Can this under-the-radar enterprise pay the $ 150 billion drug loss?

Copyright © HT Digital Streams Limit all rights reserved. Madhvendra 9 min Read 30 May 2025, 05:30 Hours IST income from weight loss Medicine supplies are expected to start in 2025-26, with scaling by 2026-27. Summary Source Speciality, a newly-imposed Pharma CDMO, will benefit from the $ 150 billion GLP-1 weight loss drug bloom with an expanding capacity, strong global customers and rising revenue from FY26 and beyond. Weight loss medicines such as Ozempic and Wegovy have shaken global pharmaceuticals. With proven outcomes and increasing demand, the segment could be $ 150 billion by 2035. It’s no surprise that companies across the health care chain are in a hurry to get a piece of the action. Onesource Speciality Pharma Ltd, which was turned off from Strides Pharma Science Ltd and listed on January 24, 2025, also wants it. The company builds capacity, develops complicated products and aboard global customers. Revenue from weight loss medicines is expected to begin in 2025-26, with scaling by 2026-27. Is this newly listed Contract Development and Manufacturing Organization (CDMO) going on, or does the rally praise it? Let’s break it down. India’s first pure-play specialty Pharma CDMO Onesource is India’s first pure play-specialty pharmaceutical CDMO. It focuses on the development and production of complex pharmaceutical products with high value and biologics. Also read: Amrit Bharat Boost: Stocks to take advantage of station modernization. The integrated abilities include biologics, medicine device combinations, complex injectable products and oral technologies such as soft gelatin capsules. Currently, it has the ability to produce more than 100 million sterile doses and 2400 million capsules annually. However, this is expected to grow. The company plans to double its sterile capacity to more than 200 million within the next three to four years. About 90-95% of its sales are consumed in the US and the European Union, with the remaining of other world markets. The company benefits from strong stickiness, with 75% of its business coming from repetition orders. However, this concentration in regulated developed markets also poses risks – any shifts in regulatory policies, trade tariffs or price controls in the US or the EU can substantially affect growth. Driving on the miracle for weight loss drug wave is well positioned to take advantage of three important winds in the industry. The most prominent is the rapid rise of GLP-1 medicine, known for effectiveness in the treatment of type 2 diabetes and obesity. The second is the pending Biosecure Act – a proposed US legislation aimed at reducing the dependence on Chinese pharmaceutical supply chains. If approved, non-China partners such as Onesource benefit from the increased demand for producing medicine. The third driver is the recent acquisition of a major CDMO player (name unknown) by a pharmaceutical major, which further sharpened the offer for outsourced manufacturing. This can allow companies like Onesource to do more business. Within GLP-1 provides the loss of exclusivity-patent expiry-a long-term event for players such as the source with Medicine Combination Combination (DDC), which integrates both medicine and medical devices into a single unit. Onesource has strong DDC capabilities, which can help meet the increasing demand for filler and assembly services of generic entrants. There is a witness to a significant increase in the request for proposals (RFPs), with more than 39 RFPs at different stages of discussion. The building functions for the next generation GLP-1 medicine within business segments are a pioneer in DDC (including GLP-1S) solutions with a full service model. This segment has nine molecules in its portfolio, including GLP-1s, biologics and small molecules. It has 17 clients, including four out of the top five global generics. Also read: Four shares to look at, as the Space Economy Eye of India is watching $ 44 billion by 2033, the DDC, including the GLP-1 drug market, is expected to grow more than 20% CAGM- $ 5 billion in FY23 to $ 12 billion in FY28. With Marquee Global Generics as clients and a growing molecule pipeline, Onesource is well positioned for the benefit. Onesource uses automatic machines by Bausch + Ströbel Vulleto-fill, lock and package products such as vials, sprayers and bottles. It is of the utmost importance to ensure the safety and quality of GLP-1 medicine. In addition, it has more than 20 advanced machines that can be adapted to handle different types of injectable medicines, such as GLP-1. This setup helps the business produce medicine according to global quality standards. The doubling of the DDC capacity to meet rising demand is strongly about service offers, especially in DDCs, where Onesource has carried out nearly 50 projects, including GLP-1s and others. It has 10+ DDC projects, which will convert in supply agreements, with approval expected in H2FY26. In addition, it has 15+ DDC projects, which are expected to be commercialized in a related way during FY26-28. One of these – a DDC product approved in the US and Europe – is expected to go commercially in FY26. To take advantage of the event, Onesource doubles its DDC capacity of 40 million units to more than 90 million against Q3FY26. The capacity is scaled up in accordance with customer forecasts and expected expiry of the patent over the next 2-3 years. A second plant is planned by end-fy26, which in turn will double the capacity. These products realized higher per unit, although volumes may not match GLPs. Even with moderate volumes, these