International brokerage Jefferies said that India’s Contract Research, Development, and Manufacturing Organization (CRDMO) industry is at an inflection point, evolving from quasi-chemical firms to strategic partners for innovators, backed by capabilities and geographic diversification.
From being known as Contract Research and Manufacturing Services (CRAMS) and sidekick of the pharma industry, now being in the global spotlight, Jefferies added that Indian CRDMO is fetching investor attention like global peers, with industry market-cap now at $40-50 billion.
The industry generates a revenue of $3 billion annually, after seeing a whopping 14 percent CAGR over the past five years despite COVID19-related volatilities and fluctuations. However, going ahead, JM Financial is expecting 18 percent CAGR from FY25 to FY30, which will find support from strong pipeline visibility, pharma players diversifying in the China+1 move, and weight loss drugs.
Jefferies is positive on Indian CRDMOs amid the India to China move, as the U.S. players have historically relied heavily on Chinese CRDMO players. With rising geopolitical tensions, these firms are shifting towards alternative markets. "We believe Indian CRDMOs, with their strong small-molecule capabilities and established track record in the segment, are well-positioned to capture this opportunity."
For Indian firms, the China+1 opportunity is valued at $700 million/year in the base case, potentially reaching $1.4 billion in a bull case. "In our view, this is a structural shift which will continue for more than a decade. The key risk factor is the rising in-licensing deals by Big Pharma with China, which results in continued dependence on Chinese CRDMO."
Among this, Jefferies is betting on Sai Life Sciences as its top pick in the segment. "Sai's strong east-west presence, integrated services, high growth visibility and potential earnings upgrades make it the best CRDMO bet." The brokerage maintained its buy call, with a price target of Rs 1,100.
Jefferies has initiated coverage on Cohance with a buy rating, citing its strong positioning in the ADC segment and proven track record. The brokerage has also upgraded Divi’s Laboratories to buy on the back of its promising GLP-1 drug pipeline. Piramal Pharma remains a buy call, viewed as the best value play in the sector.
Meanwhile, Jefferies maintained a hold on Syngene and Gland Pharma due to limited near-term triggers and reiterated an underperform on Laurus Labs, pointing to weak execution.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
