Laurus Labs is a leading Indian pharmaceutical and biotech company specializing in Active Pharmaceutical Ingredients (APIs), Finished Dosage Forms (FDFs), and Contract Development & Manufacturing (CDMO) services. With strong R&D capabilities, global regulatory approvals, and a growing presence in biologics and gene therapy, Laurus serves human and animal health markets across over 50 countries.
Business Overview & Strategic Direction
- Laurus started FY26 strongly with a sharp uptick in CDMO (Contract Development and Manufacturing Organization) contributions.
- Three major capacity expansions were announced:
- Microbial Fermentation Greenfield Facility in Vizag.
- Gene Therapy & Antibody-Drug Conjugate (ADC) GMP facility in Genome Valley, Hyderabad.
- Formulation Facility in Hyderabad under the KRKA JV.
These expansions underscore the shift toward complex, high-value tech platforms (biocatalysis, continuous manufacturing, ADCs, etc.).
Segment-Wise Commentary
CDMO Business
- Q1 CDMO revenue at ₹493 Cr, up significantly YoY.
- Growth was driven by mid-to-late-stage NCE (New Chemical Entity) projects and new capacity utilization.
- Over 110 active projects in the pipeline:
- 90+ in Human Health.
- ~20 in Animal Health and Crop Sciences.
- Increasing interest from Big Pharma across verticals like biocatalysis, peptides, flow chemistry, etc.
- Bio-CDMO (Laurus Bio) revenue flat at ₹29 Cr, due to customer-specific scale-up delays, but momentum is improving.
Generics
- Generics revenue rose 12% YoY to ₹1,048 Cr.
- Volume growth seen in ARV and developed markets.
- Currently filed 90+ DMFs and 88 formulation products cumulatively.
Laurus Bio (Biologics CDMO)
- Facing pricing model transition (from per-batch to per-kg billing).
- Phase 1 of 400 KL fermentation facility in Vizag has begun; total capacity will scale to 2 million liters in later phases.
- Targeting diversified applications: food proteins, cosmetic proteins, polymers, etc.
Financial Highlights
- Revenue: ₹1,570 Cr (YoY growth of 31%).
- Gross Margin: 59% (up due to better product mix, improved RM prices, and process efficiencies).
- EBITDA: ₹389 Cr (Margin at 25%, up 10.5 percentage points).
- PAT: ₹163 Cr.
- ROCE: 13%.
- Capex in Q1: ₹265 Cr.
- Net Debt: ₹2,388 Cr (Net Debt/EBITDA improved from 2.3x to 1.8x).
R&D and Quality
R&D spend in Q1: ₹68 Cr (4.3% of sales).
Focus on:
- Cell and gene therapy
- Sustainable technologies
- Product-specific innovation
Conducted 39 quality audits with zero critical observations.
Key Forward-looking Highlights
CDMO to potentially contribute 50% of revenue in future (currently ~30%).
Bio-CDMO ramp-up expected over next few years; strong customer visibility developing.
Non-ARV formulation capacity expansion to complete by Q4 FY26.
Targeting expansion in GLP-1 peptide drug manufacturing and ADC fill-finish capabilities (excluding Mabs).
Capital Investment Outlook
Total Capex plan of ₹5,000 Cr over 5 years:
- Mostly self-funded via internal accruals.
- CDMO will get a major share (not yet disclosed as fixed split).
- ADC and gene therapy facility being built in Hyderabad.
- No ADC-related capex is being allocated from Vizag project.
Other Strategic Points
ImmunoACT (CAR-T therapy): Local and international interest, global expansion plans under exploration.
Willow Bio Partnership: Enzyme engineering for steroids using AI-driven bioengineering; 1 project may enter pilot in FY26.
No plans for demerger/listing of CDMO or Laurus Bio as separate entities.
Formulation business volatility attributed to logistics and shipment timing, especially in ARVs.
