The Global Economy
The global economy showed resilience in 2023, growing at an estimated rate of 3.2% according to IMF projections. This modest recovery was fuelled by pent-up consumer demand, tight labour markets, and leftover savings from the pandemic era. Advanced economies like the United States (US) (2.5% growth) saw progress driven by robust consumer spending and ample job opportunities. However, the Euro Zone faced headwinds with only 0.4% growth due to high energy prices and less confident consumers.
Despite these challenges, emerging and developing economies collectively experienced a robust growth of 4.3%, driven by Chinas reopening and Indias domestic demand strength. Looking ahead, the global outlook for 2024 remains encouraging, with growth forecasted at 3.2%. The economies of advanced nations are projected to grow by 1.7%, while emerging markets are likely to witness a growth of 4.2%. By 2025, the growth of the world economy may accelerate slightly to 3.2%.
However, this years progress was tempered by challenges such as elevated inflation, aggressive interest rate hikes by central banks to combat rising prices, geopolitical tensions, and persistent supply chain constraints. Though headline inflation cooled towards the year-end it remained above targets in most countries at 5.8%, prompting a hawkish monetary policy stance.
Along with tight monetary policies, reduced fiscal support, and sluggish underlying productivity growth, the above factors contributed to the global economys resilience and steady expansion. Projections indicate a decline in global headline inflation from an average of 6.8% in 2023 to 5.9% in 2024 and further down to 4.5% in 2025.
World Economic Outlook Growth Projections
Growth Projections (%)
2023 | 2024 | 2025 | |
Global Economy | 3.2 | 3.2 | 3.2 |
Advanced Economies | 1.6 | 1.7 | 1.8 |
Emerging Markets and Developing Economies | 4.3 | 4.2 | 4.2 |
Source: [International Monetary Fund (IMF}, World Economic Report Projections, April 2024]
Outlook
The global economic outlook for 2024 is cautiously optimistic, with modest growth of 3.1-3.2% projected amid the cooling inflation. However, to sustain this growth, there is a need for careful policymaking to navigate persistent downside risks. These risks include high interest rates, weak consumer demand, supply constraints, geopolitical tensions, and potential debt issues or financial crises. While Chinasprojected recovery is an upside, there are also headwinds due to factors like housing constraints, labour shortages, and energy transition costs. While a recession is not widely anticipated, the US could see a mid-year slowdown and Europe faces prolonged downturn risks. Overall, there is a need for structural reforms to boost productivity. This will be crucial, especially in emerging markets, as the global economy walks an economic tightrope, demanding deft guidance from policymakers.
The Indian Economy
Indias economy has displayed remarkable resilience and sustained robust growth. This can be attributed to a combination of proactive policy measures, favourable economic conditions, and resilient domestic demand. The countrys GDP grew by an impressive 8.4% in the fourth quarter of 2023, surpassing analysts expectations. This strong performance can be attributed to the governments capital spending push, vigorous manufacturing activity, and strategic initiatives. For instance, the production linked incentive (PLI) scheme aimed at boosting key targeted manufacturing industries.
The Global rating agency Moodys has further underscored Indias economic strength by raising its GDP growth projection for the 2024 calendar year to 6.8%, up from the previous estimate of 6.1%. This upward revision reflects Indias robust economic performance in 2023 and the diminishing global economic challenges. Moodys anticipates that India will uphold its status as the fastest-growing G-20 economy throughout the forecast period.
The agency also anticipates policy continuity after the general election with a sustained focus on infrastructure development. The interim budget has targeted a capital expenditure allocation of INR 11.11 Lac Crores or 3.4% of GDP in the fiscal year FY 2024-25, marking a significant increase of 11.11% over the previous years estimates.
However, there are also challenges. It has become challenging to maintain price stability, which is leading to food price uncertainties and cost-push pressures The CPI inflation is projected at 4.5% for 2024-25. While overall private consumption has rebounded, the growth in consumption remains subdued at only 3.5% in the third quarter of FY 202324. These challenges underscore the importance of continued vigilance and policy measures to sustain Indias impressive economic performance and foster inclusive growth.
