implied revenue
revenue from FY25 to FY30 (in Rs mn) capacity for Bempedoic acid from FY25E to FY30E

14,000 350

12,000 300

10,000 250

8,000 200

6,000 150

4,000 100

2,000 50

0 0
FY25E FY26E FY27E FY28E FY29E FY30E FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

Multiple positive tailwinds for the innovator molecules

Esperion has been marketing Bempedoic acid under the brands ‘Nexletol’ and ‘Nexlizet’ since
CY2020. Nexletol is a pure Bempedoic acid formulation, while Nexlizet is a combination
therapy with Ezetimibe. Esperion markets the drug independently in the US, while Daiichi
Sankyo (4568 JP, Outperform) handles the marketing in Europe, and Otsuka Pharma (not
rated) does so in Japan. Esperion recognises sales directly from the US market and receives
royalties and milestone payments from its partnered geographies.
Esperion's recent label expansion in the US and EU markets has increased the total
addressable patient pool from 10 million to 70 million. US prescriptions are growing at a
double-digit rate quarter-over-quarter. Our revenue estimates for Bluejet's intermediate
supply are based on the expected revenue growth for the innovator.
Bempedoic acid inhibits cholesterol biosynthesis in the liver, making it an essential therapy
for statin-intolerant patients. Given the size of the statin market and the unmet needs
among statin-intolerant patients, the successful commercialization of Bempedoic acid could
significantly enhance Bluejet’s growth trajectory.

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Figure 20 - Sales projection for Bempedoic acid in Figure 21 - Royalty revenue projection (Ex-US
US markets)

Nexletol/ Nexlizet US sales (US$mn) Nexletol/ Nexlizet Ex-US royalty revneue (US$mn)
700 140

600 120

500 100

400 80

300 60

200 40

100 20

0 0
CY23 CY24e CY25e CY26e CY27e CY28e CY29e CY30e CY23 CY24e CY25e CY26e CY27e CY28e CY29e CY30e

Source: Visible Alpha, Macquarie Research, February 2025 Source: Visible Alpha, Macquarie Research, February 2025

High intensity sweetener segment: Steady growth

Blue Jet has successfully established strategic partnerships for high intensity sweetners
with several major FMCG companies, including Colgate-Palmolive (not rated) and Coca-Cola
(not rated). The company currently has 4 commercialised high-intensity sweeteners in its
portfolio. We expect an 8% CAGR for its high-intensity sweetener business over FY24 and
FY27E.

Figure 22 - Blue Jet's High intensity sweetners Figure 23 - Blue Jet High-intensity sweetener
segment estimated revenue (in Rs mn) portfolio

2,500 S. No Products End Use Category

2,000
Electroplating industries as nickel
1 Saccharin Insoluble Artificial sweetener
brightener

1,500

2 Saccharin Imide Probenazole Fungicides

1,000

500 Pharma excipient (sweetener), oral Artificial sweetener and

3 Saccharin Sodium
healthcare, feed, food and beverages pharma excipient

0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E 4 Calcium Saccharin Pharma excipient Pharma excipient

Source: Company Reports, Macquarie Research, February 2025

Source: Bluejet healthcare RHP, Macquarie Research, February 2025

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Global High-Intensity Sweeteners Market overview

The high-intensity sweeteners industry remains highly fragmented, with these

compounds widely used as sugar substitutes in food, beverages, oral health products,
and pharmaceuticals. These sweeteners are estimated to be 300 to 500 times sweeter
than sugar, while contributing minimal to negligible calories when incorporated into food
products. According to IQVIA, the global high-intensity sweetener market was valued at US
$2.9–3bn in FY23, encompassing products such as Sucralose, Aspartame, Saccharin, Stevia,
and Neotame.
As per the company's annual report commentary, the High-intensity Sweetener Market is
projected for significant growth, reaching a value of $5+bn by 2034 with a CAGR of ~5%. In
terms of volume, the market is expected to reach ~113k tonnes by 2034 (CAGR 3.1%). Key
drivers of market growth include the rising demand for functional foods, increasing diabetes
and obesity rates, a preference for natural sweeteners, taxes on sugary beverages, and
wider adoption in the beverage industry. However, the market faces challenges such as strict
government regulations, potential health concerns associated with artificial sweeteners, and
fluctuations in raw-material prices. Despite these challenges, opportunities exist in emerging
economies and through increased research and development on sugar-free products.
Additionally, trends such as consumer preference for clean-label products and healthier
lifestyles are shaping the future of the market.

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Strong topline growth to drive meaningful operating leverage

We build in a strong top-line CAGR (FY24-30e) of 26% for overall business. Given the
majority of top-line growth will be driven by new projects, we believe it will help improve
grow margins and bring meaningful operating leverage benefits. Hence, we expect the
company's EBITDA to be ~5x by FY30E on FY24 base. Similarly, we expect the company's
PAT to grow >5x by FY30E on FY24 base. Along with improvement in profitability we also
expect ROIC to improve from ~30% in FY24 to around 50% in FY30E.

Figure 24 - Blue Jet's Revenue (in Rs mn) Figure 25 - Blue Jet- EBITDA and EBITDA margin

30,000 12,000 45%

40%
10,000
25,000 35%

8,000 30%
20,000
25%
6,000
20%
15,000
4,000 15%

10,000 10%
2,000
5%
5,000 0 0%
FY24A FY25E FY26E FY27E FY28E FY29E FY30E

0 EBITDA (Rs mn)- LHS EBITDA margin (%)- RHS

FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

Figure 26 - Blue Jet- PAT and PAT margin Figure 27 - Blue Jet ROIC

10,000 35% 60%

9,000
30%
8,000 50%
7,000 25%

6,000 40%
20%
5,000
15% 30%
4,000
3,000 10%
2,000 20%
5%
1,000
0 0% 10%
FY24A FY25E FY26E FY27E FY28E FY29E FY30E

PAT (Rs mn)- LHS PAT margin (%)- RHS 0%

FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company Reports, Macquarie Research, February 2025 Source: Company Reports, Macquarie Research, February 2025

18 February 2025 79
Macquarie Equity Research Indian CRDMO

Valuation

The stock is currently trading at approximately 20x EV/EBITDA based on our FY27E EBITDA
estimates, which is largely in line with domestic peer average. We have valued the stock
at 26x EV/EBITDA on our FY27E EBITDA to arrive at our target price of Rs1,000 which is
also supported by our DCF analysis. Considering the strong earnings prospects in the near
term, we believe that slight premium to industry average EV/EBITDA multiple is justified. Our
Blue Jet Healthcare FY26/27E earnings estimates are 4% and 20% higher than Bloomberg
consensus estimates.

Figure 28 - Our FY26 and FY27 estimates are meaningfully above consensus
estimates
EPS MQ estimates Consensus estimates % difference
FY26e 23 22 4%
FY27e 29 24 20%