Focused strategy to prioritize CDMO over generic APIs in the near term.
Question and Answer Session Highlights
Q: Gross margins have improved significantly to 59.5%. Is this sustainable or a one-off?
A (Dr. Chava): Historically, our gross margins were around 52%. With growing CDMO contribution, we now expect gross margins to stay in the 55%–60% range.
Q: CDMO revenues are unusually strong in Q1, traditionally a weaker quarter. Will H2 still be stronger?
A (Dr. Chava): CDMO business is not strictly linear. While Q1 is strong, growth over last year will remain healthy overall.
Q: Has Laurus won the next Global Fund ARV tender?
A (Dr. Chava): The tender process usually runs in September–October. We’ve consistently secured a good share and expect the same.
Q: What’s the progress on the 2 million liter fermentation facility for food proteins?
A (Dr. Chava): Phase 1 (400 KL) has started at Vizag. Remaining capacity will be added in two more phases. We’re also targeting other segments like cosmetic proteins and fermentation-based polymers.
Q: What’s the market response to ImmunoACT’s CAR-T therapy? Any international interest?
A (Dr. Chava): Some foreign patients have been treated. We’re building global partnerships to expand presence internationally.
Q: Update on the gene therapy facility in Kanpur?
A (Dr. Chava): We moved the project to Genome Valley, Hyderabad due to space limitations in Kanpur. New facility will house both gene therapy (viral vector) and ADC manufacturing.
Q: How do you see Laurus Bio’s contribution evolving over the next 5 years?
A (Dr. Chava): We expect CDMO (currently 30% of revenue) to grow to 50% over time. Laurus Bio has potential, and investments are ongoing.
Q: Any plan to list Laurus Bio separately in future?
A (Dr. Chava): No plans to list any divisions separately.
Q: Is gross margin improvement driven more by non-CDMO businesses?
A (Dr. Chava): Yes, improvement is largely from non-ARV, non-CDMO products.
Q: In CDMO, are gross margins stable across development stages?
A (Dr. Chava): Yes, margins remain consistent regardless of whether the project is in early or late stage.
Q: Are we seeing pre-buying due to U.S. tariff risks?
A (Dr. Chava): Difficult to confirm. Our U.S. formulation exposure is not very large.
Q: Has the animal health and agrochemical CDMO business contributed in Q1?
A (Dr. Chava): Human and animal health contributed. Crop sciences revenues are expected next year.
Q: Can facilities for Human, Animal, and Crop be used interchangeably?
A (Dr. Chava): No. Animal health and crop sciences have segregated, dedicated facilities.
Q: Timeline for Laurus Bio revival post customer-specific delays?
A (Dr. Chava): Delays are resolved. No major challenges expected in achieving FY targets.
Q: Update on Willow Bio partnership and advantages of AI-led bioengineering?
A (Dr. Chava): We’re working on hydroxylation of steroid backbones. One project may move to pilot scale this year, two more next year.
Q: Will Laurus integrate these learnings into other areas?
A (Dr. Chava): Current scope is limited to steroids. No plans to expand use beyond that.
Q: ₹5,000 Cr Andhra Pradesh capex – can it be managed without increasing debt significantly?
A (Ravi Kumar): Yes. We plan to fund this via internal accruals. Net debt will not exceed 50% of revenue.
Q: Impact of U.S. Big Pharma capex on CDMO outsourcing to India?
A (Dr. Chava): We don’t see major impact yet. Core chemistry will likely stay outsourced. Gene/cell therapy finishing may move to U.S.
Q: Laurus Bio pricing challenges – details? Future potential?
A (Dr. Chava): Earlier, pricing was per batch; now, customers want per kg. We’re investing heavily because long-term outlook is strong (2M L capacity plan).
Q: Why is there volatility in FDF sales?
A (Dr. Chava): It depends on ARV shipment schedules, approvals, and logistics (especially via sea), which impact quarterly revenue recognition.