Outlook
India is on a promising economic trajectory, with an ambitious vision to become the worlds third-largest economy by CY 2047 and a targeted GDP of USD 5 Tn by CY 2027. Despite global challenges, the economy has showcased remarkable resilience. This can be attributed
to robust domestic demand, strategic initiatives like the PLI scheme to boost manufacturing, and a sharp focus on infrastructure development. Despite challenges such as uneven sectoral growth, inflationary pressures, and geopolitical tensions, the outlook remains positive. This is further bolstered by the implementation of game-changing policies like PM GatiShakti and the National Logistics Policy. With the economys inherent strength and ongoing reforms, and the Governments commitment to sustainable economic advancement, India is poised for continued expansion. The Government is aiming to enhance the quality of life for its citizens and fulfil their aspirations for a better future.
Global Pharmaceutical Market
The global pharmaceutical market was estimated at USD 1,559.53 Bn in CY 2023 and is projected to reach USD 2,832.66 Bn by CY 2033, with a CAGR of 6.15%. This can be attributed to demographic shifts, lifestyle changes, healthcare progress, and the industrys commitment to innovation.
Demographic shifts, such as aging populations and increase in chronic diseases globally, are leading to a higher demandfor treatments addressing age-related and chronic health issues. At the same time, the impact of urban lifestyles on the prevalence of obesity and diabetes continues to sustain the need for pharmaceutical interventions. The expansion of healthcare services in emerging economies is further enabling better access to care and medicines.
Alongside these demand-side factors, significant investments in research and development (R&D) by the pharma industry have led to advancements in biotechnology, genomics, and personalised medicine. This is fuelling innovation in drug discovery and development. Additionally, cost pressures have spurred the industry to develop targeted, curative, and affordable treatments, further transforming the value chain.
Innovation in therapeutics and the introduction of Covid vaccines have also contributed to the industrys growth trajectory. These factors, combined with the industrys focus on product innovation, operational efficiency, stakeholder engagement, and cost management, are poised to drive the robust expansion of the global pharmaceutical market in the coming years.
Global Pharmaceutical Market: 2023-2033 [USD Bn]
CY 2023 | CY 2024 | CY 2025 | CY 2026 | CY 2027 | CY 2028 | CY 2029 | CY 2030 | CY 2031 | CY 2032 | CY 2033 |
1,559.53 | 1,655.44 | 1,757.25 | 1,865.32 | 1,980.04 | 2,101.81 | 2,231.07 | 2,368.28 | 2,513.93 | 2,668.54 | 2,832.66 |
Source: https://www.biospace.com/article/releases/pharmaceutical-market-size-to-hit-arouncl-usd-2-832-66-bn-by-2033/ Global API Market
Recent trends in the active pharmaceutical ingredients (API) market indicate a significant shift towards promoting local production and increasing the demand for novel APIs. The global API market was valued at approximately USD 224.58 Bn in CY 2023 and is projected to reach USD 311.05 Bn by CY 2028, expanding at a CAGR of 6.73% during the forecast period. This growth is likely to be driven by the rising need for specialised drugs to address complex medical conditions, leading to the development of novel APIs using advanced biotechnologies and synthesis techniques.
APIs are the biologically active components of drug products, responsible for their therapeutic effects. These ingredients can be produced through two main methods: chemical synthesis, such as crystallisation, or biotechnological processes using living organisms like bacteria, fungi, or cell cultures in bioreactors.
The API market can be further segmented based on the manufacturer type, which includes the merchant and captive markets. Merchant APIs are sold by third-party manufacturers, either in the open market or directly to drug formulators. Captive APIs are produced in-house by pharmaceutical companies for use in their own formulations. Currently, the merchant API segment accounts for around 40% of the market share, and is expected to grow at a much higher rate due to increasing outsourcing trends. Formulation companies are focussing on improving speed-to-market, cost-effectiveness and quality, and leveraging external technical expertise, which is driving the growth of the merchant API segment.