Source: Bloomberg, Macquarie Research, February 2025

Figure 29 - CDMO valuation comparisons

CMP Mcap Upside/ EPS EBITDA (in LCY mn) P/E EV/EBITDA Revenue EBITDA EPS
Company BBG Ticker Currency Rating TP ROIC
(LCY) (LCY bn) Downside FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e CAGR CAGR CAGR
Indian CDMO's
Divis labs DIVI IN INR 5,924 1,563 OP 7,400 25% 82 106 133 29,315 39,045 48,597 72 56 45 53 39 32 18% 30% 30% 20%
Suven Pharma SUVENPHA IN INR 1,119 280 OP 1,500 34% 15 18 27 8,590 11,330 15,660 75 61 41 31 24 17 20% 27% 29% 25%
Syngene SYNG IN INR 701 280 OP 835 19% 13 17 22 10,693 12,988 15,863 54 42 31 27 22 19 13% 16% 21% 14%
Blue Jet Healthcare BLUEJET IN INR 754 134 OP 1,000 33% 17 23 29 3,651 5,308 6,668 45 33 26 37 25 20 33% 43% 43% 29%
Laurus Labs LAURUS IN INR 556 292 Not rated NA NA 6 11 16 10,559 14,465 18,334 91 50 35 34 25 19 14% 35% 74% 6%
Piramal Pharma PIRPHARM IN INR 200 260 Not rated NA NA 1 4 6 14,508 19,041 23,416 147 45 29 22 16 13 15% 25% 259% 4%
Neuland Labs NLL IN INR 11,534 146 Not rated NA NA 250 345 476 4,103 6,569 8,839 47 34 25 42 26 20 20% 24% 27% 31%
Average /median 76 46 33 35 25 20 18% 27% 30% 20%
Regional peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Asymchem 6821 HK HKD 56 31 Neutral 56 1% 3 4 5 1,353 1,760 2,162 19 15 12 16 12 10 2% -9% 16% 4%
Pharmaron Beijing 3759 HK HKD 16 47 UP 8 -49% 1 1 1 2,916 3,387 3,889 15 15 13 16 14 12 11% 9% 5% 10%
Wuxi Apptec 2359 HK HKD 61 183 Neutral 43 -30% 3 3 4 13,652 15,181 16,614 18 16 15 12 11 10 5% 3% 7% 17%
Wuxi XDC 2268 HK HKD 30 36 Neutral 18 -40% 1 1 1 1,009 1,462 2,026 44 31 22 30 21 15 47% 62% 25% 15%
Wuxi Bio 2269 HK HKD 23 95 Neutral 14 -39% 1 1 1 5,853 6,878 7,942 28 24 20 15 13 11 11% 15% 11% 7%
Samsung bio 207940 KS SKW 1,180,000 83,985 OP 1,260,000 7% 22,785 27,970 32,780 2,462,000 3,006,000 3,493,000 66 53 45 34 28 24 26% 24% 19% 12%
Average/ median 32 26 21 21 16 14 11% 12% 14% 11%
Global Peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Lonza LONN SW CHF 598 43 Not rated NA NA 17 20 24 2,215 2,562 2,969 36 30 25 21 18 16 13% 26% 12% 7%
Siegfried SFZN SW CHF 1,070 5 Not rated NA NA 36 40 45 288 319 354 30 27 24 18 16 15 6% 12% 8% 13%
ICON Plc ICLR US USD 183 15 Not rated NA NA 14 14 16 1,725 1,707 1,867 13 13 11 10 11 10 3% 7% 5% 8%
Charles River CRL US USD 153 8 Not rated NA NA 10 10 11 1,007 977 1,051 15 16 14 10 11 10 0% 2% 2% 8%
Bachem Holding BANB SW CHF 57 4 Not rated NA NA 2 2 3 174 210 297 36 31 23 23 19 14 19% 19% 17% 10%
Polypeptide Group PPGN SW CHF 22 1 Not rated NA NA 0 0 1 21 61 95 -64 67 21 39 14 9 15% -351% -244% -3%
Average/ median 11 31 20 20 15 12 9% 9% 7% 8%

Overall Average 41 35 25 26 19 16

Source: Bloomberg, Macquarie Research, February 2025

Priced as at close 17 February 2025. We use our own estimates for Indian CDMOs and Samsung Bio. We use median for EBITDA CAGR, EPS CAGR and ROIC.

Figure 30 - We use DCF to arrive at our TP of Rs1,000

Free cash flows (in Rs mn) FY24A FY25e FY26e FY27e FY28e FY29e FY30e FY43e
Revenue 7,116 9,975 14,467 17,666 21,432 24,604 28,096 128,697
YoY growth (%) -1% 40% 45% 22% 21% 15% 14% 7.0%
EBIT 2,011 3,458 5,037 6,344 7,937 9,530 10,938 51,516
EBIT Margin (%) 28% 35% 35% 36% 37% 39% 39% 40.0%
Change in working capital 106 -1,568 -1,697 -256 -1,694 -1,494 -1,549 -7,722
Capex (1,722) (2,000) (1,500) (1,500) (1,500) (1,500) (1,500) (5,791)
FCF 183 -763 851 3,326 3,131 4,570 5,611 30,915
Terminal value 638,930
Discount rate (%) 11%
NPV of FCF 0 -744 751 2,656 2,263 2,988 3,320 108,111
EV 174,344
Net debt (860)
Total value of equity 173,484
Equity value per share 1,000
No of shares (mn) 173
Current share price (Rs) 754
Upside/Downside 32.6%

Source: Company Reports, Macquarie Research, February 2025

Closing price as of Feb 17, 2025

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Macquarie Equity Research Indian CRDMO

Appendix

Company background and important milestones

Blue Jet Healthcare is a prominent player in the pharmaceutical industry, specialising in the
development, manufacturing, and supply of high-quality pharmaceutical intermediates and
Active Pharmaceutical Ingredients (APIs). The company is known for its strong emphasis on
innovation, quality, and customer satisfaction, making it a trusted partner for many leading
pharmaceutical companies globally.

Key Milestones in Blue Jet Healthcare's History

• 1968: Established as Jet Chemicals Private Limited in Shahad (Unit I) by the late Shri B.L.
Arora.
• 1970: Began manufacturing saccharin and its salts, which are high-intensity sweeteners.
• 2000: Commenced the manufacturing of pharma intermediates and API.
• 2002: Entered the X-ray contrast media sector, with a basic building block (5-NIPA).
• 2003: Established Blue Circle Organics Private Limited (at Unit II, Ambernath facility).
• 2017: Commenced semi-automated manufacturing block for our contrast media
intermediate business.
• 2019: Received US-FDA Establishment Inspection Report of Blue Circle Organics Private
Limited for Unit II.
• 2019: As part of our corporate restructuring strategy, a merger between Blue Circle
Organics Private Limited and Jet Chemicals Private Limited was undertaken to form Blue
Jet Healthcare Private Limited.
• 2020: Acquisition of a brownfield site in Mahad on a leasehold basis (Unit III).
• 2021: Acquisition of a greenfield site in Ambernath on a leasehold basis (Unit IV).
• 2023: Supply of Pharmaceutical Intermediates to an innovator and Company got listed on
NSE and BSE.

Manufacturing facilities

The company currently operates three manufacturing facilities in Maharashtra, India,

specifically located in Shahad (Unit I), Ambernath (Unit II), and Mahad (Unit III). These facilities
have annual installed capacities of 200.6 KL, 607.3 KL, and 213.0 KL, respectively.
In 2021, it also acquired a leasehold greenfield manufacturing site in Ambernath (Unit IV),
where we plan to build several multi-purpose blocks dedicated to our CDMO business. Once
it obtains the necessary approvals, the company expects Unit IV to have an estimated
installed capacity of 71 KL.

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Macquarie Equity Research Indian CRDMO

Shareholding pie chart

Figure 31 - Blue Jet Healthcare shareholding pattern

Public
14%

Promoter &
Promoter Group
86%

Source: Company Reports, Macquarie Research, February 2025

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Macquarie Equity Research Indian CRDMO

Key Quant Findings Alpha Model Decomposition

(top 5% of the Macquarie Quant Alpha model) The Macquarie Alpha is decomposed into its sector and
The quant model currently holds a strong positive view market relative factor & styles exposures (a higher/better
on Blue Jet Healthcare. The strongest style exposure is percentile is coded in green, whilst lower in red).
Earnings Momentum, indicating this stock has received Percentile
earnings upgrades and is well liked by sell side analysts. The relative to
weakest style exposure is Valuations, indicating this stock sectors market
is over-priced in the market relative to its peers. Factors / Styles (/1224) (/1021) Core factors in definition

ALPHA 99% 98% Built from the styles below

VALUE 36% 11% Book, CF, Yield, Earnings Multiples

Macquarie Alpha Model: Key rankings ANALYST 100% 99% Revisions (Earnings, Recommendations)

The Macquarie Quant’s flagship Alpha model is a dynamic MOMENTUM 99% 96% Price Momentum
multi-factor model based on a staple of quant factors such GROWTH 78% 87% EPS, Sales (Forecast, Historic)
as value, momentum, revisions, quality, and risk.
PROFITABILITY 96% 92% ROE, Margin, Asset Turnover
Global Market (Country) Sector
Pharma, Biotech QUALITY 94% 94% Accruals, Earn Stability, Cash Conversion
Whole Universe India
& Life Sciences CAPITAL 92% 89% Investment/Capex, Net share issuance
Macquarie Alpha
189/17780 21/1021 7/1224 LIQUIDITY 96% 92% Size, Turnover, Analyst Coverage
Model

Fundamental LOW RISK 25% 22% Beta, Volatility, Earn.Cert, Leverage

5672/17780 358/1021 511/1224
(Consensus) *
TECHNICAL 56% 32% MACD, RSI, Bollinger, Williams R, etc

* based on Total Shareholder Return = Consensus Price target / Current Price

Factors driving the Alpha Model vs peers

Current and Historical Alpha Model Rank For the comparable firms this chart shows the key underlying
The chart shows the Macquarie Alpha model market ranking styles and their contribution to the current overall raw Alpha
against the company’s peers and over recent history. score.
100%

