Concord Biotech

  • **Concord has strong competitive advantages in the Fermentation API space. Also, the Fermentation space has high barriers to entry **
    It is very rare for a company to earn a strong ROIC in this space. Historically, this business has been a graveyard for Indian companies. 3 decades back, India used to have many companies in the Fermentation API space. These companies eventually died because they could not match the scale and cost economics of Chinese players.
    Concord has been operating in a niche and technically complex space and enjoys strong economics.

DRHP and the latest presentation are quite insightful

Concord has been able to crack customers in Japan, which is a big feather in their cap since entry barriers to the Japanese market are relatively higher owing to the fact that customers have high qualification criteria

IPO was 100% OFS and all of the OFS was done to give an exit to PE Investor. So, Promoters still have motivation to create value.

KTAs from Earnings Call:

Sep 2023
The global API market can be broadly segmented into therapeutic areas such as anti-infective, oncology, immunosuppressants, and others. Of these immunosuppressants accounted for 7% of the market and is expected to grow by approximately 9.7% and oncology market which accounted for 19% is expected to grow at a CAGR of 19.7%.
At Concord, we are the market leaders for immunosuppressants and the only supplier in the world having complete portfolio of fermentation-based APIs for the immunosuppressants. Alongside, we have also developed our capabilities into niche fermentation-based APIs in oncology, anti-infectives, and antifungal APIs.
Initially started with production of enzyme with just one manufacturing block, but with an experienced team of biotechnologists, especially in the field of fermentation. Over the years, company has made remarkable strides and currently operates approximately 41 manufacturing blocks across three manufacturing units, offering a wide range of products, spanning diverse therapeutic areas and segments.
Notably, Concord stands out on the global stage as one of the few companies that have effectively and sustainably established and expanded their capabilities in the fermentation-based API manufacturing. Furthermore, Concord proudly holds the distinction of being the only supplier of a complete production portfolio for fermentation-based immunosuppressants APIs. Fermentation as a core component of our manufacturing process presents unique challenges. It involves the intricate management of microbial strains, the precise control of multiple interconnected processes, and the execution of various purification steps.
The slightest adjustment to this process can yield significant variations in the final output. As a result, this approach stands in stark contrast to chemical synthesis, requiring a highly specific, scientific, and quality-centric approach. As we expanded our market presence in the specialized fermentation-based API industry, we took a strategic step of entering into the formulation business back in 2016. Our Valthera facility was established with the purpose of producing forward integrated formulations for oral solid doses. Over time, we have successfully developed and are now manufacturing products and catering to both domestic and international markets.
At present, our Valthera facility boasts an impressive capacity of approximately 802 million units. Furthermore, as part of our commitment to strengthening our position in the formulation business, we are in the process of establishing an injectable facility. We anticipate that commercial production at this new facility will commence by the first quarter of the next financial year. Over the years, Concord has diligently cultivated its capabilities and an extensive range of products, positioning itself at the forefront of the competition. We have steadily expanded our customer base across global markets.
This strategic approach has solidified our reputation and enabled us to make deeper inroads by attracting additional customers and further penetrating our existing client space. The production of fermentation-based API is inherently complex, making us one of the very few global suppliers capable of manufacturing a comprehensive range of products under one roof. In recent times, the industry has witnessed significant consolidation of manufacturing activities. Several companies have encountered challenges related to the growth on the back of skill shortages, lack of scalability, and a limited product portfolio. This has presented us with ample opportunities to expand our presence in various markets and geographical regions, ultimately contributing to the growth of our revenues and market shares.
Our strategic focus is on further expanding our API portfolio across therapeutic areas, especially in oncology, where we currently have 6 APIs for global markets, and anti-infectives and antifungal, where we currently have 7 products. Also, we continue to invest in R&D and have a strong pipeline of products under development across therapeutic areas of Immunosuppressant, oncology, and anti-infectives, which have an addressable market size of USD 2.5 billion at the formulation level.
And this will allow us to cater to the regulated markets. I’m happy to inform you that USFDA authorities inspected our Limbasi facility from 26 to 30th of June of 2023. And the inspection was successfully concluded with zero 483 observations. We now have an EIR report for the same. So with this, customers have now initiated qualification of the Limbasi facility. I would also like to highlight that we have only one manufacturing standard across our facilities, which is followed irrespective of the end markets, be it regulated or semi-regulated markets.
Further, we are in the process of enhancing our capabilities in formulation manufacturing through our injectable facility. Speaking of R&D, in research and development we have set up two DSR approved R&D facilities comprising of 148 members, a significant number of whom had full doctoral qualifications. Our R&D team has showcased its proficiency in moving products, even complex ones, from the R&D stage to full commercialization.