Global API Market: 2023-2028 [USD Bn]
CY 2023 | CY 2024 | CY 2025 | CY 2026 | CY 2027 | CY 2028 |
224.58 | 238.59 | 254.00 | 271.02 | 289.94 | 311.05 |
Source: Global Active Pharmaceutical ingredients Market 2024-2028
Market Drivers Volume Growth Drivers
The increasing prevalence of chronic diseases globally and better diagnosis rates are major volume growth drivers for the API market. The pharmaceutical sector in emerging markets is growing rapidly, driven by improving healthcare infrastructure and rising economic prosperity. This is further fuelling higher volume consumption of APIs. The increasing availability and adoption of low-cost generic drugs as expensive innovator drugs lose exclusivity is another key volume growth catalyst.
Value Growth Drivers
From a value perspective, the FDA approved 227 new chemical entities and 88 new biological entities between 2016 and December 2022. Many of these required complex and high-value APIs like peptides and siRNA. Around 25% of all new chemical entities currently under development are highly potent compounds requiring specialised manufacturing capabilities and stringent handling protocols. The growing adoption of these complex drug molecules is expected to drive high-value API demand and pricing.
Global Fermentation-Based API Market
The global small molecule fermentation API market was valued at USD 11 Bn in CY 2022 and is expected to reach approximately USD 14 Bn by CY 2026, recording an impressive CAGR of 3.6%. In terms of volume, this market was 51,519 metric tonnes in CY 2022 and is forecasted to expand robustly at a 4.6% CAGR to reach 61,673 metric tonnes by CY 2026. Fermentation products can be naturally derived as well as semi-synthetically processed. These fermentation-derived APIs are versatile active ingredients or intermediates used in a wide range of pharmaceutical products like vaccines, anticancer drugs, antibiotics, hormones, and immunosuppressants. A diverse array of microorganisms is utilised to produce a range of molecules including peptides, proteins, nucleic acids and lipids.
The fermentation-based API market is being propelled by the rapid adoption of generic drugs, as companies and healthcare systems seek low-cost alternatives. Consequently, the volume of APIs utilised in generic drugs is expected to witness quicker growth at a 5.2% CAGR between CY 2022 and 2026 compared to 3.3% for innovator drugs over the same period. Generic drug fermentation APIs accounted for a dominant share of nearly 70% by volume in CY 2022, highlighting the cost-effectiveness of this technology platform. The inherent technological advantages of fermentation such as higher yields, natural extraction and the availability of a diverse array of expression hosts are key driving forces expanding this market globally.
Global Small Molecule Fermentation API Market by Sales Value [USD Bn]
CAGR (2022-2026): 3.6%
CY 2019 | CY 2022 | CY 2026 |
11 | 12 | 14 |
The Indian API Market
The India API market is expected to witness substantial growth. It is anticipated to reach USD 20.32 Bn by CY 2029 from USD 13.64 Bn in CY 2024, at a CAGR of 8.31% during the forecast period (2024-2029). This growth can be attributed to the increasing prevalence of chronic diseases, growing geriatric population, increasing adoption of biologics and biosimilars, and the rising production of generic drugs in the country.
India is the worlds third-largest drug producer by volume, operating over 250 facilities approved by the USFDA and UKMHRA. The rising burden of infectious, genetic, and other chronic diseases, such as cancer, diabetes, and neurological disorders, is a key driver for market growth. The growing geriatric population, more prone to developing chronic conditions, is also contributing to the demand for APIs. The increasing adoption of biosimilars and biologic drugs is expected to boost market growth. The Indian Government is also taking initiatives to boost API production. This includes setting up bulk drug parks and providing PLIs to companies investing in domestic manufacturing of critical APIs. Companies are also adopting strategies like collaborations, agreements, and increasing generic drug production, thereby contributing to market growth. However, stringent regulations for drug approvals, various drug price policies, and high competition among API manufacturers may hinder market growth.