Blue Jet Healthcare

Most Attractive
75% Strides Pharma Scien…

Suven Pharmaceutical…
50%
Jubilant Pharmova

25% Eris Lifesciences

Least Attractive Syngene Internationa…

0% Solara Active Pharma…

Solara Syngene Eris Jubilant Suven Strides Blue Jet
Active Internationa Lifesciences Pharmova Pharmaceut Pharma Healthcare
Pharma… … ical… Scien… -3.0 -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0
VALUE PROFITABILITY MOMENTUM LOW RISK & LIQUIDITY ALPHA
5 Year Ago 3 Year Ago 1 Year Ago Current
GROWTH ANALYST QUALITY & CAPITAL

Drivers of Stock Return Macquarie Style Returns over last year

Breakdown of 1-year total return (local currency) into returns Recent performance to Macquarie style factors
from dividends, changes in forward earnings estimates and Monthly Factor Long-Short Returns for
the resulting change in earnings multiple. Last 5 Last 10
Jan - Dec - Nov - Oct - Sep - Aug - Jul - Jun - May - Apr - Mar - Feb - Years Years
Asia Ex JP
25 24 24 24 24 24 24 24 24 24 24 24 (ann) (ann)

Blue Jet Healthcare ALPHA 1% 7% 1% -1% -19% 5% -2% 6% 0% 2% 3% -3% 6% 5%

Strides Pharma Scien… VALUE 1% 5% 1% -2% 1% 3% -2% 0% 3% 3% 0% -6% 6% 4%

Suven Pharmaceutical… ANALYST 3% 6% 0% 2% -7% 1% -3% 4% -2% 1% 3% 4% 14% 10%

Jubilant Pharmova
MOMENTUM -1% 4% 2% 1% -23% 3% -2% 9% 2% 0% 3% -6% 4% 2%

Eris Lifesciences
GROWTH 0% 5% 2% -1% 0% -2% 0% 1% -2% 0% 2% 5% -1% 0%

Syngene Internationa…
PROFITABILITY 1% 4% 0% -3% -3% 3% -2% 1% 1% 1% -1% -1% -6% -2%
Solara Active Pharma…
QUALITY 1% 4% 1% -1% -1% 0% -4% 1% 1% 2% 0% 1% -2% 0%

-100% -50% 0% 50% 100%

CAPITAL -1% 1% 1% -1% 1% 1% -1% -2% 1% 3% 0% -2% 0% -3%
Dividend Return Multiple Change Forecast Earnings 1Yr Total Return
Change LIQUIDITY 0% -1% 2% -3% -13% 4% -1% 5% 1% 0% 1% -6% -2% 0%

LOW RISK -1% 4% 2% -3% -9% 4% 3% 3% 0% 2% 1% -7% -2% -2%

Source (all charts): FactSet, Refinitiv, and Macquarie Quant. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global
Quantitative Team: [email protected]. Explanation for items on this page can be found at https://www.macquarieinsights.com/rp/d/r/p/OTUyMzg1

18 February 2025 83
Macquarie Equity Research
18 February 2025

Healthcare

Pharma, Biotech & Life Sciences

Syngene International India

Initiation: Gearing up for next growth phase

Dr. Kunal
Key Points Dhamesha, MBBS

• Syngene is in a unique position to benefit from biotech funding

recovery, supply chain de-risking, and higher pharma outsourcing. SYNG IN Outperform
• We expect its medium-term earnings to materially improve as its Price (at 18 Feb 2025) INR701.40
12-month target INR835.00
increasing capabilities are matched by higher capacity expansion/
12-month TSR (%) 19.9
utilisation. Volatility Index Low
• We initiate at Outperform with a TP of Rs835, implying ~22x FY27E EV/ Market Cap (Local) (m) 282,339
EBITDA, a ~10% discount to the sector average. Market Cap (USD) (m) 3,250
Free Float (%) 47
30-day avg turnover (USD) (m) 7.1

Transitioning to integrated CDMO with broad presence: Syngene Investment Fundamentals

is well positioned to benefit from India's growing appeal as a sourcing Year end 31 Mar 2024A 2025E 2026E 2027E
hub, rising demand for integrated services, and supply-chain de-risking Revenue (bn) 34,886 36,774 42,525 49,451
Revenue growth (%) 9.3 5.4 15.6 16.3
by major pharmaceutical innovators. The company has evolved from a
EBIT (bn) 5,885 6,327 8,434 11,153
contract research organisation to an integrated Contract Development EBIT growth (%) 3.6 7.5 33.3 32.2
and Manufacturing Organisation (CDMO), with capabilities spanning small Reported profit (bn) 5,100 5,198 6,681 8,966
molecules, biologics, antibody-drug conjugates, and oligonucleotides. Adjusted profit (bn) 5,100 5,198 6,681 8,966
EPS rep [INR] 12.7 12.9 16.6 22.3
Development and manufacturing services - the primary growth driver: EPS rep growth (%) 9.7 1.8 28.5 34.2
We expect the company's development and manufacturing services EPS adj [INR] 12.7 12.9 16.6 22.3
division (40% of revenue in FY24) to report high-teens top-line CAGR (over EPS adj growth (%) 9.7 1.8 28.5 34.2
Net debt/equity (%) (0.2) (4.2) (11.3) (19.7)
FY24-30E), as it increases supplies for both small and large molecules.
ROA (%) 9.8 9.9 12.1 14.6
Discovery services growth to bounce back: A weak biotech funding ROE (%) 13.0 11.4 12.9 15.2
PER rep (x) 55.3 54.3 42.3 31.5
environment in the US and globally has led to muted growth in this segment
PER adj (x) 55.3 54.3 42.3 31.5
over the past couple of years. With improving biotech funding and supply- EV/EBITDA (x) 27.1 25.8 21.3 17.4
chain de-risking owing to geopolitical events, we build in revenue growth P/BV (x) 6.6 5.8 5.1 4.5
recovery in the discovery segment (a 15% CAGR over FY25E-30E vs 14% in Total div yield (%) 0.3 0.7 0.9 0.0

FY19-24). Quant (rank vs. global sector) 401/1,224

Business mix shift and higher capacity utilisation to drive bottom-

line: We expect Syngene's EBITDAm to increase by ~500bps by FY30E
(from 29% in FY24), driven by a strategic business mix shift, higher capacity
utilisation, and improved employee productivity. Thus, we expect ROIC to
rise to 35%+ by FY30E from 14% in FY24.

Valuation: We value the stock at 22x EV/EBITDA on our FY27E EBITDA to

arrive at our TP of Rs835 which is also supported by DCF analysis.

Catalysts: 4QFY25 results, improving biotech funding, re-introduction of SYNG IN rel BSE Sensex
the US Biosecure Act, Incremental RFP momentum. performance, & rec history

Investment Thesis and Recommendation

We expect Syngene's earnings growth to accelerate as it shifts from a
service-oriented model to a product-focused one. We project a 14%
revenue CAGR and 22% earnings CAGR over FY24-30E, driven by the
development and manufacturing services segments.

Source: FactSet, Macquarie Research, Feb 2025 (all figures in

INR unless noted, TP in INR)

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Macquarie Equity Research Indian CRDMO

Key Risks to Investment Thesis Company Description

• Adverse regulatory outcome at manufacturing facility Syngene is a contract research, development, and
• Loss of dedicated research centre partner manufacturing services company, offering a wide range of
scientific services, from discovery to commercial supply. With
• Delay in biotech funding recovery
over 5,600 skilled scientists and advanced technology, it is a
preferred partner for biopharmaceutical companies. While
focusing on pharmaceuticals, Syngene also collaborates with
firms in nutrition, animal health, consumer products, and
specialty chemicals, serving around 400 clients, mainly in the
US, Europe, and the UK.

