Concord Biotech is an India-based biopharma company that is into the development and manufacturing of select fermentation-based APIs. The company manufactures biopharmaceutical APIs through fermentation and semi-synthetic process across the therapeutic areas of immunosuppressants, oncology, and anti-infectives; and formulations that are used in therapeutic areas of immunosuppressants, nephrology drugs, and anti-infective drugs for critical care. The company is among a few companies globally that have successfully and sustainably established and scaled up fermentation-based API manufacturing capabilities. The company is one of the leading global developers and manufacturers of select fermentation-based APIs across immunosuppressants and oncology in terms of market share, based on volume in 2022, supplying to over 70 countries including regulated markets such as the United States, Europe, Japan, and India.
Objects of the issue:
The net proceeds from the fresh issue will be used towards the following purposes:
- To carry out the offer for sale
Investment Rationale:
Well-established presence across the fermentation value chain to cater to future demand
Concord has established capabilities across the fermentation value chain. The fermentation value chain includes aspects such as R&D, patents, key starting materials, API and formulation manufacturing as well as marketing and distribution of fermentation-based products. In addition, they have improved their capabilities across the fermentation value chain which they leveraged to build a track record across multiple products in various therapeutic areas. Over the years, Concord has built difficult-to-replicate technical expertise in the fermentation process which has enabled them to develop and commercialize a wide spectrum of fermentation-based APIs. Further, the company’s business model aims to capture opportunities within the fermentation segment across APIs, formulations, and other adjacencies by combining their R&D and production capabilities. Their integration of R&D, patents, key starting materials, API and formulations manufacturing, and marketing and distribution allows them to cater to their customer’s specific requirements and provide them with customized solutions. Their ability to do so further enhances their business profile and strengthens their customer relationships.
Well-diversified market reach and long-standing relationships with key customers to sustain growth
Concord has established long-standing relationships with key customers including leading global generic pharmaceutical companies. Over the years, Concord has built strong relationships with Intas Pharmaceuticals and Glenmark Pharmaceuticals, two of their top-10 customers. A majority of their customers are from regulated markets. In addition, they have developed relationships with 60 new customers during FY23. Further, Concord APIs are provided under a B2B model to pharmaceutical companies globally. For the formulation business as well, the company operates through a B2B model across the United States and emerging markets under arrangements with distributors. In India, the company markets immunosuppressant, nephrology, and anti-infective drugs for critical care, which they supply under their brands and through their sales force model. We, thus, expect Concord to focus on growing its presence through its own sales force as well as through its distribution network with its own brands.
Valuation and Outlook:
Concord is an Indian biopharma company and one of the leading global developers and manufacturers of select fermentation-based APIs across immunosuppressants and oncology in terms of market share, based on volume in 2022, supplying to over 70 countries including regulated markets such as the United States, Europe and Japan, and India. The company has an established presence in these therapeutic areas and is well-poised to benefit from the industry growth tailwinds. In the domestic market, they had a portfolio of 27 brands across immunosuppressants, nephrology drugs, and anti-infective drugs for critical care, with presence across 20 states and 5 union territories in India through their sales team. They also have a B2B CDMO business where they supply immunosuppressants to the Indian market. Further, as of FY23, Concord had over 200 customers in over 70 countries for both their APIs and formulations and. have entered into long-term supply agreements with some of their customers. The company has a track record of sustained revenue growth which rose at a CAGR of 17.6% during the FY21-23 period. On the upper price band, the issue is valued at a P/E of 32.2x based on FY2023 earnings which we feel is richly valued, as it is higher than other industry API players such as Suven Pharma, Laurus Labs, and Glenmark Lifesciences. It is interesting to note that the entire IPO issue is by way of an OFS and no fund is being received by the company. We, therefore, recommend an “Avoid” rating for the issue
