Blog

Concord Biotech IPO which envisages to raise ₹1,551 crore comprises entirely of an offer for sale by existing shareholder Helix Investment Holdings. The issue has been priced in the band of ₹705 to ₹741 per share. Concord Biotech is an India-based R&D-driven biopharma company that manufactures Active Pharmaceutical Ingredients (API) through fermentation & semi-synthetic process and finished formulations. Concord Biotech is ranked among 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.

About Concord Biotech Limited:

• Concord Biotech Limited is a R&D driven biopharma Company that manufactures Active Pharmaceutical Ingredients (API) through fermentation & semi-synthetic process and finished formulations. Concord, founded in the year 2000 has transformed from a single-product company to a broad-spectrum solution provider, offering products across diversified therapeutic segments.
• Concord is globally known for its products and has an established presence in 70 countries worldwide with distribution set-ups in place in the US, Europe, Japan, Latin America, Africa, and Asia. It also has a significant presence in the domestic market.  The company is currently partnering with leading global pharma giants to meet their product development needs for APIs and formulations.
• The company has over 200 customers in over 70 countries as of March 31, 2023 for itss APIs and formulations.
• It is also into the manufacture of finished formulations.
• Concord Biotech Ltd has 3 manufacturing facilities.
• This consists of 2 API manufacturing units and one finished formulation unit in Gujarat.
• Unit I at Dholka facility manufactures different classes of APIs.
• Unit II at Valthera facility is into formulations manufacturing. It has manufacturing units for oral solids, including tablets and capsules, as well as oral liquids, including oral solutions and oral suspensions. Concord is also developing liquid and lyophilized vials injectable line, a dry powder injectable line and a sterile powder bulk lyophilization line, which will be dedicated to manufacturing of injectables, including injectable liquids, lyophilized injectables and dry powder injectables. Unit III at Limbasi is an API manufacturing facility.
• Concord Biotech has established two DSIR-approved R&D units with 148 members as of March 31, 2023.
• Sudhir Vaid is the man behind the journey of Concord Biotech. He is the Chairman and Managing Director of the company and holds over 40 years of extensive experience in the field of corporate R&D & consultancy with leading domestic & global API companies.

• As of March 31, 2023, Concord Biotech employed a total of 1,234 permanent employees, as well as 950 contract workers.
• The following table sets forth the function wise split of permanent employees as of March 31, 2023:

Concord Biotech IPO: Financials

Anchor Investors

Some top anchor investors are:

Concord Biotech IPO: Risks

• Competition from other global players
• Changes in government regulations
• Fluctuations in raw material prices
• Product recalls

