Sai Life Sciences Ltd Management Discussions

Management Discussion and Analysis Report

Economic Review

Global Economy

In CY 2025, the global economy grew by 3.4%, demonstrating resilience amid persistent geopolitical uncertainties. Within this landscape, advanced economies expanded by 1.8%, driven by robust private sector adaptability and greater technological investments in the US and a gradual stabilisation of domestic consumption in the UK. Meanwhile, emerging market and developing economies grew by 4.4%, due to surging domestic demand and strong industrial productivity in Asia. This sustained regional performance helped offset overall trade policy volatilities and supply chain disruptions throughout the year. Further, global trade volume increased by 5.1% during the year, reflecting significant front-loading activities and the rapid recalibration of international supply chains to counter potential trade headwinds.

Outlook

Global economic growth is projected to moderate to 3.1% in CY 2026 amid trade policy uncertainties and fiscal pressures. However, monetary easing, policy support and resilient domestic demand are expected to promote sustained growth. Persisting geopolitical tensions in West Asia will continue to disrupt global energy supply chains, thereby escalating inflationary pressures. Consequently, inflation is projected to reach 4.4% in CY 2026 before easing to 3.7% in CY 2027, due to favourable labor market conditions and subdued tradable goods demand.

Global Growth Projections (%)

Indian Economy

Indias economy maintains strong momentum, with a steady growth rate of 7.7%, positioning India as the fastest-growing major economy for the fourth consecutive year. Robust domestic demand, aided by lower income tax and GST rates, is expected to facilitate sustained growth. Inflation moderated during the year, with the Consumer Price Index (CPI) estimated at 3.4%, supported by improved supply chains and lower input costs.

On the supply side, industrial activity strengthened, with manufacturing sectors contributing substantially to overall output. The pharmaceuticals and medicinal chemicals segment, recorded stable growth, accelerated by steady demand and capacity expansion.

Policy support remained a key driver of industrial development. Government initiatives such as the Production Linked Incentive (PLI) schemes consistently encouraged domestic manufacturing, reduced import dependence and enhanced export competitiveness across the pharmaceutical and bulk drug sectors. These measures are driving capacity expansion, improving infrastructure and reinforcing Indias strategic position as a global pharmaceutical manufacturing hub.

Outlook

Economic activity is expected to remain resilient, with GDP growth projected at 6.6% for FY 2026-27, driven by sustained momentum in the services sector, strong domestic demand and stable financial performance. However, persistent geopolitical tensions are projected to elevate headline CPI inflation to 5.1%. To meet consumer demand and anchor expectations in this environment, the RBI Monetary Policy Committee (MPC) has maintained the repo rate at 5.25% under a neutral stance.

The Union Budget 2026-27 reinforces the governments commitment to strengthening the pharmaceutical and healthcare ecosystem through the Promotion of Research and Innovation in Pharma-MedTech (PRIP) scheme and the Biopharma SHAKTI (Strategy for Healthcare Advancement through Knowledge, Technology and Innovation) initiative, thereby encouraging advanced drug development to achieve long-term industrial self-reliance.

Industry Review

Pharmaceutical Industry Overview

The pharmaceutical industry is undergoing a major shift, marked by rapidly rising demand for GLP-1 treatments, antibody-drug conjugates and other next-generation therapeutic modalities. The global pharmaceutical industry was valued at approximately US$ 1,627.73 billion in 2025. This sector covers the entire lifecycle of medicines, including discovery, development, production and marketing, with an increasing focus on novel therapies. Driven by front-loading activities ahead of expected US tariffs, global drug manufacturing grew by 9.1% in 2025.

The sector is witnessing a strong rise in R&D and manufacturing outsourcing among pharma and biotech companies, making integrated CRO-CDMO partnerships strategically important. Concurrently, large pharmaceutical companies are actively diversifying their supply chains and manufacturing networks geographically. While a recovery in biotech funding is underway, capital remains heavily skewed toward mid-to- late-stage assets and pipeline progression. These factors are driving major pharmaceutical firms to increasingly build long-term, integrated development and manufacturing relationships.

Regionally, The United States continues to lead the world in overall pharmaceutical spending. Meanwhile, the Asia-Pacific region stands out as the fastest-growing market, propelled by expanding manufacturing networks, rising investments and growing healthcare demand. India plays a dominant role in the global pharmaceutical supply chain, manufacturing nearly one in five generic medicines used worldwide and supplying medicines to patients in more than 200 countries. Furthermore, India accounts for nearly 35%-40% of Drug Master Files (DMFs) filed with the United States Food and Drug Administration (USFDA), reflecting the countrys strong scientific and manufacturing capabilities.