Our product selection assessment encompasses a comprehensive evaluation of factors such as the market potential, competitive dynamics, technical feasibility, and the intellectual property landscape for each prospective product. As of now, we have successfully developed and brought to market 23 fermentation-based APIs with the valuable support of our dedicated R&D team.
With high quality niche products, we’ve been able to successfully add new customers across therapies and geographies over the years. We will continue with our endeavour of adding new customers and increasing in the share of wallet of our existing customers as well. To take you through our strategies going forward, our primary strategy is to continue to increase our market share and develop our portfolio of complex and niche products with high growth potential. API will continue to be the core focus of the business and we will continue to increase our wallet share among existing customers by selling them existing and new products across therapies.
Also, our investments into new manufacturing capacity has enabled capabilities to grow our wallet share from existing customers. Secondly, adding new customers across different geographies with established product portfolio and with the commercialization of new products. Thirdly, increase our presence in existing formulations and add new formulations by adding geographical reach, launching new dosages, and expanding the product portfolio.
And the fourth lever being the growth in the CDMO business. So, with the capacity expansion at our Limbasi facility, the China plus One strategy and given our expertise in the fermentation area, we see this as a growth opportunity for future growth in the company. And the last growth lever for us being the increased utilization of existing and new facilities by adding more customers, and products to be marketed and sold across geographies.
So we have close to around eight to 10 molecules which are there in the pipeline across different segments such as the Immunosuppressants, Oncology, and anti-infectives and one would appreciate that it takes close to around six to seven years to kind of develop the molecule in the fermentation space. And there are products which are at different life cycles within the development, R&D development stage.
But typically, I say that one can expect around one to two molecules that would become commercialized based on our historical trend is what I would point out. But it’ll be difficult to mention which specific product would become commercial because it will all depend upon the market dynamics about the state at which we are with respect to those molecules.
So while, you know, we have been inspected by regulatory authorities, but still, this is a risk that we carry. However, we have a very strong theme of quality, QA, and QC, which ensures that quality standards are maintained on an ongoing basis. With respect to any other risk, I won’t call it a risk, but of course, any changes in the macroeconomic conditions could impact companies in the pharmaceutical space, whether it is through changes in certain raw materials or changes to certain power and fuel costs, which could affect us as it would affect any other pharmaceutical company.
So as we have discussed in the past that our raw materials are usually the basic raw materials which are either agro-based or are the solvents which are typically used in the downstream recovery. And we have close to 150 to 200 raw materials that are being used for different range of products that we manufacture. So there could be an impact of seasonality on the agro-based compounds or as I mentioned due to global changes, which could affect the solvents. But then again, it may affect maybe some of the raw materials because of which there could be an impact, but it could be very, very minuscule because of it being impacting maybe one or two raw materials out of the 150 to 200 raw materials that we use. So the gross margins work in a very, very narrow band, if I would put it. And it is more about the expertise that is needed for the fermentation manufacturing, which makes the differentiation there.
Basically, historically, we have been growing at a CAGR of around 18% in the past for the last couple of years. In the last two years or three years, we have also built-up significant capacities with respect to the API and the formulations. And we expect to increase the capacity utilization and our growth may be better than what we have been doing in the past. So historically, we have been growing at a CAGR of around 18%, so going forward we may improve the growth per percentage.
In fact, in Limbasi, we have invested around INR 400 crores of money in the capex. And with the 450-meter cube of the capacity in unit one, we are able to generate revenue of around INR 600 crores. So with an 800-meter cube of the capacity, you can begin to basically take it nearly to the level of around INR 1,500 crores, INR 1,600 crores of revenue from Limbasi facilities.
Around 75% to 80% will be the right capacity utilization.
So, the injectable project is running on track as we had envisaged, and we expect it to be ready by the end of this year and have commercial production by the first quarter of next year. Given that, the idea would be, the plan is to kind of first take it to the domestic market because the export market is more of a medium term to a long-term strategy for us because, by next year, we take the validation batches, put it on stability, do the dozier filing and get the approval. This is typically close to around 12 months to 18 months of time period. However, we will be going with the same integrated approach, where we have quite a few molecules, where we are the manufacturers of the API, as well as we’ll be going for the forward integration to the injectables. So you do not see many companies having that kind of fully integrated approach in some of these niche anti-infectives also, which are through fermentation. But in terms of timelines, I would say that initially we would start with the domestic supplies and then going forward, they would be, being targeted towards the export market.
So CDMO is definitely an area, which is a focus to us and we now have the capacities in place, we are also building on our regulatory approvals and we have a longstanding relationship with our customers as well. So we are reaching out to customers and working with them to kind of build on the CDMO opportunity. But again, opportunities like these do take their time because customers wanting to evaluate and shift their complete manufacturing to a new site would typically be a time-consuming activity.