Source:[https://www. mordorintelligence. com/industry- reports/india-active-pharmaceutical-ingredients-market]
Indias Competitive Advantage in the API Industry Robust Industry Foundation
India has a strong specialty chemicals industry, as the 6th largest global producer. This provides the country with a strong foundation to manufacture high-quality intermediates and key starting materials for APIs cost-effectively. The large chemicals base acts as a backbone, enabling cost- competitive API production.
Solid R&D Ecosystem
India has invested intensively in R&D infrastructure, with 3,500 engineering colleges, emerging startups, and growing global partnerships. This allows for continuous process optimisation, quality improvements, and environmental sustainability in large-scale API manufacturing.
Capacity Expansion Initiatives
The Indian Government is driving multiple initiatives like raising FDI limits, new IP frameworks, production clusters, and PLI schemes to expand the countrys API manufacturing capacity. This Aatmanirbhar vision aims to increase self-reliance and make Indian APIs more cost- competitive globally.
Regulatory Excellence
India has a proven track record of serving highly regulated markets like the US. In CY 2022, India accounted for 50% of USDMF filings and 28% of USFDA approved API facilities. This regulatory proficiency allows the country to reliably meet global API demand.
Cost Competitiveness
Increasing pricing pressures are driving pharmaceutical companies to seek cost-competitive, high-quality API suppliers. India offers substantial cost advantages such as 40-70% lower manufacturing/operating costs and 50-70% lower labour costs compared to western countries. Setting up an FDA-approved plant in India costs ~50% less on average.
The country has a robust chemical industry, strong R&D capabilities, proactive Government support, regulatory excellence, and significant cost advantages. All of these position India as a leading, cost-competitive API manufacturing hub for global markets.
Company Overview
Concord Biotech (also referred to as Concord or The Company) is an India-based biopharmaceutical company and one of the leading global developers and manufacturers of select fermentation-based APIs across immunosuppressant and oncology. The Companys marketleading position, with over 20% share by volume in 2022 for key fermentation-based APIs like mupirocin, sirolimus, tacrolimus, mycophenolate sodium and cyclosporine, enables it to supply to over 70 countries. These include highly regulated markets such as the US, Europe, and Japan (Source: F&S Report). With a total installed fermentation capacity of 1250 m3 as of 31st March 2024, Concord is among the few companies globally to have successfully established and scaled up complex fermentation-based API manufacturing capabilities.
The Companys comprehensive offerings span both biopharmaceutical APIs and formulations across therapeutic areas like immunosuppressants oncology, anti-infectives nephrology, and critical care. Concords fermentation and semi-synthetic expertise allows it to produce high-quality, complex APIs. Its formulations business caters to the growing demand for advanced drug products like tablets,capsules, and injections. Since launching its formulations vertical in 2016, the Company has rapidly expanded its geographical footprint to markets across India, emerging economies, and the US. Its vertically integrated business model, coupled with robust manufacturing capabilities, enables it to deliver a consistent supply of high-quality products to customers worldwide.
Product Portfolio
Concords diversified product portfolio underpins its leadership in fermentation-based APIs and formulations. As of 31st March 2024, the Company had a robust portfolio comprising 30 API products and 98 formulations brands additionally, The Companys extensive range includes critical therapeutic areas such as immunosuppressant, anti-bacterial, anti-fungal, oncology, nephrology, and critical care, catering to the diverse needs of patients worldwide.
Strengths
Established Presence Across the Complex
Fermentation Value Chain
Concord Biotech has built robust capabilities across the fermentation value chain, encompassing R&D, patents, key starting materials, API and formulation manufacturing, as well as marketing and distribution. This comprehensive expertise has enabled it to develop and commercialise a wide range of fermentation- based APIs across multiple therapeutic areas over the past two decades.
