Anthem Biosciences Ltd. (Subscribe)

Highlights

Anthem Biosciences Limited (ABL), incorporated in 2006, innovation and technology focused Contract Research, Development and Manufacturing Organization (CRDMO) which also a one-stop shop service provider for chemical synthesis and biology-based drugs, and they are one of the few players in India with integrated NCE and NBE capabilities across all three segments of drug discovery, development, and commercial manufacturing.

Their business segments comprise of (i) CRDMO service – Where they serve comprehensive, integrated and highly customizable range of end-to-end services across the NCE and NBE lifecycles, from target identification and the concept stage, preclinical development and (ii) Speciality Ingredients – Where they manufacture and sell complex specialized fermentation-based APIs, including probiotics, enzymes, peptides, nutritional actives, vitamin analogues and biosimilars.

With a strong presence across various modalities such as RNAi, ADC, peptides, and oligonucleotides and manufacturing techniques such as custom synthesis, flow chemistry, fermentation and biotransformation, they offer a wide range of technological capabilities for drug development.

They had 550+ customers across both CRDMO and specialty ingredients businesses, respectively, spread across 44+ countries including the United States, European countries and Japan. Within CRDMO business, they served 169 customers, ranging from small pharmaceutical and emerging biotech companies to mid-scale and large pharmaceutical companies, including 145 small pharma and emerging biotech companies.

Out of the total proceeds of Rs. 33,950 mn, ~Rs. 33,950 mn would go towards existing selling shareholders of the company as Company expects that listing of the Equity Shares will enhance their visibility and brand image.

Key Highlights

• The Indian CRDMO industry is expected to grow at a CAGR of 13.4 pct from 2024 to 2029 to reach an estimated value of USD 15.4 bn, which outpaces the global industry rate of 9.1 pct and other markets. Players engaged in this business is poised to benefit from the fast-growing industry size which will eventually create bigger market opportunity.
• ABL is one of the pioneers for green chemistry techniques in India having introduced biotransformation as a manufacturing capability in 2014 and flow chemistry in 2019. Such green chemistry techniques have enabled them to reduce wastage and realize cleaner reactions thereby achieving cost efficiencies.
• ABL’s focus on developing long-term partnerships with small pharmaceutical and emerging biotech companies enables them to achieve two strategic outcomes. Firstly, they develop a relationship with the customer from an early stage of the drug discovery cycle and grow with these customers as they evolve through the drug discovery phases. Secondly, due to their early involvement, when the molecules developed for these customers succeed, they typically remain as their customers even after being acquired by a larger pharmaceutical company.
• The company has the largest fermentation capacity among Indian CRDMO companies, with a 142 kL and following the completion of their expansion activities by the H1FY26, their fermentation capacity of 182 kL is expected to be more than 6x of the fermentation capacity of the second largest assessed player in this industry.
• Their bio-catalysis and biosynthesis capabilities enable them to provide differentiated solutions for custom synthesis and chemical manufacturing using enzymes, and their advanced capabilities for high-potency compounds position them as one of the preferred knowledge partners for large pharma companies and emerging biotech companies.
• ABL’s key growth strategies includes (i) Continue to expand their technological capabilities to gain wallet share and to win new customers in the discovery and development phase (ii) Leverage on their manufacturing capacity to cater to the expected increase in commercialized and late-stage molecules. (iii) Focus on growing complex specialty ingredients business with large market opportunity (iv) Improving cost management and operational efficiencies, including supply chain resilience. (v) Complement overall growth through identifying opportunities for inorganic expansion (vi) Continue to implement sustainable manufacturing practices and green chemistry.   
• The sales of the company registered CAGR of 32.11 pct over FY23-25 while EBITDA and profit grown by 23.81 pct CAGR and 8.24 pct CAGR over same period. In FY25 the company reported sales of Rs. 18,446 mn, which grew 29.96 pct YoY while EBITDA of the company rose 31.51 pct YoY to Rs. 6,838 mn. In FY25 company posted profit of Rs. 4,513 mn, rose 22.86 pct YoY.

Key Risk

• ABLs business is subject to extensive government regulations, and if they fail to obtain, maintain or renew statutory and regulatory licenses, permits and approvals required to operate business, might affect business operations.
• Company might see client concentration risk as significant portion of sales is derived from top 5 and top 10 customers which contributed to 70.92 pct and 77.33 pct of sales generated in FY25.
• ABL conducts animal testing in a small portion of their preclinical trials, which can result in adverse publicity and other issues, including potential disruption to facilities as a result of protests against animal testing.

Financial Performance

Peer Comparison Based on FY25 Financials

Valuation

Anthem Biosciences is a Contract Research and Innovation Service Provider (CRISP), with a built-up capacity to house over 1000 researchers and manufacture novel commercial drug actives. At the upper end of the price band of Rs. 570, the issue priced at PE of 70.6x of FY25 earnings post issue. The issue appears to be fully priced. One can subscribe this issue from a long-term perspective.

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