So CDMO is definitely an area, which is a focus to us and we now have the capacities in place, we are also building on our regulatory approvals and we have a longstanding relationship with our customers as well. So we are reaching out to customers and working with them to kind of build on the CDMO opportunity. But again, opportunities like these do take their time because customers wanting to evaluate and shift their complete manufacturing to a new site would typically be a time-consuming activity.
As long as it matches these criteria, which we have internally defined, we are not therapeutic diagnostic. So we would be open to look at other molecules across different therapeutic segments as well. It just happens to be that some of the molecules that we are currently under development falls within these three therapeutic segments, which is the immuno, onco, and anti-infectors, anti-fungal. But we are not therapeutic diagnosed to these.
No, so I, as we pointed out that we have growth levers in place for both the API and the formulations. At the API, the new Limbasi facility which will start ramping up and at the formulation level we have ramping up of the oral solid dosage facility and the build-up of the injectable plant. So while the base will continue to grow, we expect the revenue split between the two to be somewhere around 80%- 20% as we have had in the past. So do not expect any meaningful change in the allocation between the two.
As far as the percentage of capacity utilization is been 32% in unit 3 as of 31st of March 2023 and in formulation, it is 10% and in Dholka, it is 75%
So definitely, this will boost our sales to the US as well. But again, this Limbasi facility is for global markets because as mentioned in the past that we are working on close to around 70%, 75% capacity utilization at unit one. So now that we have regulatory approvals in place, this new facility is going to be catering not only to the regulated markets, but for global markets including India and the rest of the world. And newer products that would also come in would also be commercialized at this new site. So it will definitely boost our US sales, but it would also be used to cater to global markets as well.
So I would say that the products which are made through chemistry cannot be made through fermentation and products which are made through fermentation cannot be made through chemistry. So, they are two very different areas of manufacturing. However, we do see moreand-more interest coming within the fermentation space because it creates significant barriers to entry because there are not many global players in this space. So there is a good growth prospect for the fermentation but it cannot be interchanged with the chemistry APIs.
So, you know, Concord holds the leadership position on several of the APIs that we manufacture. The reasons of course are that we have economies of scale, we have global regulatory approvals, strong technical expertise, and offering a basket of products. So we are the only company in the world which actually manufactures the entire range of fermentation based Immunosuppressants. So when you have these kinds of capabilities and strengths, customers look at working with companies such as ours. And that is the reason why we’ve been gaining market share year-onyear basis. And when we talk about that kind of niche, highly complex products, you typically do not see much competition coming from China. As a matter of fact, that we are commercially, we have now got approvals in China to sell our products, our APIs, which shows that, and customers are also showing interest in terms of partnering with us for the API, which kind of shows the kind of advantages and the kind of strength that we have on the API, even with respect to some of the Chinese players. And when we talk about the European counterparts, European competition, people now are talking more about the China Plus One and Europe Plus One strategy because of what is happening at the global footprint with the Russia-Ukraine war, the power costs and other things and the salaries have gone up quite significantly in Europe. And they are looking at alternate sources which are more reliable and can consistently provide them with these kinds of products. So, I think we see a lot of companies shutting down in Europe also and other parts of the world. So, we see a lot of consolidation happening in the fermentation API space.
So basically around 17% of the revenue in the export, or in the total revenue comes from the US market and the balance comes from the rest of the world.
In terms of cannibalization, we are not looking at disturbing the market and we are looking at value creation and opportunities within the formulation space. And that is why while we are backwardly integrated, we would look at opportunities where we can be there in the market but at the same time maintain healthy margins for us rather than going all in and destroying the value for ourselves as well as for our customers.
Annual operational cost for formulation facility is ~35cr.
Most of the capex has already been done as far as the growth capex was concerned. Now it’s only the operational capex which will be required to be done in the future. It will be in the range of around INR 15 crores to INR 20 crores of per annum. Yes, very little amount is required to be spent to complete the project. Majority of the amount has been spent. And yes.
So you know, the prices are more or less quite similar to what you would have across the globe because, while we see limited competition on our molecules, we still are not in a monopolistic market. So when formulation companies are looking at potential suppliers. They kind of evaluate new suppliers based on which is going to supply, and give the best price. So we also have many Indian companies which are targeting the US market and they have a good amount of clarity on what the prices are there in the global markets, including in India being offered by some other manufacturers. So I would say that there is not much of a difference between what the price you offer to Indian versus that to the US.