Industry Outlook

The global pharmaceutical industry is projected to reach approximately US$1,722.05 billion in 2026, reflecting steady expansion and an expected market growth rate of 5.8% from 2025 to 2026. The 2026 outlook is supported by increasing global healthcare expenditure, growing demand for personalized medicine and expanding pipelines for new vaccines, advanced therapies and biosimilar options.

Market headwinds and complex operational challenges persist across the industry. The sector faces significant pricing pressures arising from ongoing regulatory reforms, looming patent expirations for major legacy drugs and rising biosimilar competition. Additionally, logistics management is becoming more challenging due to increasing complexity in global supply chains, creating a critical industry-wide need to build and maintain supply chain resilience.

Technological maturation and evolving domestic research ecosystems are shaping the future of global drug development. Companies are leveraging real-world evidence generation and Al-driven platforms to support better strategic decision-making. Simultaneously, a growing pipeline of new drugs and advanced therapeutics from Indian companies reflects the steady maturation of the countrys research ecosystem, demonstrating an increasing capability to translate early-stage science into globally relevant therapies.

Global CRDMO

Industry

The global Contract Research, Development and Manufacturing Organisation (CRDMO) market is progressing rapidly. Increasing outsourcing intensity among pharmaceutical and biotechnology companies, together with integrated CRO-CDMO partnerships, continues to drive market growth. Companies are increasingly diversifying their supply chains and manufacturing networks, while long-term strategic partnerships are becoming increasingly prevalent. India is also emerging as a preferred destination for pharmaceutical outsourcing, supported by increasing R&D activities.

The industry is witnessing growing adoption of AI, automation and digital technologies to improve productivity, accelerate workflows and enhance scientific processes. The FDAs push toward New Approach Methodologies (NAMs) is expected to reshape discovery workflows and increase demand for biology-heavy discovery services. The BIOSECURE Act has reinforced the focus on pharmaceutical supply chain diversification, while customers continue to adopt multi-source supply strategies. The evolving tariff environment remains an area of focus, with large pharmaceutical companies taking proactive measures to mitigate tariff exposure. Biotech funding has also shown encouraging signs of recovery, supporting outsourcing demand and program progression.

The global CRDMO market was valued at US$260.51 billion in 2025. It is projected to expand from US$281.16 billion in 2026 to US$540.51 billion by 2034, representing a CAGR of 8.5% during the forecast period. Growth is being driven by pharmaceutical companies outsourcing R&D and manufacturing to focus on their core competencies.

Global CDMO Industry

The contract development and manufacturing organization (CDMO) market was valued at US$199.27 billion in 2025. Growth is driven by surging demand for outsourcing complex, capital-intensive activities, thereby reducing fixed costs, accelerating development timelines and improving access to specialized technologies. Increasing R&D activity and limited in-house manufacturing capabilities among small and mid-sized biotech companies are further accelerating growth. The industry is currently undergoing a major transition from single-service outsourcing as companies adopt integrated, end-to-end platforms across development, manufacturing, clinical supply, testing, fill-finish, packaging and regulatory support operations.

The market is projected to grow from US$ 214.95 billion in 2026 to US$ 419.93 billion by 2034, registering a CAGR of 8.7% over the forecast period. Rising demand for advanced biologics, cell and gene therapies, Antibody-Drug Conjugates (ADCs), peptides and high-potency APIs drives the need for specialised CDMO capabilities. Advanced industry requirements and shifting preferences ensure a favorable environment for sustained global market growth.

Global CDMO Industry Size (US$ Billion)

Global CRO Industry

The global Contract Research Organisation (CRO) market is expanding rapidly as pharmaceutical, biotechnology and medical device companies outsource clinical development needs. As biopharma innovation accelerates, regulatory complexity increases and digital ecosystems develop, CROs are evolving into agile, data-driven partners. The global market was valued at US$ 45.3 billion in 2025, with North America being the largest region. Market growth is supported by the increasing complexity and volume of clinical trials. Additionally, a growing focus on patient-centric models such as Decentralized Clinical Trials (DCTs) is driving market expansion. The flexibility of services offered by CROs further supports sustained outsourcing of drug development and clinical research activities.

