Financial Performance Summary

Q2 FY27 Financial Highlights:

  • Revenue: INR 4,767 million (13% sequential growth from Q1 FY27)
  • Adjusted EBITDA: INR 458 million
  • Adjusted EBITDA Margin: 10%
  • Adjusted PAT: Returned to positive territory
  • Cash and liquid investments: ~INR 2.9 billion
  • Borrowings: ~INR 2.3 billion
  • Inventory: Increased to ~INR 7.3 billion from ~INR 5.6 billion

H1 FY27 Capital Expenditure:

  • Group deployed over INR 1 billion in capex (excluding acquisitions and ownership investments)

Business Segment Performance

Pharma CDMO Business:

  • Revenue growth of 34.5% quarter-on-quarter in Q2
  • Year-on-year revenue decline: 27% in Q2, 32% in H1
  • Niche technologies contributed 13.7% of revenue in Q2, 14.4% in H1
  • Commercial revenues remained healthy at ~78% of sales
  • Phase III programs: Net 11
  • Commercial products: Moved to 19

New Business Wins:

  • Secured two new commercial programs with large global pharmaceutical customers
  • Secured one late-stage (Phase III) program
  • Programs are patent-protected products from innovator companies
  • Expected first deliveries in Q4 FY27 or Q1 FY28
  • Products involve Registered Starting Material (RSM) delivery

ADC Business (NJ Bio):

  • H1 performance affected by customer destocking across two established commercial programs
  • Development funnel showing encouraging signs with improving order activity
  • Bioconjugation capacity expansion on track for commercial availability by early FY2028
  • Successfully delivered two ADC GMP campaigns in Q2
  • Objective to move business to breakeven

Nucleic Acids (Sapala):

  • Strong performance with 33.6% year-on-year growth in Q2
  • 83% growth in H1
  • Growth achieved without contribution from early phase III supplies
  • Supported by healthy demand for specialized nucleotides, amidites, and building blocks

API+ Business:

  • Revenue: INR 2,671 million in Q2 (5% year-on-year growth)
  • Contributed 56% of consolidated revenue
  • Performance impacted by heavy audit schedule across facilities
  • Higher raw material prices affected select API products
  • Progress with three innovator pharma companies on lifecycle management solutions
  • Advanced to sampling stage with two innovator companies

Specialty Chemicals Business:

  • Expects revenue to decline year-on-year in FY27
  • Legacy Agrochemical products facing generic pressure
  • Newer programs progressing but won't fully offset near-term pressure
  • Targeting two new product launch qualifications per annum
  • Adding one new customer each in US, Europe, and Japan geographies

Regulatory and Compliance Update

USFDA Inspections:

  • Completed USFDA inspections at Pashamylaram, Shamshabad, and Jaggayyapeta facilities
  • Comprehensive responses submitted
  • Corrective and preventive actions (CAPA) progressing within committed timelines
  • Expected FDA classification decision within 1-3 months

Suryapet Facility Incident:

  • Facility closure order received following incident resulting in colleague fatality
  • Impact assessment ongoing
  • Facility described as one of the smaller, non-GMP plants
  • Engagement with authorities to resolve closure notice

Operational and Strategic Highlights

Order Visibility and Pipeline:

  • Improved order and reload position for Q3 and Q4
  • Multiple reload orders across existing commercial programs
  • Late-stage and commercial RFP activity strengthened
  • Broader range of RFQs across payload and linkers in ADC business

Integration Progress:

  • Increasing integration of Sapala's specialized chemistry with Cohance's development network
  • NJ Bio reorganization sharpening commercial focus
  • Connecting payload and linker development in India with bioconjugation capabilities
  • Opportunities increasingly sourced through broader Cohance commercial organization

Capital Allocation Strategy:

  • Focused on growth capabilities, quality, safety, sustainability, and maintenance
  • Planning to build adjacencies to unlock full integration potential
  • Strengthening bioconjugation and integrated ADC payload linker capability
  • Enhancing R&D infrastructure across payload linkers, APIs, and specialty chemicals
  • Investments phased against customer visibility

Forward Outlook

H2 FY27 Guidance:

  • Expects year-on-year growth on both revenue and EBITDA
  • Sequential momentum expected to sustain through H2
  • Key drivers: Scheduled small molecule deliveries and reloads, API+ platform resilience, Sapala growth, NJ Bio approaching breakeven
  • Focus on improving quality of revenues, mix, and utilization across platform

Medium-term Strategy:

  • Move API+ business further up pharmaceutical value chain
  • Reposition Specialty Chemicals towards innovator-led portfolio
  • Build sustainable, growing business over medium term
  • Unlock significant value from Cohance platform through capability integration

Q&A Session Highlights

Project Details:

  • New commercial projects are small molecule, patent-protected products
  • Expected first campaign revenues in Q4 FY27 or Q1 FY28
  • Unit economics comparable to existing small molecule CDMO projects

Lifecycle Management:

  • Typically 18-36 months from sampling to commercialization
  • Pricing premium to generic space
  • Better margin profile and predictability

Suryapet Impact:

  • Early stages of impact assessment
  • Facility described as smaller commercial manufacturing plant
  • Resolution timeline uncertain

FDA Observations:

  • Global CAPAs implemented across all facilities
  • Remediation actions monitored through implementation milestones

#Tags: #CohanceLifesciences #Q2Results #SEBIReg30 #Pharmaceuticals #RegulatoryUpdate #Neutral