This a nice detailed information on the company.

Can you tell me any listed players who are their direct or indirect competitors , Is Gujarat Themis Biosyn Ltd a competitor of this company ?

Apologies for the delayed response. I have studied the USFDA DMF Filings. To the best of my knowledge, the only close competitor to Concord in India is Biocon. RPG Lifescience manufactures Tacrolimus but not in a big way. For every product of Concord, there are 2-3 Chinese manufacturers. The customers in this business are ANDA holders supplying to the US generic market. The negative of having Chinese competitors is that they are extremely aggressive when it comes to pricing and they have huge scale (which has led to death of many fermentation based API companies in India). The positive side is that a) Regulatory Compliance (with FDA norms) is the key when it comes to supplying to the US market. Historically, the Chinese players have had a poor track record in India (though the list of Chinese competitors does show the names of players like Scinopharm (who have been compliant). b) Chinese players have had relatively poor track record when it comes to OTIF (on time in full). If Concord can maintain a good compliance track record and keep on supplying reliably at the right time and cost, then Concord can keep on gaining share over time. The above points about characteristics of Chinese players is a more general trend. Specifics of current competitors of Concord is impossible to know.

Gujarat Themis Bio does not manufacture the products which Concord makes. Gujarat TB by far has only excelled at making two products a) Rifamycin and b) Lovastatin. This management has not shown much ambition.

The key risk in these products is someone coming up with a superior process leading to much lower cost vs Concord. By far, this risk has not played out imho.

Also, this a B2B Business. The new player needs to come up with a basket of products. Without the full basket, the new player will never have negotiating power with the customer.


APIs (80% of FY24 revenue):

  • The global API market as of 2022 was valued at ~$219 billion, which is expected to grow at a CAGR of 6.1% till FY26. Of the total market, biological APIs accounted for 37% and Small molecule APIs accounted for the remainder of 63% share.

  • The global API market can be broadly segmented into therapeutic areas such as anti-infective, oncology, immunosuppressants, and others. Of these immunosuppressants accounted for 7% of the market and is expected to grow by ~9.7% and oncology market which accounted for 19% is expected to grow at a CAGR of 19.7%.

  • The Indian API market valued at ~17 billion, it comprises of APIs manufactured for exports and APIs consumed in formulation by Indian formulation companies. These formulations are domestically consumed as well as exported to the global market. The total India API market is expected to grow at a CAGR of 11.1%.

  • The fermentation market is expected to reach ~USD 14 bn by CY26, representing a CAGR growth of 3.6% over CY22–26.

  • Fermentation vs synthetic route:

  • Fermentation is a process used for cultivating microorganisms or other organic material into important pharmaceuticals such as antibiotics, therapeutic proteins, enzymes, and insulin. It is typically carried out in temperature-controlled tanks (fermenter) which requires addition of nutrients at the correct concentration to maximize the productivity of the organism of interest.