Figure 1 - Syngene - Revenue (in Rs mn) Figure 2 - Syngene - PAT (in Rs mn)

80,000 20,000
70,000
60,000 15,000
50,000
40,000 10,000
30,000
20,000 5,000
10,000
0 0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company, Macquarie Research, February 2025 Source: Company, Macquarie Research, February 2025

Syngene International (SYNG IN) INR/(m) unless otherwise noted

Income Statement Mar FY 2024A 2025E 2026E 2027E Q3/25A Q4/25E Balance Sheet 2024A 2025E 2026E 2027E
Revenue 34,886 36,774 42,525 49,451 9,437 10,530 Cash 5,635 8,847 11,671 15,583
Cost of Goods Sold 9,302 9,392 10,757 12,363 2,374 2,317 Receivables 5,132 5,148 5,953 6,923
Gross Profit 25,584 27,383 31,768 37,088 7,063 8,214 Inventories 2,385 1,839 2,126 2,473
EBITDA 10,144 10,693 12,988 15,863 2,819 3,738 Investments 0.0 0.0 0.0 0.0
Depreciation 4,259 4,366 4,553 4,710 1,087 1,101 Fixed Assets 23,783 24,847 25,793 26,584
Amortisation 0.0 0.0 0.0 0.0 0.0 0.0 Intangibles 4,306 4,497 4,497 4,497
EBIT 5,885 6,327 8,434 11,153 1,732 2,637 Other Assets 20,275 21,366 22,459 23,775
Net Interest Income (472.0) (444.2) (476.8) (383.8) (124.0) (72.2) Total Assets 61,516 66,544 72,499 79,834
Associates 0.0 0.0 0.0 0.0 0.0 0.0 Payables 2,555 2,869 3,249 3,695
Exceptionals 0.0 0.0 0.0 0.0 0.0 0.0 Short Term Debt 901.0 1,110 1,110 1,110
Forex Gains / Losses 0.0 0.0 0.0 0.0 0.0 0.0 Long Term Debt 4,651 5,701 4,373 2,049
Other Pre-Tax Income 795.0 1,165 950.1 1,185 200.0 289.1 Other Liabilities 10,832 8,214 8,940 9,791
Pre-Tax Profit 6,208 7,048 8,907 11,954 1,808 2,854 Total Liabilities 18,939 17,894 17,672 16,645
Tax Expense (1,108) (1,849) (2,227) (2,989) (497.0) (784.5) Shareholders' Funds 42,577 48,650 54,828 63,189
Net Profit 5,100 5,198 6,681 8,966 1,311 2,069 Minority Interests 0.0 0.0 0.0 0.0
Minority Interests 0.0 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0
Reported Earnings 5,100 5,198 6,681 8,966 1,311 2,069 Total S/H Equity 42,577 48,650 54,828 63,189
Adjusted Earnings 5,100 5,198 6,681 8,966 1,311 2,069 Total Liab & S/H Funds 61,516 66,544 72,499 79,834
Basic Shares Outstanding 401.3 402.5 402.5 402.5 402.5 402.5 Net Debt / Equity (%) (0.2) (4.2) (11.3) (19.7)
Diluted Shares Outstanding 401.9 402.5 402.5 402.5 402.5 402.5 Interest Cover (x) 12.5 14.2 17.7 29.1
EPS (rep) [INR] 12.7 12.9 16.6 22.3 3.3 5.1 ROE (%) 13.0 11.4 12.9 15.2
EPS (adj) [INR] 12.7 12.9 16.6 22.3 3.3 5.1 ROA (%) 9.8 9.9 12.1 14.6
Total DPS [INR] 2.0 5.0 6.0 0.0 0.0 0.0 ROIC (%) 12.4 11.0 13.6 17.2
Ratio 2024A 2025E 2026E 2027E Cash Flow Analysis 2024A 2025E 2026E 2027E
Revenue Growth (%) 9.3 5.4 15.6 16.3 - - EBITDA 10,144 10,693 12,988 15,863
EBITDA Growth (%) 8.6 5.4 21.5 22.1 - - Tax Paid (1,108) (1,849) (2,227) (2,989)
EBIT Growth (%) 3.6 7.5 33.3 32.2 - - Chgs in Working Cap 54.0 1,248 1,079 1,336
EPS Growth (adj) (%) 9.7 1.8 28.5 34.2 - - Net Interest Paid 0.0 0.0 0.0 0.0
Gross Profit Margin (%) 73.3 74.5 74.7 75.0 - - Other (2,502) (4,567) (2,158) (2,671)
EBITDA Margin (%) 29.1 29.1 30.5 32.1 - - Operating Cashflow 6,589 5,524 9,682 11,538
EBIT Margin (%) 16.9 17.2 19.8 22.6 - - Acquisitions 0.0 0.0 0.0 0.0
Net Profit Margin (%) 14.6 14.1 15.7 18.1 - - Capex (6,394) (3,805) (5,500) (5,500)
Payout Ratio (%) 15.8 39.0 36.4 0.0 - - Other 3,649 1,089 0.0 0.0
PE (rep) (x) 55.3 54.3 42.3 31.5 - - Investing Cashflow (2,745) (2,716) (5,500) (5,500)
PE (adj) (x) 55.3 54.3 42.3 31.5 - - Dividend (Ordinary) (251.5) (346.1) (476.8) (383.8)
EV/EBITDA (x) 27.1 25.8 21.3 17.4 - - Equity Raised 0.0 0.0 0.0 0.0
EV/EBIT (x) 46.8 43.6 32.7 24.7 - - Debt Movements (2,725) 270.0 (1,328) (2,323)
Price/Book (x) 6.6 5.8 5.1 4.5 - - Other (500.0) (240.5) 446.9 581.2
Total Div Yield (%) 0.3 0.7 0.9 0.0 - - Financing Cashflow (3,477) (316.6) (1,358) (2,126)
Net Chg in Cash/Debt 367.0 2,492 2,823 3,913
Free Cashflow 195.0 1,720 4,182 6,038
Source: Company data, Macquarie Research Feb 2025

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Syngene has developed its Well positioned to capitalise on secular growth tailwinds
capabilities across both small
and large molecules
We believe Syngene has created the right mix of capabilities to meaningfully benefit from:
1) the secular growth tailwinds from India's growing appeal as a sourcing hub, 2) the rising
preference for integrated service providers, 3) increased demand for biologics CDMO
services, 4) the impact of the US Inflation Reduction Act (IRA), and 5) supply chain de-risking
by major pharmaceutical innovators. The company has graduated from being a contract
research organisation (CRO) to an integrated contract development and manufacturing
organisation (CDMO) with capabilities across the entire spectrum of pharmaceutical
drug development, including small molecules, biologics, antibody drug conjugates and
oligonucleotides.

Figure 3 - Syngene's capabilities Figure 4 - Syngene - Revenue split in FY24

Others
3%
Dedicated
R&D centers
Development
24%
and
Manufacturing
services
40%

Discovery
services
33%

Source: Company, Macquarie Research, February 2025 Source: Company, Macquarie Research, February 2025

Business models

Syngene offers multiple collaboration options to provide flexibility and customisation based
on client needs. These collaboration models include:
• Fee for Service (FFS)
Þ Agreed services are delivered within a defined scope.
Þ Engagements can be short term or long term.
• Dedicated R&D Centres
Þ Clients receive customised, ring-fenced infrastructure.
Þ Dedicated scientific and support teams work exclusively on the client’s projects.
Þ Typically structured as long-term strategic alliances extending for five years or more.
• Outcome-based Model with Service Level Agreement
Þ Contracts are based on achieving a defined outcome.
Þ Engagement is linked to productivity goals.
• Full-time Equivalent (FTE) Model
Þ A predefined number of scientific personnel from specified disciplines work full-time
on client projects.
Þ Deliverables and team composition evolve as the project progresses.
Þ Agreements are usually renewed annually.
• Risk/Reward Model
Þ A milestone-based approach covering a portfolio of research projects.
Þ Clients benefit from reduced upfront payments in exchange for milestone-based
payments tied to pre-agreed success criteria.

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Macquarie Equity Research Indian CRDMO

Secular growth tailwinds in CRDMO sector

Innovator pharma companies face downside risks to their profitability from increasing drug
pricing pressure by payors and regulatory changes such as in the Inflation Reduction Act.
Hence, these companies are increasingly adopting outsourcing of research, development
as well as manufacturing activities to CRDMO (contract research, development and
manufacturing organisation) partners. Frost & Sullivan has valued the global CRDMO market
at ~US$197bn in 2023 and expects it to reach US$300+bn by 2028, a 9% market size CAGR.
We expect Indian CRDMO companies to expand faster at ~14% revenue CAGR from 2023 to
2028E. With capabilities across both small and large biologic molecules, we expect Syngene
to be a primary beneficiary of this accelerated growth.