high-value projects are expected to contribute meaningfully to the growth of the near term. While DDC volumes remain modest, GLP-1 medicine is expected to scale quickly. Morgan Stanley estimates that the penetration of obesity drugs could rise by 2035 to 10%, from only 1% currently, which could be an event of $ 70 billion. Three GLP-1 molecules are set up for commercial offer here where it becomes interesting. Onesource has set three GLP-1 molecules molecules A, Molecule B and Molecule C-Eksen with signed Master Service and Clinical Input Agents. Also read: This luggage leader is drawing up a turnaround. But can it overcome his luggage? For Molecule A, key customers include three of the top five global generic players. Commercial supplies started in Q4FY25, and full revenue will start flowing from FY26. Meanwhile, Molecule B – with two of the top three generics as key customers – will start in FY26. Income contribution begins after launching in different markets. In contrast, molecule C will only come into play after exclusivity ended in 2036. Still, Onesource has already secured offer agreements for this with the top three generics – a strong signal of future demand. Worldwide introduction potential of patent decay is an important trigger. The big trigger is the expiry of the semaglutide patent-an important GLP-1 molecule used in weight loss medicines such as Ozempic and Wegovy-in more than 100 countries, including Canada, Brazil, Saudi Arabia and India. Patent falls are expected in Q4FY25 and Q4FY26, enabling commercial supplies in these markets. FY27 is probably the first full year of semaglutide sales in many of these regions. Many clients have already paid booking fees and entered into-pay agreements-a sign of confidence in execution and capacity. Markets such as Brazil and Canada are undermined, with less than 1% penetration in Brazil and 4-5% in Canada. According to management, generics entering these markets can drive the market expansion 10-12 times in Brazil and 4-5 times in Canada. With molecule A expected to contribute fully from FY26, this ongoing fiscal could be an important year for Onesource. Capex-led capacity on the right road with supply agreements already secured with the top generic players, the company invests around £ 850 in the expansion of capacity for DDC-related development and commercialization. It will be funded via internal accruals, partner contributions and debts. Customers also pay progress to discuss capacity, which also reduces the execution risk. Most of this expansion is expected to be completed within 12-18 months, in line with the timeline of supply agreements. Current projects are based in India, although the company evaluates organically and inorganically. Profitability and margin boost in FY25 The numbers speak for themselves. Revenue increased by 33% from last year to £ 1.445 crore in FY25, powered by 16 new DDC projects, expansion to Softgel CDMO Services and new launches. EBITDA has more than doubled, with 104% to £ 466, with a product mixture shift to high value biologics and DDCs. Margins expanded by 11.6 percentage points to 32%, aided by better capacity utilization and operational synergies. It also achieved a net profit of £ 93 crore, its first profitable year. With 15 new customer supplements and a strong repetitive business, the company expects the growth of FY26 to be further significant. With a new capacity expected to live in FY26, the turnover of the assets is expected from 1.9 (FY25) to 2.5 in the near term and 3.0 in steady condition. With a strong turnover of the assets, the company expects turnover to grow at a compound annual growth rate (CAGR) of more than 30%, from £ 1,445 in FY25 to £ 3,378 in FY28. As the scale benefits start with higher production, Ebitda is expected to grow at a 40% Cagr – from £ 466 to £ 1.331 crore. With a higher operational efficiency, the company estimates the margin to expand from 32% to 40%, and returns on capital that work from 23% to 50% in a steady state. In addition to DDCs and GLP-1s, the source is also perfectly placed to tap other emerging medicine markets. Biologics, a fast -growing class derived from living organisms, is expected to grow at 14% CAGR growth from $ 20 billion (in FY23) to $ 38 billion in FY28. Similarly, the soft gelatin market is also expected to grow at a 9% CAGR from $ 12 billion to $ 18 billion. With one of the largest installed capacity in the top five worldwide, Onesource is well placed to catch this growth. Valuation reflects growth potential the company trades at an EV/ebitda multiple of 43, which is higher than peers – Neuland Labs (41), Pyramal Pharma (19) and Blue Jet Healthcare (36). On FY27E EV/Ebitda of 15x, the stock seems to be priced more fairly. However, much of the valuation in the short term depends on the execution of its expansion plans and real earnings delivery. With that said, the opportunity comes with risk. Most of the CDMO income in FY25 comes from services provided during the pre-approval or filing phases before the product is commercialized. Therefore, risks such as products can drop and the lack of approvals derail the growth story. Other risks include higher competition and a long pregnancy period. About the author: Madhvendra has more than seven years of experience in stock markets and has cleared the Nismsm-Series XV: research investigation for research analysts. He specializes in writing detailed research articles on listed Indian businesses, sectoral trends and macro -economic developments. Disclosure: The author does hold the shares discussed in this article. 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