  • The slightest adjustment to this process can yield significant variations in the final output. As a result, this approach stands in stark contrast to chemical synthesis, requiring a highly specific and quality-centric approach.

  • Some of the advantages vs synthetic include low-cost of starting materials for fermentation and ability to recycle agricultural waste/ by-products. Fermentation in comparison to chemical synthesis, does not involve using as many harmful or toxic solvents or chemical raw materials, thereby avoiding producing dangerous waste.

  • API via the fermentation route is more complex and costly compared to the synthesis one. But the products which are obtained thru the fermentation process, it is difficult to make same from synthesis route.

  • Semi-synthetic API : Semi-synthesis is a type of chemical synthesis that utilizes compounds isolated from natural sources as starting material, such as bacterial or cell cultures or plant material. These natural biomolecules are usually large and complex. Generally, semi-synthetic derivatives outperform original biomolecules with respect to potency, stability or safety

  • Concord’s API offerings:

  • As we saw, fermentation API market remains an extremely niche area having low competition as compared to chemical APIs. The process of making APIs via fermentation route remains a highly challenging and multi-step process that involves microbial strains with multiple controllable parameters.

  • The complexities in the manufacturing process and the requirement of capex commitment have resulted in creating significant barriers to entry into the fermentation-based API space. The small molecule fermentation API companies are largely concentrated in Asia, with China accounting for more than 50% of the global supply

  • The recent shutdown of manufacturing plants in China due to environmental and quality concerns has changed the competitive dynamics leading to increased opportunities for players in India. The shift in trend from China towards India offers new market opportunities for Concord.

  • Concord offers API products within immunosuppressants, anti-fungal and Oncology.

Immunosuppressants – There are drugs or medicines that lower the body’s ability to reject a transplanted organ. Another term for these drugs is anti-rejection drugs. These drugs are used when a patient is going through any kind of organ transplant.

Antifungals – These are medicines that kill or stop the growth of fungi that cause infections.

Oncology - Cancer

  • Globally the company holds market share within these products of more than 20% primality in the immunosuppressants therapies. These APIs are niche in offerings and also have limited competition.

  • Within fermentation also, there are few therapies which are easier to manufacture and have a lot of competition. Chinese players are present in vitamins, statins and anti-biotics where competition and volumes are higher compared to the categories that Concord focuses on.

  • The primary selection criteria for Concord entails a higher focus on high-complexity APIs. This enables Concord to spend its manufacturing capacity on products that yield the highest profitability.

  • Currently the revenue share within APIs have been dominated by immunosuppressants, which accounted for more than 75% (as of FY23) of the revenue in APIs. The other therapies are growing faster than immunosuppressants, and the share has been reducing as per the mgmt. But the company does not provide revenue bifurcation on therapy/product level.

  • Brief about the products and company’s market share:

  • Immunosuppressants:

Tacrolimus :

Product market size - $3bn, API of the product market size - $121 mn

Tacrolimus is prescribed for preventing organ transplant rejection and treating moderate to severe atopic dermatitis. As per the company, the Tacrolimus API market is expected to grow at ~7% CAGR, within which the generic API market is expected to grow at a faster pace of ~16% from CY22–26. Concord is a leader in the Tacrolimus API market, with an estimated volume share of 35% in FY23 with two of the top five global API consumers being its clients.


Product market size - $3bn, API of the product market size - $36 mn

Cyclosporine helps in preventing organ rejection in kidney, liver, and heart allogeneic transplants. The drug is also prescribed for psoriasis, rheumatoid arthritis, and uveitis. Concord is the only supplier of Cyclosporine API from India to all major regulated markets and had a volume share of 31% in FY23. The company caters to two of the top five formulation companies in North America and Asia and three of the top five in the RoW markets. The molecule is likely to see an increase in the number of generics and we expect Concord’s market share to grow sustainably.

Mycophenolate Sodium :

Product market size - $364 mn, API of the product market size - $26 mn

Mycophenolate Sodium is the sodium salt of mycophenolic acid used as an immunosuppressive prophylactic to prevent rejection during organ transplantation. The API market by volume is expected to witness a CAGR of ~8%. Concord had a market share of ~28% by volume in FY23.