Figure 5 - Global CRDMO Industry, 2018-2028F (in Figure 6 - Global CRDMO Industry by Function,
USD bn) 2018-2028F (in USD bn)

350 350

300 20
300 18
250

250 200 13
144
10
150
200 9 89
6
100
51
150 50 121
84
61
0
100
2018 2023 2028F
Commercial Manufacturing Clinical Development
50 and Supplies
Preclinical Development Discovery

0
2018 2019 2020 2021 2022 2023 2028F Source: Frost & Sullivan, February 2025

Source: Frost & Sullivan, February 2025

Figure 7 - Indian CDMO sector to expand at 14% Figure 8 - India CRDMO industry by functions,
CAGR (2023-28F) 2018-2028F (in USD bn)
16
Indian CDMO sector (US$bn)
16
14 0.8
0.6
14
12
12
10 5.0
10
8
0.5
8 0.3
6
0.3 2.5
6
4 0.2 7.7
4 1.3
2 4.0
2 2.3
0
0 2018 2023 2028F
2018 2019 2020 2021 2022 2023 2024F2025F2026F2027F2028F Commercial Manufacturing Clinical Development
Preclinical Development Discovery
Source: Frost & Sullivan, February 2025
Source: Frost & Sullivan, February 2025

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Macquarie Equity Research Indian CRDMO

We expect Syngene's Development and manufacturing services to be primary growth driver

capacity utilisation to ramp
up across its small & large
The company's Development Services division offers essential services for clinical supplies,
molecule businesses
supporting clinical trial programs and conducting studies on the safety, efficacy, and
tolerability of drug candidates. Also, advanced manufacturing plants for both large and small
molecules, coupled with expertise from early development to commercial-scale production,
position the company as a preferred CDMO partner. We factor in an 18% top-line CAGR
over FY24-30E for the business, as the company ramps up supply for both small and large
molecules.

Figure 9 - Syngene - Development and manufacturing services revenue (Rs

mn)

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company, Macquarie Research, February 2025

Development services capabilities and capacities

Syngene's Development Services division excels in preclinical development, API and

drug product development for both small and large molecules, and regulatory support,
including filings with the US FDA. Its integrated approach, which includes clinical supplies,
manufacturing, stability, and in-house regulatory expertise, ensures faster regulatory filings
and first-in-human studies, while maintaining quality and cost control. The division has
shown scientific excellence and high operational standards, consistently meeting client
demand with repeat orders.
The company recently added a new process research and development lab, a non-GMP
capability center, and Supercritical Fluid Chromatography for purification. Also, the company
has established a dedicated facility for animal health API manufacturing, solidifying its
position as a leading supplier in this sector.

Manufacturing services capabilities and capacities

Syngene's Manufacturing Services complement its integrated approach for both small and
large molecule projects.
• Small molecules: It offers comprehensive solutions, including process development, non-
GMP supplies, and clinical and commercial supplies. Its state-of-the-art small molecule
commercial manufacturing facility in Mangaluru, India, is US FDA approved, providing
cGMP manufacturing from benchtop volume to commercial scale. This includes end-to-
end solutions from GLP-Tox batches to clinical supplies, scale-up, launch, and commercial
manufacturing, making Syngene a preferred partner for clients seeking reliable and
comprehensive manufacturing services.
• Large molecules: The company is a fully integrated custom biomanufacturer, offering
mammalian and microbial capabilities for clinical and commercial supplies. It has extensive
expertise in monoclonal antibodies, bispecifics, antibody fragments, recombinant
proteins, glycoproteins, mRNA, microbial (E. coli and Pichia), and microbiome Live
Biotherapeutic Products (LBP). Its biologics manufacturing facility supports multi-product

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production using single-use technology, designed for long-term commercial manufacturing

with advanced technology and rich cell culture experience.

Figure 10 - Syngene's manufacturing capacity

Mfg. facility nGMP S1 Kilo Lab Unit 2 Kilo Lab HPAPI S14 Mangalore
Range 160L-5000L 10L-20L 10L-50L 60L-630L 60L- 8,000L 2000L- 12,500L
Total Capacity 26,640L 120L 90L 2010L 63,600L 69,600L
Largest reactor 5,000L 20L 50L 630L 8,000L 12,500L
# Reactors 15 3 4 5 32 11
Total number of reactors (Manufacturing Volumes) 70 reactors (>161,000L)

Source: Company, Macquarie Research, February 2025

Discovery services growth to bounce back

Syngene's discovery services revenue has remained flat in the last couple of years
(FY23-25E) primarily due to weakness in the biotech funding environment. We expect
discovery segment top-line growth to bounce back driven by improving biotech funding
environment and supply chain de-risking owing to geopolitical events. Hence, we build in
discovery segment revenue to expand at a ~13% CAGR over FY24-30E.

Figure 11 - Syngene - Discovery services revenue (in Rs mn)

25,000

20,000

15,000

10,000

5,000

0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company, Macquarie Research, February 2025

Biotech funding especially VC Improving biotech funding to drive growth acceleration in the business
funding is improving
After a sluggish couple of years of biotech funding in the US, it is back on the growth path.
Overall US biotech funding in 2024 was up 34% YoY. Importantly, Venture capital funding
has also grown 12% YoY in 2024 YTD. This should help with recovery in discovery services
projects for the company. The pandemic-era surge in biotechnology funding (2020/21) led to
increased outsourcing of research projects. However, macro-economic changes normalised
these levels, slowing early-stage research outsourcing in 2024. This cyclical trend reflects
historical patterns, with biotechnology funding in 2023 comparable to pre-pandemic 2019
levels. Despite challenges in 2022/23, 1Q2024 funding was the highest in 14 quarters, akin
to 2020/21 levels. The long-term growth suggests biotechnology remains a promising
investment, with accelerated growth over the past decade.

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Macquarie Equity Research Indian CRDMO

Figure 12 - Syngene's client base is primarily based in the US

Japan, 3% India, 2%
Others, 6%

Europe, 21%

USA, 68%

Source: Company, Macquarie Research, February 2025

Figure 13 - US Biotech funding was up by 34% in Figure 14 - Biotech VC funding is up in 2024

2024
Biotech VC funding
50 800
US Biotech funding (US$mn) 45 700
35,000 120%
40
100% 600
30,000 35
80% 30 500
25,000
60% 25 400
20,000 40% 20 300
15
15,000 20% 200
10
0% 100
10,000 5
-20% 0 0
5,000
-40% 2019 2020 2021 2022 2023 2024*

0 -60% Deal value (USD bn)- RHS Number of deals - LHS

Source: DealForma, Macquarie research February 2025

US Biotech funding YoY growth (RHS)
*2024 data is through Dec 9, 2024

Source: Biocentury, Macquarie Research, February 2025

The company is planning to Discovery services

add meaningful capacity in
its research business
Syngene's Discovery research services encompass early-stage research from target
identification to drug candidate delivery. Clients can select from functional services in
Chemistry, Biology, Safety Assessment & Toxicology, and Computational & Data Sciences, or
opt for integrated solutions via SynVent. The Discovery Chemistry team excels in synthetic
and medicinal chemistry, PROTACs, antibody drug conjugates, peptides, and oligonucleotides.
The Discovery Biology team is focused on cell engineering, antibody discovery, protein
sciences, assay biology, in vivo pharmacology, genomics, and translational sciences. Safety
Assessment provides exploratory and GLP studies, including cytotoxicity and medical device
testing. Advanced informatics and computational capabilities support efficient decision-
making and extend to target intelligence, multi-omics analysis, and predictive modelling.
Syngene continues to enhance its end-to-end capabilities for discovery and preclinical
development across various modalities, including small molecules, peptides, oligonucleotides,
PROTACs, biologics, ADCs, and cell and gene therapy. The SynVent leadership team and
operating model have been strengthened, providing clients with a unique approach
to integrated drug discovery (IDD) where SynVent experts manage project design and
execution. Discovery Services have achieved key milestones, such as identifying a small
molecule therapeutic candidate for a rare endocrine disorder, advancing four bi-specific
antibodies into IND-enabling studies within 15 months, and developing two novel biologics
lead molecules. Syngene scientists have been co-inventors in four patents. Also, the
company has acquired 17 acres in Genome Valley, Hyderabad, India, for future growth.

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Figure 15 - The company has been adding Figure 16 - ...including scientists

resources...
7,000
9,000
6,000
8,000

7,000 5,000

6,000 4,000

5,000
3,000
4,000
2,000
3,000

2,000 1,000

1,000
0
0 FY19A FY20A FY21A FY22A FY23A FY24A
FY19A FY20A FY21A FY22A FY23A FY24A
Source: Company, Macquarie Research, February 2025
Source: Company, Macquarie Research, February 2025

Recent developments in the Discovery business

Syngene has expanded its biologics discovery platform with the creation of its first
proprietary naive camelid antibody library and launched the Induced Pluripotent Stem Cells
(iPSCs) platform for better efficacy predictions in human clinical trials. Additional chemistry
laboratories and local operations for assay biology and in vitro DMPK were established on
the Hyderabad campus, enhancing cross-functional collaboration and reducing turnaround
time. A centralised compound management facility was also commissioned in Hyderabad.
New in vivo models for collagen-induced arthritis and cystitis were validated, and the drug
metabolism and pharmacokinetics (DMPK) team developed sensitive bioanalytical methods
for measuring antisense oligonucleotides (ASOs) and their metabolites, supporting regulatory
submissions.