Global Leadership in Immunosuppressant APIs and Complex Fermentation-based APIs
Concord Biotech has more than 20% market share by volume for its key fermentation-based APIs like Mupirocin, Sirolimus, Tacrolimus, Mycophenolate Sodium, and Cyclosporine. This makes the Company one of the leading global developers and manufacturers of fermentation-based APIs in immunosuppressants and oncology. Its extensive portfolio also includes fermentation-based APIs in anti-bacterial, anti-fungal, and other therapeutic segments.
Scaled Manufacturing Facilities with Regulatory Compliance and Strong R&D
The Company operates three manufacturing facilities in Gujarat, India, with flexible plant configurations and a total installed fermentation capacity of 1,250 m3 as of 31st March 2024. Its facilities have successfully undergone inspections by global regulators, including the USFDA and EMA, demonstrating a consistent track record of regulatory compliance. Concords strong R&D capabilities, with a team of 173 members, has enabled the commercialisation of 30 fermentation-based APIs.
Diversified Global Customer Base and Long-Standing Relationships
Concord Biotech has cultivated a diverse global customer base spanning over 250 customers in 70+ countries as of 31st March 2024. The Company has established long-standing relationships with leading global generic pharmaceutical companies and developed relationships with 48, 47, and 63 and 95 new customers during FY 2020-21, 2021-22, and 2022- 23 and 2023-24, respectively.
Experienced Promoters and Management Team
Concord Biotech is led by an experienced Promoter-led management team, supported by over 2,400 employees across various functions.
Research & Development
Concords robust R&D capabilities form the backbone of its fermentation and product development expertise across APIs and formulations. With dedicated R&D units approved by DSIR, India, and a workforce of 173 personnel as of 31st March 2024, the Companys API R&D focusses on fermentation technology. This encompasses strain improvement, media optimisation, process development, scale-up, and technology transfer. It also includes chemical processes like downstream processing, semi-synthetic routes, non-infringing processes, and analytical methods. The Companys formulations R&D unit develops niche dosage forms, leveraging comprehensive analytical capabilities.
It offers contract research and manufacturing services spanning the entire spectrum, from strain improvement to process optimisation, scale-up, biotransformation, and formulation development for global markets. Concords R&D investments of INR 23 Crores in FY 2023-24 reinforce its commitment to innovation.
R&D Investments
FY 2020-21 | FY 2021-22 | FY 2022-23 | FY 2023-24 |
19 | 26 | 30 | 23 |
Manufacturing
Concord Biotech has three world-class manufacturing facilities in Gujarat, India spanning a massive area. The Companys API facilities comprise numerous blocks with comprehensive capabilities for fermentation, chemical synthesis, downstream processing and handling processes like filtration and chromatography. On the formulations side, it has dedicated facilities for manufacturing oral solids, liquids as well as injectable dosage forms. Concords units have received approvals from global regulators like USFDA, EMA and PMDA, attesting to its stringent quality standards. With this extensive vertically integrated infrastructure adhering to global regulatory requirements, Concord is well- positioned to reliably serve its customers worldwide with a range of high-quality APIs and formulations.
Financial Review
Concord Biotechs financial performance in FY 2023-24 was robust, driven by strong growth across its key divisions.
It revenue from operations stood at a remarkable INR 1,016.9 Crores, reflecting a significant increase from the previous year. The Company also saw substantial growth in its Operating EBITDA which reached an impressive INR 434.9 Crores. The Profit After Tax (PAT) stood at INR 308.1 Crores, showing a notable improvement from FY 2022-23. Additionally, the Earnings Per Share (EPS) increased to INR 29.5 from the figure recorded in the previous year. Overall, these outstanding results demonstrate the Companys strong performance and growth trajectory in FY 2023-24, fostering a confident and optimistic outlook for the future.
