Informist, Friday, Aug. 29, 2025

By Narayana Krishna

HYDERABAD – Sai Life Sciences Ltd. expects its earnings before interest, tax, depreciation, and amortisation margin to touch 28-30% in the next 2-3 years from the current 25%, led by capacity expansion and robust traction in its contract research, development, and manufacturing organisation business. The company expects to grow its revenue at a compounded annual growth rate of 15-20% over the next 3-5 years.

"The CRO (contract research organisation) and the CDMO (contract development and manufacturing organisation) business, we are expecting both will continue to grow. And I think India outsourcing has become a bigger topic in terms of the overall China diversification story," Siva Chittor, director and chief financial officer, Sai Life Sciences, told Informist in an exclusive interview.

"The overall outsourcing story still remains very strong," he said. "So we have projected at 15-20% revenue per year over the next 3-5 years." For the financial year 2024-25 (Apr-Mar), the company's net profit more than doubled to INR 1.70 billion and revenue rose 16% to INR 16.95 billion.

Chittor said the pharmaceutical outsourcing story, particularly India-focused strategies gaining traction as global pharmaceutical companies diversify away from China, is driving higher demand for Indian contract development and manufacturing capabilities. While the contract development and manufacturing business is inherently lumpy, the firm believes that evaluating performance over a three- to five-year horizon, rather than on the basis of a quarter or two, provides a more accurate reflection of trends.

He said the contract development and manufacturing business depends on clients' requirements and timings. Any delay in the process may reflect on that particular quarter's performance for the company, but this would not be the right scale to measure the company's performance. An evaluation of performance has to be on a long-term basis, he said.

"It is pure timing... delay by a month (in execution), your quarter could look bad, but it does not mean fundamentally business has changed. And in another quarter, if a purchase order had come on time, again, it did not mean that something in the company has drastically changed," he said.

Sai Life reported a net profit of INR 604.55 million for the June quarter against a loss of INR 134.98 million a year ago. The pharmaceutical company had reported a loss of INR 31.51 million in the trailing quarter. Its revenue for the June quarter rose over 77% on year to INR 4.96 billion but was down 14% sequentially.

GROWTH DRIVERS

The growth expected in the next 3-5 years will be supported by enhanced capacity, diversification of portfolio, and an improvement in scientific talent pool, the company's finance head said.

Chittor said the company expects to spend around INR 7.00 billion on capital expenditure in FY26 to increase its infrastructure for manufacturing and for research and development, including setting up a second manufacturing site in Hyderabad. Once completed, this expansion will double the company's manufacturing capacity. The company expects its current capacity expansion plan to be completed by FY27, which will also help to diversify its footprint and reduce concentration risk. Sai Life's capital expenditure for the June quarter was INR 1.34 billion.

The company started a 91-kilolitre manufacturing capacity at Bidar in Karnataka recently, taking its total capacity to 700 kilolitres. It has also begun work to set up an additional 200 kilolitres capacity at Bidar. The company is also expanding its R&D capacities by adding more space and people. The company has started work on expanding its process R&D block in Hyderabad to increase capacity for early phase peptide development and its clinical formulations business. In the quarter gone by, the company also onboarded 250 scientists and other staff.

"Our capacity that we have announced... both the production blocks will become operational towards the second half of next year, with the first one coming earlier and the second one coming towards the end of the next financial year," he said. This expansion is expected to support both revenue growth and margin improvement.

The contract research organisation segment contributed around 37% of Sai Life's revenue as of Jun. 30 while the contract development and manufacturing organisation segment contributed 63%. For a company in the contract development business, commercialisation of a molecule refers to the stage where a drug candidate or molecule has completed the development and regulatory approval processes and enters mass production and sale. If the agreement also covers contract manufacturing, the company will supply the active pharmaceutical ingredients and intermediaries of such molecules to the clients for the agreed period.

The company is also working on 160 early-phase molecule development projects. Sai Life has over 200 clients on hand and the average tenure with large pharmaceutical companies is 10 years, which proves customer confidence, the chief financial officer said.

Looking ahead, the company is confident of capturing a disproportionate share of the growing Indian outsourcing market by leveraging technology, artificial intelligence, and delivery capabilities. "The way we are looking to position ourselves is to ensure that we can get more than a disproportionate share of the growth we believe (in). Industry in India will grow. The sector particularly will grow," he said. By focusing on strategic client relationships, a strong pipeline of molecules, and capacity expansion, Sai Life is poised to maintain a high growth trajectory in the global contract research-contract development and manufacturing ecosystem, he said.

Sai Life expects its EBITDA margin to improve on the back of robust growth in its contract development and manufacturing business. The company expects the margin to rise to 28-30% over the next 2-3 years. For the June quarter, Sai Life reported an EBITDA margin of 25%, up from 11% a year ago.

Chittor said the company has made significant investment in R&D and created a talent pool that is now helping it ramp up business and improve the margin. "Our CDMO revenue has jumped in the June quarter, which just increased overall margin leverage, and that is why our margins went up by 14% year-on-year," he said.

CHINA SHIFT

Sai Life is bullish on the small molecule development segment, where big pharmaceutical companies are looking for an alternative to China. Chittor said India has enormous potential to develop the small molecule space as 95% of the current R&D projects are done by Chinese companies.

"From an overall CDMO-CRO perspective, I think there are broader trends at play," he said. "If you actually look at the overall outsourcing in Asia, and if you also look at what is happening with the small molecule space, I think the outsourcing to India is probably less than 5% and China gets 95% out of just the Asia outsourcing.

"This is a huge skew that has gotten developed over a longer period of time, which is what pharma is trying to correct. Just given geopolitics, just given the situation, which is ever changing on a day-to-day basis."

Chittor said big pharmaceutical companies are looking to reduce their dependency on China. Issues such as intellectual property and allegations of theft of such property are driving companies out of China, and India is seen as a more attractive and safe option for drug discovery. "So companies that have the ability and money are saying that we will pay whatever it is two times or three times, but we will not outsource to China," he said.

Sai Life expects the contract development and manufacturing business to continue to be its core revenue growth driver. There may be a change of up to 5% in the business mix, but in the long term the mix will remain stable, the head of finance said.

Commercialisation of new molecules will be a key growth driver for the company. Chittor said several molecules have just started the commercialisation phase and will start contributing to revenue growth.

The company continues to strengthen its relationships with big pharmaceutical companies, which now account for nearly 70% of core revenues. "By nature, working with big pharma is a de-risking strategy," he said. "Our relationships are fairly broad within the CDMO sector and there are certain relationships that have been with us for around 10-plus years."

The company sees a huge opportunity in the glucagon-like peptide-1, or GLP-1, space but is unwilling to share details owing to confidentiality agreements with clients. Chittor said there are nearly 60 molecules in this category which pharmaceutical companies are set to capitalise on and it will be a good opportunity for contract research and contract manufacturing companies such as Sai Life.

"There are probably 60-plus molecules in the pipeline on GLP-1 alone," he said. "Anybody who works with big pharma on the CDMO side will end up having to work on some GLP product or products that are in the pipeline."

Shares of Sai Life Sciences were listed on Dec. 18 at INR 650 apiece on the National Stock Exchange, an 18% premium on the issue price of INR 549. Since then, the stock has gained more than 27%. Friday, the company's shares closed 1.1% higher at INR 824.70. End

US$1 = INR 88.19

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Rajeev Pai

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