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Dedicated research centres Dedicated research centres

offer stable cashflow
Syngene's dedicated research centre business has been growing steadily, and we estimate it
contributed ~24% of its revenue in FY24E. We expect this business to continue to expand at
a ~9% revenue CAGR through FY30E assuming the current relationship with Amgen (AMGN
US, not rated), Bristol-Meyers Squibb (BMY US, not rated) and Baxter (BAX US, not rated)
to continue. We note that the contract with Amgen was renewed in FY22 and will be up for
renewal in FY27 since it was a five-year contract. The contract with BMS was renewed in
FY21 for 10 years.

Figure 17 - Syngene - Dedicated research centres revenue (in Rs mn)

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E

Source: Company, Macquarie Research, February 2025

Figure 18 - Syngene- Comparison of Dedicated Research centres

Company Amgen Baxter BMS

Syngene Amgen Research & Development Biocon Bristol Myers Squibb Research &
Research Center Name Baxter Global Research Center (BGRC)
Center (SARC) Development Center (BBRC)
Location Bangalore, India India India
Relationship Start Year 2012 2013 1998
Dedicated Center Established 2016 2013 2007

Number of Scientists Not specified Started with 70, now over 200 Growth in FTEs noted
Drug discovery, discovery chemistry, biology,
Product and analytical development, pre- Research and early development projects,
peptide chemistry, antibody and protein
Key Focus Areas clinical evaluations in parenteral nutrition and translational medicine, incorporation of good
reagents, pharmacokinetics, drug metabolism,
renal therapy, oncology research clinical practices in laboratories
pharmaceutical development
Added a dedicated kilo lab in FY24 to Expanded nitrosamine testing capabilities, Consolidated translational medicine
Notable exapnsions
accelerate early development initiated oncology projects capabilities, expanded lab infrastructure

Source: Company Reports, Macquarie Research, February 2025

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Profitability expansion in medium term to drive return ratios higher

We expect Syngene's EBITDA margin to expand by 300-500bps over the next 3-5 years,
compared to FY24 EBITDA margin of 29%, driven by: a) a strategic shift in the business mix
towards the development and manufacturing segments, b) enhanced operating leverage
resulting from higher capacity utilisation at the Mangaluru API and biologics plants, and
c) to a lesser extent, improvements in employee productivity. We believe improvement in
profitability would also drive improvement in return ratios, with ROE increasing to ~28% by
FY30E from 13% in FY24.

Figure 19 - Syngene - EBITDA and EBITDA margin Figure 20 - Syngene- ROCE and ROIC

30,000 35% 40%

34%
25,000 35%
33%
30%
20,000 32%
25%
31%
15,000
30% 20%
10,000 29% 15%
28%
5,000 10%
27%
5%
0 26%
FY24A FY25E FY26E FY27E FY28E FY29E FY30E 0%
FY24A FY25E FY26E FY27E FY28E FY29E FY30E
EBITDA (Rs mn) - LHS EBITDA margin (%)- RHS
ROCE ROIC

Source: Company, Macquarie Research, February 2025

Source: Company Reports, Macquarie Research, February 2025

Figure 21 - Syngene - revenue mix (FY24-30E) Figure 22 - Syngene - Revenue contribution per
scientist (in Rs mn)
90,000
80,000
7,000 7.0
70,000
6,000 6.0
60,000
50,000 5,000 5.0
40,000 4,000 4.0
30,000
3,000 3.0
20,000
10,000 2,000 2.0
0 1,000 1.0
FY24A FY25E FY26E FY27E FY28E FY29E FY30E
0 0.0
Discovery services Development and FY19A FY20A FY21A FY22A FY23A FY24A
manufacturing services
Dedicated service center Other income No of Scientists- LHS Revenue per
scientist- RHS
Discovery + Dedicated
Source: Company, Macquarie Research, February 2025 revenue per scientist- RHS

Source: Company, Macquarie Research, February 2025

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Macquarie Equity Research Indian CRDMO

Valuation is attractive

The stock is currently trading at an EV/EBITDA multiple of 19x based on our FY27E EBITDA
estimates. This represents a modest discount to sector average FY27e EV/EBITDA multiple
of ~20x. We value the stock at 22x EV/EBITDA on FY27E EBITDA to arrive at our TP of
Rs835 which is also supported by DCF analysis.

Figure 23 - CDMO valuation comparisons

CMP Mcap Upside/ EPS EBITDA (in LCY mn) P/E EV/EBITDA Revenue EBITDA EPS
Company BBG Ticker Currency Rating TP ROIC
(LCY) (LCY bn) Downside FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e FY25e FY26e FY27e CAGR CAGR CAGR
Indian CDMO's
Divis labs DIVI IN INR 5,924 1,563 OP 7,400 25% 82 106 133 29,315 39,045 48,597 72 56 45 53 39 32 18% 30% 30% 20%
Suven Pharma SUVENPHA IN INR 1,119 280 OP 1,500 34% 15 18 27 8,590 11,330 15,660 75 61 41 31 24 17 20% 27% 29% 25%
Syngene SYNG IN INR 701 280 OP 835 19% 13 17 22 10,693 12,988 15,863 54 42 31 27 22 19 13% 16% 21% 14%
Blue Jet Healthcare BLUEJET IN INR 754 134 OP 1,000 33% 17 23 29 3,651 5,308 6,668 45 33 26 37 25 20 33% 43% 43% 29%
Laurus Labs LAURUS IN INR 556 292 Not rated NA NA 6 11 16 10,559 14,465 18,334 91 50 35 34 25 19 14% 35% 74% 6%
Piramal Pharma PIRPHARM IN INR 200 260 Not rated NA NA 1 4 6 14,508 19,041 23,416147 45 29 22 16 13 15% 25% 259% 4%
Neuland Labs NLL IN INR 11,534 146 Not rated NA NA 250 345 476 4,103 6,569 8,839 47 34 25 42 26 20 20% 24% 27% 31%
Average /median 76 46 33 35 25 20 18% 27% 30% 20%
Regional peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Asymchem 6821 HK HKD 56 31 Neutral 56 1% 3 4 5 1,353 1,760 2,162 19 15 12 16 12 10 2% -9% 16% 4%
Pharmaron Beijing 3759 HK HKD 16 47 UP 8 -49% 1 1 1 2,916 3,387 3,889 15 15 13 16 14 12 11% 9% 5% 10%
Wuxi Apptec 2359 HK HKD 61 183 Neutral 43 -30% 3 3 4 13,652 15,181 16,614 18 16 15 12 11 10 5% 3% 7% 17%
Wuxi XDC 2268 HK HKD 30 36 Neutral 18 -40% 1 1 1 1,009 1,462 2,026 44 31 22 30 21 15 47% 62% 25% 15%
Wuxi Bio 2269 HK HKD 23 95 Neutral 14 -39% 1 1 1 5,853 6,878 7,942 28 24 20 15 13 11 11% 15% 11% 7%
Samsung bio 207940 KS SKW 1,180,000 83,985 OP 1,260,000 7% 22,785 27,970 32,780 2,462,000 3,006,000 3,493,000 66 53 45 34 28 24 26% 24% 19% 12%
Average/ median 32 26 21 21 16 14 11% 12% 14% 11%
Global Peers CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e CY25e CY26e CY27e
Lonza LONN SW CHF 598 43 Not rated NA NA 17 20 24 2,215 2,562 2,969 36 30 25 21 18 16 13% 26% 12% 7%
Siegfried SFZN SW CHF 1,070 5 Not rated NA NA 36 40 45 288 319 354 30 27 24 18 16 15 6% 12% 8% 13%
ICON Plc ICLR US USD 183 15 Not rated NA NA 14 14 16 1,725 1,707 1,867 13 13 11 10 11 10 3% 7% 5% 8%
Charles River CRL US USD 153 8 Not rated NA NA 10 10 11 1,007 977 1,051 15 16 14 10 11 10 0% 2% 2% 8%
Bachem Holding BANB SW CHF 57 4 Not rated NA NA 2 2 3 174 210 297 36 31 23 23 19 14 19% 19% 17% 10%
Polypeptide Group PPGN SW CHF 22 1 Not rated NA NA 0 0 1 21 61 95 -64 67 21 39 14 9 15% -351% -244% -3%
Average/ median 11 31 20 20 15 12 9% 9% 7% 8%

Overall Average 41 35 25 26 19 16

Source: Bloomberg, Macquarie Research, February 2025

Priced as at close 17 February 2025. We use our own estimates for Indian CDMOs and Samsung Bio. We use median for EBITDA CAGR, EPS CAGR and ROIC.