Concord Biotech IPO: Salient Points

• This being a purely OFS, the company is not receiving any funds. 
• Concord is an R&D based Biotechnology company having state-of-the-art Fermentation Facility which is quite difficult to set.
• Concord Biotech is ranked among 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. It had (i) 23 APIs across immunosuppressants, oncology and anti-infectives, and (ii) 77 approved products for formulations.
• Company has invested significantly in capacity expansion in recent years. As of March 31, 2023, It had 23 API products and had filed 128 Drug Master Files (“DMFs”) across several countries for its APIs, including 20, 65 and four, respectively, in the United States, Europe and Japan. Company has increased its API and formulation capacity in the past 2 years.
• As per management, Over the last two decades they have been able to build difficult-to-replicate technical expertise in the fermentation process, which has enabled it to develop and commercialize a wide spectrum of fermentation-based APIs. Fermentation is a challenging process requiring specialized manufacturing expertise, as it involves working with microbial strains and culture, controlling multiple process parameters and performing various purification steps. Small modifications to the process may lead to relatively large variances in the output. These factors, coupled with the complex technical capabilities, difficulties in scaling up operations and the substantial capital investment in infrastructure and resources required, have resulted in significant barriers to entry in the fermentation-based API space (Source: F&S Report).
• It had 23 fermentation-based APIs across various therapeutic areas, including immunosuppressants, anti-bacterials, anti-fungals and oncology, and several fermentation-based APIs in the pipeline. Its well-invested fermentation capacities position it to cater to the large and growing global small-molecule fermentation-based API market, which is expected to grow from US$11 billion (₹925 billion) in 2022 to US$14 billion (₹1,186 billion) in 2026 at a CAGR of 3.6% from 2022 to 2026. (Source: F&S Report)
• Leveraging Its fermentation capabilities, it has forward integrated to semi-synthetic APIs with in-house fermentation- based APIs as key starting materials. In addition, its is among the few Indian immunosuppressant formulation manufacturers with ANDA approvals to be integrated with in-house fermentation-based immunosuppressant APIs for select organ transplant drugs, namely tacrolimus, mycophenolate mofetil and mycophenolate sodium. (Source: F&S Report).
• As of 2022, more than 90% of the approved and commonly prescribed small-molecule organ transplant drugs were fermentation-based. (Source: F&S Report) The global demand for immunosuppressant APIs is expected to increase, driven by the growth of the immunosuppressant formulation markets. In particular, the growth is expected to be driven by organ transplantation becoming more common, where patients would need to take immunosuppressants for the rest of their lives. However, the end use of immunosuppressants in organ transplantation requires stringent quality standards to minimize variations during the fermentation process. According to the F&S Report, the global immunosuppressant drug market was valued at US$111 billion (₹9,200 billion) in 2022 and is expected to grow at a CAGR of 9.6% between 2022 and 2026 in terms of revenue. (Source: F&S Report)
• As an established fermentation-based immunosuppressant API manufacturer, Concord is well-positioned to benefit from the growth potential in the immunosuppressant drug market. The global small molecule fermentation API market was valued at USD 11 billion (₹925 billion) in 2022.
• Similarly the oncology drug market is the largest segment among the therapeutic areas in the API market, with a sales value of USD 42 billion (₹3,466 billion) in 2022.
• It third main line, The anti‐infectives market is one of the largest segments by sales value among the therapeutic areas in the API market, with a sales value of USD 32 billion (₹2,643 billion) in 2022.
• The table sets forth a breakdown of revenue from operations by geography for the years indicated:

• API customers include Intas Pharmaceuticals Limited and Glenmark Pharmaceuticals Limited.
• APIs contributed 89.23% to total revenue and Formulations 10.77% in the last year.
• Company also offers contract research and manufacturing services, where it collaborate with third-party pharmaceutical companies to develop APIs and formulations. Going forward, company plans to grow its CDMO business.
• It received Rs. 25 cr incentives under GoI’s PLI scheme in FY23, which it is eligible for till FY28.
• Company has a dedicated intellectual property team which is responsible for filing patents in both the Indian and overseas markets.
• As of June 30, 2023, it had been granted two patents in the United States. It filed 128 DMFs for APIs with various regulatory agencies across the world.
• Company is cash rich, with surplus cash of Rs. 150 cr.
• Concord’s revenue has grown at 18% CAGR for past 3 years.
• Concord’s EBITDA margin is expected to remain high as fermentation process is difficult to establish and master.
• It is amongst the few companies globally that have successfully and sustainably established and scaled up fermentation-based API manufacturing capabilities
• Growth of the fermentation-based API market is expected to be good mainly driven primarily by the therapeutic areas of immunology, oncology and anti-infectives (Source: F&S Report).
• It commanded a market share of over 20% by volume in 2022 across identified fermentation-based API products, including mupirocin, sirolimus, tacrolimus, mycophenolate sodium and cyclosporine. (Source: F&S Report).
• PE investor Helix is completely selling his 20%stake. It is good to note that promoters who hold 44% are not selling in OFS and stake of late Shri Rakesh Jhunjhunwala is also not being offered.
• On FY23 earnings Concord Biotech IPO is valued at 39x P/E.
• I intend to apply in Concord Biotech IPO.
• GMP as reported on social media has been around Rs. 180.
• Please do your own diligence. There is good amount of risk in all equity investments including this IPO.
• Investors may note that such R&D driven companies face considerable challenges. Many innovator companies in past have faltered after a good start.
• Despite its background, company’s price performance on bourses are determined by plethora of factors including demand , supply, visibility, current trends etc.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.