Particulars | FY 2023-24 | FY 2022-23 |
EBITDA/Turnover (%) | 42.8% | 40.5% |
Return on Capital Employed | 27.0% | 24.3% |
Return on equity (%) | 22.0% | 20.1% |
Book value per share (INR) | 145.9 | 123.3 |
Earnings per share (INR) | 29.5 | 22.9 |
Working Capital Days | 259 | 229 |
Current ratio (x) | 6.3 | 3.8 |
Net profit margin (%) | 30.3% | 28.1% |
Risk Management
Type of Risk | Risk Description |
Risk Mitigation |
Human Resource Risk | Inability to attract/retain skilled staff impacting operations and product development | The Company provides competitive compensation, growth opportunities, and a positive work culture for its employees. It also invests in comprehensive training and development programmes. |
Regulatory Risk | Non-compliance with regulations or failure to secure approvals disrupting business | Concord Biotech maintains a dedicated regulatory affairs team to monitor changes. The Company implements robust quality systems and procedures. Its approach ensures transparency with regulatory bodies. |
Intellectual Property Risk | IP infringement or challenges undermining competitive advantage | The Company vigorously pursues patent protection for its innovations globally. It has established IP monitoring and defence processes in place. Concord also ensures strict confidentiality of proprietary information. |
Demand Risk | Fluctuations in market demand leading to excess inventory or reduced sales | Concords demand forecast aligns with production levels. It maintains flexible manufacturing capabilities. The Company also diversifies its product portfolio to mitigate risks. |
Manufacturing Operations Risk | Disruptions in manufacturing processes impacting product supply | Concord Biotech implements rigorous quality control, preventive maintenance, and inventory management. It has backup facilities and alternative sourcing options and also prioritises continuous upgrades to manufacturing technologies. |
Quality Assurance & Certifications Risk | Loss of quality standards/ certifications leading to quality issues and customer loss | Concord maintains a dedicated quality assurance team. The Company conducts regular audits, inspections, and validations. It also provides ongoing training to its manufacturing and quality personnel. |
Human Resources
Concord Biotech recognises its people as the most valuable asset. The Company is committed to fostering an inclusive and engaging work environment, attracting and retaining top talent through innovative recruitment strategies. It emphasises on hiring skilled researchers, scientists, and technical professionals passionate about driving innovation and providing comprehensive training programmes for their professional growth. Concord also promotes diversity and inclusion initiatives, ensuring equal opportunities for all.
The Company prioritises employee well-being and satisfaction through wellness initiatives, employee assistance programmes, and open communication channels. Regular feedback, coaching, and performance evaluation ensures that employees are able to effective contribution towards the organisational mission. With an employee strength of 1377 as of 31st March 2024, Concords human resources practices are centred around developing and retaining top scientific and technical talent, fostering engagement, and driving organisational success through effective workforce management.
Internal Control Systems and its Adequacy
Concord Biotech prioritises robust internal control systems to ensure operational efficiency and integrity. The Company emphasises on integrity, accountability, and ethical behaviour, with its management setting the tone at the top. Regular risk assessments help Concord identify and address potentialrisks, while comprehensive control activities tailored to its healthcare operations include segregation of duties and IT controls. Clear communication, training programmes, and continuous monitoring ensure the effectiveness of internal controls. Concord Biotech maintains a culture of compliance and accountability, empowering its employees to uphold controls and report any concerns. It regularly enhances the internal control framework to adapt to evolving risks and industry best practices, ultimately aiming to deliver quality healthcare services.
Cautionary Statement
The statement provided in this section outlines the Companys objectives, projections, expectations, and estimations, which may be deemed as forward-looking as per applicable securities laws and regulations. These forward-looking statements are based on certain assumptions and anticipations of future events. However, its important to note that the Company cannot guarantee the accuracy or realisation of these assumptions and expectations. Actual results may significantly differ from those expressed in the statement or implied due to various external factors beyond the Companys control. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements based on subsequent developments. Its essential for stakeholders to exercise caution and consider the inherent uncertainties associated with forward-looking statements when making decisions based on such information.
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