Mycophenolate Mofetil

Product market size - $973mn, API of the product market size - $116 mn

It is an immune-suppressing drug. It’s primarily used to prevent organ rejection in transplant patients and to treat various autoimmune diseases. The medication works by slowing down the growth of certain immune cells, helping to reduce excessive immune responses in the body. Concord accounted for ~15% global volume share while serving at one out of the top five API consumers in FY23.

Anti-infective APIs (~13% of FY23 API sales)

Mupirocin and Mupirocin calcium

Product market size - $291mn, API of the product market size - $46 mn

It is an anti-bacterial use to treat superficial skin infections such as impetigo caused due to bacteria. There were eight companies with active US DMFs, five with valid CEPs, and one with an active Japan DMF as of FY23. Concord has 21% volume market share within this product.


Product market size - $712mn, API of the product market size - $20 mn

It is an antibiotic used to treat severe bacteremia, complicated skin and soft tissue infections, bone and joint infections, endocarditis, peritonitis, pneumonia, and UTIs. Due to its efficacy and low cytotoxicity, Teicoplanin has also been used for patients with complications. There are 5 companies globally which manufacture the API for these products. Concord has 10% volume market share within this.

Oncology :


Product market size - $1bn, API of the product market size - $25 mn

Everolimus is prescribed for the treatment of breast cancer and tuberous sclerosis complex and for prophylaxis of organ rejection in adult patients receiving organ transplants. Concord has 10% volume market share in this product.

Mitomcin and Midostaurin:

The company has a volume market share of ~17% and 15% within Mitomcin and Midostaurin respectively. These products have API size of $8mn and $3mn. Very niche products having highly specialised uses.

Formulations (20% of FY24 revenue):

  • Concord began its formulation journey in 2016 by forward integrating into products in which it has strong API manufacturing skills.
  • The company has a basket of 98 approved formulation products contributing ~20% to overall revenue.
  • In formulations, products are offered under its own brands in India, and sold in emerging countries in Asia, Africa and Latin America and the US, primarily through arrangements with distributors.
  • In addition, the company offers nephrology drugs and anti-infectives for critical care, which h the company in-licenses in India under its own brands.
  • Being backwardly integrated with the manufacturing of key starting materials also provides a distinct competitive advantage. This vertical integration can contribute to cost efficiencies, quality control, and a more streamlined production process. It also enhances the ability to manage supply chain effectively, ensuring a steady and reliable source of key essential materials.
  • The company has been getting more approvals across markets lead by the efforts of the marketing team. This segment is expected to grow at very healthy rates as they have been able to recently get the products up and running. Although the verticle was started in 2016, they got the approvals in ANDAs in 2019 and then covid hit because of which there were very less approvals till FY22. Hence the pickup in the segment was hampered again and again, and then in FY23 there was a drop because of issues at the distributor end.
  • India formulations:
  • The India business contributed nearly 70% to Concord’s total formulations revenue in FY23, having a presence in immunosuppressants and Anti-Infective therapies in India.
  • The company sells its products via the tender route to hospitals, it also markets over 27 brands of immunosuppressants, nephrology, and anti-Infective drugs for critical care through a network of 150 MRs.
  • Besides, Concord also works as a CMO partner by supplying immunosuppressant to its clients in India.
  • The company has three products under NLEM, namely Mofecon 500 mg, Tacrocord 1.0 mg, and Gammacord 100 ml, which constitutes 36% of its India formulations revenue in FY23.
  • Export formulations:
  • Export formulations accounted for ~30% of the segmental revenue in FY23 with key export markets being the US, Europe, Japan, and RoW. Within exports, North America is a key contributor followed by the RoW markets. As of FY24, the company had filed 128 API DMFs and 77 approved products for formulations with various regulatory agencies across the world.
  • The company registered a revenue decline of ~33% in FY23 largely on account of a ~65% decline in its export business. This decline was on account of the termination of a supply agreement with a large distributor for the US market. Concord competes with its clients by selling a similar set of products for which it supplies APIs.
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