The market is projected to grow from US$48.5 billion in 2026 to US$83.3 billion by 2033, expanding at an estimated CAGR of 8.0% over the forecast period. In 2025, North America remained the largest region, while the Asia Pacific region is expected to register the highest CAGR during the forecast period. This rapid growth in Asia-Pacific is being accelerated by expanding pharmaceutical industries, lower trial costs and favorable government support. Rising demand for personalized medicine will continue to drive overall market growth. Despite this expansion, increasing competition, pricing pressures and complex regulatory environments pose significant challenges while improving accessibility to global patient pools.

Indian CRDMO Industry

Indias Contract Research, Development and Manufacturing organization (CRDMO) sector is experiencing substantial growth, driven by increasing global pharmaceutical outsourcing and rising demand for biologic medicines. The domestic CRDMO market is estimated at US$3.4-4.0 billion for CY 2025. This expansion reflects the increasing global outsourcing of pharmaceutical development and manufacturing activities to Indian service providers offering cost-effective, high-quality solutions. The sector benefits from a strong foundation of scientific expertise, cost-efficient operations and an extensive network of USFDA-approved manufacturing facilities, enabling Indian companies to effectively serve global pharmaceutical innovators. of USFDA-approved manufacturing facilities, enabling Indian companies to cater effectively to global pharmaceutical innovators.

The countrys role is evolving beyond being a generic pharmaceutical manufacturer to becoming a key partner in advanced drug development and pharmaceutical innovation. The market is projected to register a strong CAGR of 15-16% between CY 2026 and CY 2035. This expansion is expected to drive the industrys growth to US$7-9 billion by CY 2030 and further to US$14-18 billion by CY 2035. Revenue growth for CRDMO companies is forecast at 8-10% in FY 2026-27, reflecting the short-term impact of reduced biopharma funding, although the long-term growth prospects remain favorable.

Opportunities and Challenges Opportunities

Favorable Demographic Trends

Rising life expectancy and an aging population increase the prevalence of chronic conditions such as cardiovascular diseases, diabetes, asthma and respiratory disorders. This supports sustained demand for healthcare services and pharmaceutical products.

Growing Demand for Advanced Therapies

Growing demand for advanced therapies, including ADCs, cell and gene therapies, peptides and high-potency APIs, is driving the need for specialized manufacturing capabilities. These therapies create higher-value opportunities for CRDMOs.

Sterile Fill-finish Infrastructure

The transition toward injectable therapies is increasing the demand for sterile fill-finish manufacturing capacity. The expansion of such capabilities presents significant opportunities for CRDMOs.

Functional Service Provider Models

Pharmaceutical companies are increasingly transitioning from traditional full-service outsourcing to Functional Service Provider (FSP) models. These models provide flexible access to specialized functions such as biostatistics, data science and regulatory compliance.

Oncology Pipeline Dominance

Oncology remains the largest therapeutic area in the drug development pipeline. The manufacture of oncology drugs is driving demand for specialized CDMO capabilities equipped to handle Highly Potent Active Pharmaceutical Ingredients (HPAPIs) within controlled manufacturing environments.

Challenges

Regulatory Complexity and Compliance Costs

Stringent global standards are increasing compliance costs and operational complexity, requiring continuous investments to maintain regulatory compliance.

Increasing Competition

Greater competition and consolidation in key markets are escalating pricing pressures across the industry. Service providers continue to prioritize operational efficiency to safeguard profitability.

Drug Pricing Controls

Government drug pricing regulations limit pricing flexibility for pharmaceutical companies, thereby reducing investments in outsourced research and manufacturing services.

Company Overview

Sai Life Sciences Limited, headquartered in Hyderabad, India, is an integrated Contract Research, Development and Manufacturing Organisation (CRDMO) with over 27 years of industry experience. The Company has established a strong global footprint, supported by long-term relationships with pharmaceutical and biotechnology innovators.

By prioritizing consistent innovation, the Company is among the few scaled Indian organizations offering both Contract Research Organisation (CRO) and Contract Development and Manufacturing Organization (CDMO) capabilities for small molecules. Its integrated platform enables seamless progression of small-molecule New Chemical Entities (NCEs) from discovery through development and commercialization.

The Company offers a comprehensive range of services spanning medicinal chemistry, process development, clinical manufacturing and commercial manufacturing, supported by advanced technology platforms across its global operations. Its delivery model is centered on quality, cost efficiency and scalability, while adhering to rigorous standards of safety and ensuring regulatory compliance and strong governance. The Companys quality and sustainability practices are aligned with global operational standards.