Figure 24 - We use DCF to arrive at our TP of Rs 835

Free cash flows (in Rs mn) FY24A FY25e FY26e FY27e FY28e FY29e FY30e FY43e
Revenue 34,886 36,774 42,525 49,451 57,239 66,093 75,261 208,253
YoY growth (%) 9% 5% 16% 16% 16% 15% 14% 6%
EBIT 5,885 6,327 8,434 11,153 13,906 17,151 20,350 62,556
EBIT Margin (%) 17% 17% 20% 23% 24% 26% 27% 30%
Change in working capital 1,813 (359) (1,079) (1,336) (1,390) (1,618) (1,653) (4,575)
Capex (10,419) (5,500) (5,500) (5,500) (5,500) (6,000) (7,000) (8,330)
FCF 506 3,095 4,300 6,239 8,379 10,236 11,848 42,342
Terminal value 982,298
Discount rate (%) 10%
NPV of FCF 3,025 3,838 5,084 6,234 6,953 7,348 194,705
EV 335,021
Net debt 1,166
Total value of equity 336,187
Equity value per share 835
No of shares (mn) 403
Current share price (Rs) 701
Upside/Downside 19.2%

Source: Company Reports,Macquarie Research, February 2025

Closing Price as of Feb 17, 2025

Risks to our investment thesis

Slowdown in biotech funding: Syngene derives the majority of its revenue from providing
services to small- and medium-size biotech companies. Hence, any slowdown in biotech
funding could stunt growth.
Adverse drug pricing in US: Government policies to reduce drug prices could impact
investment in biotech sector adversely and in turn slow growth for Syngene.
Plant-related issues: Any adverse GMP inspection outcome could drive slower growth for
the company.

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Appendix

Company description

Syngene International is an integrated research, development, and manufacturing services

company catering to global pharmaceutical, biotechnology, nutrition, animal health,
consumer goods, and speciality chemical industries. With a 30-year track record, Syngene
offers end-to-end solutions across discovery, development, and manufacturing of small and
large molecules. Its capabilities include dedicated R&D centres, contract research (CRO), and
contract development and manufacturing (CDMO) services. Headquartered in Bengaluru,
India, with additional facilities in Hyderabad and Mangaluru, Syngene serves over 400 clients
worldwide, including top global pharmaceutical companies. The company is committed
to innovation, compliance with global regulatory standards, and sustainability, ensuring
scientific excellence and operational efficiency in delivering high-quality solutions.

Figure 25 - Syngene's employee split Figure 26 - Syngene's shareholding pattern

Others ESOP Trust

8% 1%

Master's
Degree
24%
Public Promoter &
47% Promoter
Group
52%

PhDs
68%

Source: Company, Macquarie Research, February 2025 Source: Company, Macquarie Research, February 2025

Syngene: Key milestones

1993-2010: Early Growth and Establishment

• 1993: Syngene was founded as a contract research organisation (CRO).
• 2001: Established its first dedicated research center for a major global pharmaceutical
company.
• 2009: Expanded into biologics research and development.

2011-2020: Expansion and Strengthening Capabilities

• 2011: Launched integrated drug discovery platform SynVent.
• 2012: Expanded capabilities in chemistry and biology.
• 2016: Listed on the stock exchanges (NSE & BSE).
• 2017: Established a commercial-scale biologics manufacturing facility.
• 2018: Commissioned its first U.S. FDA-inspected API manufacturing plant in Mangaluru.
• 2019: Strengthened biologics services with expanded development and manufacturing
capabilities.
• 2020: Expanded digital and automation initiatives across research and development.

2021-Present: Accelerated Growth and Strategic Investments

• 2021: Signed a 10-year manufacturing agreement with Zoetis, strengthening its CDMO
business.
• 2022: Invested in a new R&D center in Hyderabad to support discovery services.

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Macquarie Equity Research Indian CRDMO

• 2023: Acquired a biologics manufacturing facility from Stelis Biopharma, adding 20,000
liters of biologics capacity.

2024
• Expanded capabilities in mRNA manufacturing and GMP plasmid DNA production.
• Commissioned a digitally-enabled quality control laboratory.
• Acquired 17 acres of land in Genome Valley, Hyderabad, for future growth.
• Strengthened integrated drug discovery and biologics service offerings.

Syngene's value add to clients

• Case 1. Discovery and Development of Bispecific Antibodies for Cancer

Þ Objective: Assist a client in discovering novel bispecific antibodies targeting solid
tumours.
Þ Approach: Syngene designed and executed the entire discovery process, including
screening, engineering, stability testing, and efficacy evaluation.
Þ Outcome: Within 1.5 years, four lead bispecific antibodies were identified and are now
progressing to preclinical IND-enabling studies

• Case 2. Optimisation of Drug Substance Synthesis

Þ Objective: Improve a client’s drug substance (DS) synthesis process, which was
inefficient (12 steps, low yield, and suboptimal chiral purity).
Þ Approach: Syngene reduced the number of synthetic steps, optimised reaction
conditions, and eliminated time-consuming crystallisation.
Þ Outcome: The optimised process reduced costs by 40%, doubled overall yield (from
2% to 4.2%), and improved chiral purity to >98%.

• Case 3. AI-Based Impurity Detection in Hydrocarbon Mixtures

Þ Objective: Enable a client to analyse complex hydrocarbon mixtures where traditional
methods were ineffective.
Þ Approach: Syngene developed an AI-driven mass spectrometry model to predict
impurities and their physical properties.
Þ Outcome: The AI model provided reliable impurity characterization, reducing the need
for multiple experimental analyses.

• Case 4. Manufacturing Partnership with Zoetis for Librela

Þ Objective: Scale up and manufacture monoclonal antibody (mAb) drug substance for
Zoetis’ Librela, used to treat osteoarthritis in dogs.
Þ Approach: Syngene successfully scaled the manufacturing process from 10L to 2000L,
meeting stringent FDA and EMA quality standards.
Þ Outcome: The US FDA approved Librela in May 2023, and Syngene now supports its
commercial manufacturing.

• Case 5. Induced Pluripotent Stem Cells (iPSCs) for Drug Discovery

Þ Objective: Develop high-quality iPSCs for disease modeling and drug discovery.
Þ Approach: Syngene generated iPSCs from blood samples and optimised
differentiation protocols into neurons and cardiomyocytes.
Þ Outcome: The iPSCs were developed using GMP-like procedures, positioning Syngene
to support off-the-shelf cell therapy applications.

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Key Quant Findings Alpha Model Decomposition

The quant model currently holds a neutral view on The Macquarie Alpha is decomposed into its sector and
Syngene International. The strongest style exposure is market relative factor & styles exposures (a higher/better
Quality, indicating this stock is likely to have a superior and percentile is coded in green, whilst lower in red).
more stable underlying earnings stream. The weakest style
Percentile
exposure is Valuations, indicating this stock is over-priced relative to
in the market relative to its peers.
sectors market
Factors / Styles (/1224) (/1021) Core factors in definition

ALPHA 67% 55% Built from the styles below

Macquarie Alpha Model: Key rankings VALUE 44% 23% Book, CF, Yield, Earnings Multiples

The Macquarie Quant’s flagship Alpha model is a dynamic ANALYST 37% 44% Revisions (Earnings, Recommendations)
multi-factor model based on a staple of quant factors such MOMENTUM 75% 55% Price Momentum
as value, momentum, revisions, quality, and risk.
GROWTH 31% 28% EPS, Sales (Forecast, Historic)
Global Market (Country) Sector
PROFITABILITY 81% 69% ROE, Margin, Asset Turnover
Pharma, Biotech
Whole Universe India
& Life Sciences QUALITY 89% 82% Accruals, Earn Stability, Cash Conversion
Macquarie Alpha
8716/17780 460/1021 401/1224 CAPITAL 85% 72% Investment/Capex, Net share issuance
Model
LIQUIDITY 79% 69% Size, Turnover, Analyst Coverage
Fundamental
7846/17780 512/1021 621/1224
(Consensus) *
LOW RISK 76% 90% Beta, Volatility, Earn.Cert, Leverage