Q: Any GLP-1 or weight-loss related peptide opportunity?
A (Dr. Chava): Yes, we see opportunity. But no details shared yet.
Q: ₹5,000 Cr capex – what portion is for CDMO?
A (Ravi Kumar): Not fixed. Will depend on evolving business opportunities.
Q: Break-up of ARV formulation and API revenue?
A (Dr. Chava): ARV APIs – ₹363 Cr; ARV FDF – ₹284 Cr; Total ~₹640 Cr.
Q: Why is non-ARV FDF growth slow?
A (Dr. Chava): Capacity expansion is underway and will be ready by Q4. Revenue will pick up post qualification.
Q: Are we near peak margins seen in FY21 in non-CDMO segments?
A (Ravi Kumar & Dr. Chava): Possibly. Very healthy margins currently.
Q: How will margins improve further?
A (Dr. Chava): Through operational efficiency. As revenue grows, cost (especially employee cost) won’t rise proportionally.
Q: Why have API/formulation CMO revenues flattened?
A (Dr. Chava): Growth expected from Q4, once tech transfers and capacity expansions are done.
Q: What’s the outlook for non-ARV APIs (like oncology)?
A (Dr. Chava): Flat in near term. Focus and resources are currently allocated to CDMO projects.
Q: Can we expect consistent quarterly CDMO growth?
A (Dr. Chava): Yearly growth will be healthy. Q-o-Q may have lumpiness, but FY outlook is strong.
Q: How many CDMO projects are in commercial phase?
A (Dr. Chava): Cannot disclose. But we’re working on several Big Pharma projects with visibility on volumes, pricing, and timelines.
Q: CDMO contribution is 30% now; when will it reach 50%?
A (Dr. Chava): It’s a potential target. No specific timeline is committed.
Q: What’s Laurus’ involvement in ADC manufacturing?
A (Dr. Chava): We manufacture payloads and linkers, do bioconjugation, purification, and fill-finish. We don’t manufacture monoclonal antibodies.
Q: Any of the ₹5,000 Cr Vizag capex used for ADC?
A (Dr. Chava): No. ADC capex is separate and based in Hyderabad.
Q: Why was there a sharp 21% increase in employee expenses?
A (Ravi Kumar): Includes annual long-service awards, increment cycle, and new hires. May stabilize but represents a new baseline.
Q: Why still no growth guidance in ARVs despite Q1 increase?
A (Dr. Chava): Significant price erosion expected. Volume growth may offset this. Hence, guidance is conservative at ₹2,500 Cr ± ₹200 Cr.
Q: What kind of drugs is Laurus doing in CDMO – chronic or rare/orphan?
A (Dr. Chava): Can’t share therapeutic details. Majority of CDMO revenues come from medium and Big Pharma, not virtual biotechs.
Q: Are we primary suppliers for these clients?
A (Dr. Chava): Cannot disclose that level of customer information.
Q: Net Debt to EBITDA is 1.8x now. What’s the outlook?
A (Ravi Kumar): Will stay within 2x–2.5x. We’ll keep net debt under 50% of annual revenue.
Q: Will ₹5,000 Cr capex be funded internally or via JVs?
A (Ravi Kumar): Mostly internal accruals. Capex will be spread over 4–5 years.
Q: Any benefit from U.S. tariff situation for Laurus?
A (Management): No direct impact currently. No major meetings or actions on that front.
Q: Can you break down CDMO revenue into phases (I/II/III/commercial)?
A (Dr. Chava): No. We do not disclose that level of detail.
Q: As CDMO scales up, will it lift company-wide margins?
A (Dr. Chava): Yes. Increasing CDMO share will improve both gross and EBITDA margins.
Q: Any role for Laurus in lenacapavir and cabotegravir APIs?
A (Dr. Chava): Not a licensee for lenacapavir. For cabotegravir/rilpivirine, we make APIs used by partners.