TECHNICAL 74% 54% MACD, RSI, Bollinger, Williams R, etc

* based on Total Shareholder Return = Consensus Price target / Current Price

Current and Historical Alpha Model Rank Factors driving the Alpha Model vs peers
The chart shows the Macquarie Alpha model market ranking For the comparable firms this chart shows the key underlying
against the company’s peers and over recent history. styles and their contribution to the current overall raw Alpha
score.
100%

Most Attractive
75% Strides Pharma Scien…

Aurobindo Pharma
50%
Jubilant Pharmova

25% Alkem Laboratories

Least Attractive Ipca Laboratories

0% Eris Lifesciences
Syngene Eris Ipca Alkem Jubilant Aurobindo Strides
Internationa Lifesciences Laboratorie Laboratorie Pharmova Pharma Pharma
Syngene Internationa…
… s s Scien…

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0

5 Year Ago 3 Year Ago 1 Year Ago Current
VALUE PROFITABILITY MOMENTUM LOW RISK & LIQUIDITY ALPHA
GROWTH ANALYST QUALITY & CAPITAL

Drivers of Stock Return

Macquarie Style Returns over last year
Breakdown of 1-year total return (local currency) into returns
from dividends, changes in forward earnings estimates and Recent performance to Macquarie style factors
the resulting change in earnings multiple. Monthly Factor Long-Short Returns for

Last 5 Last 10
Jan - Dec - Nov - Oct - Sep - Aug - Jul - Jun - May - Apr - Mar - Feb - Years Years
Asia Ex JP
25 24 24 24 24 24 24 24 24 24 24 24 (ann) (ann)
Strides Pharma Scien…

Aurobindo Pharma ALPHA 1% 7% 1% -1% -19% 5% -2% 6% 0% 2% 3% -3% 6% 5%

Jubilant Pharmova VALUE 1% 5% 1% -2% 1% 3% -2% 0% 3% 3% 0% -6% 6% 4%

Alkem Laboratories ANALYST 3% 6% 0% 2% -7% 1% -3% 4% -2% 1% 3% 4% 14% 10%

Ipca Laboratories MOMENTUM -1% 4% 2% 1% -23% 3% -2% 9% 2% 0% 3% -6% 4% 2%

Eris Lifesciences
GROWTH 0% 5% 2% -1% 0% -2% 0% 1% -2% 0% 2% 5% -1% 0%

Syngene Internationa…
PROFITABILITY 1% 4% 0% -3% -3% 3% -2% 1% 1% 1% -1% -1% -6% -2%

-100% -50% 0% 50% 100% QUALITY 1% 4% 1% -1% -1% 0% -4% 1% 1% 2% 0% 1% -2% 0%

Dividend Return Multiple Change Forecast Earnings 1Yr Total Return
Change CAPITAL -1% 1% 1% -1% 1% 1% -1% -2% 1% 3% 0% -2% 0% -3%

LIQUIDITY 0% -1% 2% -3% -13% 4% -1% 5% 1% 0% 1% -6% -2% 0%

LOW RISK -1% 4% 2% -3% -9% 4% 3% 3% 0% 2% 1% -7% -2% -2%

Source (all charts): FactSet, Refinitiv, and Macquarie Quant. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global
Quantitative Team: [email protected]. Explanation for items on this page can be found at https://www.macquarieinsights.com/rp/d/r/p/OTUyMzg1

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Macquarie Equity Research Indian CRDMO

Analysts

Dr. Kunal Dhamesha, MBBS Tony Ren

9122 6720 4162 852 3922 5830
[email protected] [email protected]
Macquarie Capital Securities (India) Pvt. Ltd. Macquarie Capital Limited

Jun Choi
822 3705 8689
[email protected]
Macquarie Securities Korea Limited

Important Disclosures
Recommendation definitions Volatility index definition Financial definitions
Macquarie – Asia and USA This is calculated from the volatility of historical price All "Adjusted" data items have had the following
Outperform – expected return >10% movements. adjustments made:
Neutral – expected return from -10% to +10% Added back: goodwill amortisation, provision for
Very high – highest risk – Stock should be expected to
Underperform – expected return <-10% catastrophe reserves, IFRS derivatives & hedging, IFRS
move up or down 60–100% in a year – investors should be
impairments & IFRS interest expense
Macquarie – Australia/New Zealand aware this stock is highly speculative.
Excluded: non recurring items, asset revals, property revals,
Outperform – expected return >10%
High – stock should be expected to move up or down at appraisal value uplift, preference dividends & minority
Neutral – expected return from 0% to 10%
least 40–60% in a year – investors should be aware this interests
Underperform – expected return <0%
stock could be speculative.
EPS = adjusted net profit / efpowa*
During periods of share price volatility,
Medium – stock should be expected to move up or down ROA = adjusted ebit / average total assets
recommendations and target prices may
at least 25–40% in a year. ROA Banks/Insurance = adjusted net profit /average
occasionally and temporarily be inconsistent
Low – stock should be expected to move up or down at total assets
with the above definitions.
least 15–25% in a year. ROE = adjusted net profit / average shareholders funds
Recommendations – 12 months Gross cashflow = adjusted net profit + depreciation
* Applicable to select stocks in Asia/Australia/NZ
12-month target – Expected share price *equivalent fully paid ordinary weighted average number of
in 12 months Note: expected return is reflective of a Medium Volatility shares
Valuation – The company's estimated stock and should be assumed to adjust proportionately
with volatility risk All Reported numbers for Australian/NZ listed stocks are
fair value share price based on the disclosed
modelled under IFRS (International Financial Reporting
valuation methodology
Standards).
Note: Quant recommendations may differ
from Fundamental Analyst recommendations

Recommendation proportions for quarter ending 31 Dec 2024

AU/NZ Asia USA
Outperform 59.71% 65.18% 66.98% (for global coverage by Macquarie, 1.50% of stocks followed are investment banking clients)

Neutral 34.17% 22.25% 30.19% (for global coverage by Macquarie, 1.35% of stocks followed are investment banking clients)

Underperform 6.12% 12.57% 2.83% (for global coverage by Macquarie, 0.00% of stocks followed are investment banking clients)

Company-Specific Disclosures

Company Name Disclosure

Divi's Laboratories (DIVI IN) None
Outperform
12-month target: INR7,400 - EV/EBITDA
Valuation: INR 7,400.00 - DCF
Price: INR5,919

Syngene International (SYNG IN) None

Outperform
12-month target: INR835.00 - EV/
EBITDA
Valuation: INR 835.00 - DCF
Price: INR701.40

Suven None
Pharmaceuticals (SUVENPHA IN)
Outperform
12-month target: INR1,500 - EV/EBITDA
Valuation: INR 1,500.00 - DCF
Price: INR1,088

Blue Jet Healthcare (BLUEJET IN) None

Outperform
12-month target: INR1,000 - EV/EBITDA
Valuation: INR 1,000.00 - DCF
Price: INR754.40
A reference to “Macquarie” is a reference to the entity within the Macquarie Group of companies (comprising Macquarie Group Limited and its worldwide affiliates
and subsidiaries) that is relevant to this disclosure. Important disclosure information regarding the subject companies covered in this report is available publicly at
18 February 2025 98
Macquarie Equity Research Indian CRDMO

www.macquarie.com/research/disclosures. Clients receiving this report can additionally access previous recommendations (from the year prior to publication of this report)
issued by this report’s author at https://www.macquarieinsights.com.

TO THE EXTENT THAT ANY COMPANY MENTIONED IN THIS COMMUNICATION IS A COMPANY LISTED IN THE ANNEX TO EXECUTIVE ORDER 14032 OF JUNE 3, 2021 FROM THE
PRESIDENT OF THE UNITED STATES OF AMERICA (“EO14032”) OR IN THE OFAC NON-SDN CHINESE MILITARY-INDUSTRIAL COMPLEX COMPANIES LIST AS UPDATED FROM
TIME TO TIME AND YOU ARE A “UNITED STATES PERSON” AS DEFINED UNDER EO14032, YOU ARE REMINDED THAT YOU MAY BE PREVENTED BY EO14032 FROM TRADING
THE SECURITIES OF SUCH A COMPANY.

Sensitivity analysis:
Clients receiving this report can request access to a model which allows for further in-depth analysis of the assumptions used, and recommendations made, by the author
relating to the subject companies covered. Contact https://www.macquarieinsights.com/contacts for access requests.

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