Value Chain

Key Strengths

Strengths	Description
Integrated Service Platform	A comprehensive platform for discovery, development and manufacturing.
Diverse Molecule Portfolio	CDMO platform with a diverse range of commercial and under-development molecules.
Integrated Discovery Capabilities	Fast-growing, integrated discovery capabilities with a focus on biology, chemistry and Drug Metabolism and Pharmacokinetics (DMPK) services.
Diverse Customer Base	Long-standing relationships with an extensive network of existing and emerging customer base.
Advanced R&D Infrastructure	Modern R&D infrastructure with a differentiated delivery model and a strong regulatory framework to supervise operations.
Qualified Leadership and Talent	Experienced management team and board of directors supported by a qualified scientific talent pool.
Strategic Financial Growth	Strategic business investments with improving profitability metrics.
Digital Regulatory Compliance	Proprietary, Good Manufacturing Practice (GMP) enabled digital systems ensure compliance, data integrity and adherence to global standards across every function.
Technological Efficiency	AI-powered digital tools and automation accelerate R&D, enhance efficiency and drive insight-led scientific decision-making.
Resilient Ethical Sourcing	Resilient, global supply network with reduced dependence on China and Pharmaceutical Supply Chain Initiative (PSCI) aligned ethical sourcing ensures future-ready reliability.
Sustainability and Safety Commitment	Advanced safety systems, zero liquid discharge and proactive risk controls reflect the Companys commitment to people and planet.

Business Overview CRO

The Companys CRO (Discovery Services) business provides integrated drug discovery capabilities spanning synthetic and medicinal chemistry, computational chemistry, Computer-Aided Drug Design (CADD), biology, DMPK, toxicology, in vivo pharmacology and formulations, supporting customers from Target Validation to Investigational New Drug (IND).

During FY 2025-26, the integrated CRO strategy continued to gain momentum, particularly among biotechnology and pharmaceutical customers, driven by emerging cross-sell opportunities with existing CDMO customers and increased traction for large-scale and discovery programs. More than 65% of discovery programs are integrated, supported by next-generation biology, automation and AI, enabling the Company to handle large integrated programs. The Company also expanded its capabilities in ADCs, TPDs, peptides, CGTs and oligonucleotides, while strengthening its discovery platform through high-throughput experimentation (HTE), DMPK automation, Al-enabled drug discovery tools and advanced preclinical models.

J 775 Cr.

Discovery Services (CRO) Revenue in FY 2025-26

CDMO

The Companys CDMO (CMC Services) business provides end-to- end capabilities from IND through commercialization, supporting pharmaceutical and biotechnology companies across process development, manufacturing and commercial supply. Its capabilities include complex chemistry, ADC payloads and linkers, supported by GMP-compliant facilities across India and the UK, ensuring flexibility to meet both clinical and commercial manufacturing requirements.

The Company is actively engaged with 19 of the top 25 global pharmaceutical companies.

During FY 2025-26, the Company maintained a pipeline of 34 commercial molecules, 11 Phase III/pre-registration molecules and around 155 molecules in earlier stages of development across multiple therapy areas. It consistently expanded capabilities in new modalities, including Peptides, Antibody-Drug Conjugates (ADCs), Oligonucleotides and Lipids, while prioritizing digitalization, automation and sustainability.

J 1,417 Cr.

CDMO Revenue in FY 2025-26

Operational Performance

Key Business Highlights during FY 2025-26:

• CDMO contributed 65% and CRO contributed 35% to the Companys total revenue during FY 2025-26.

• Revenue contribution from the Companys 19 global large pharmaceutical customers increased to 49% in FY 2025-26 from 28% in FY 2021-22. The Company expanded engagement with global large pharmaceutical customers across the value chain, from early discovery to commercial manufacturing and received commercial supply qualification from two additional large pharmaceutical customers.

• More than 65% of discovery programs were integrated, with active use of next-generation biology, automation and AI to accelerate development and improve outcomes.

• The Company incurred H633 Cr. of capital expenditure during FY 2025-26 and announced a planned capital expenditure programme of H1,100-1,300 Cr. for FY 2026-27, focused on capacity expansion, capability enhancement, AI and technology investments.

• The Company continued to invest in High-Throughput Experimentation (HTE), advanced biology platforms, organoid technologies, peptides and ADC capabilities, while advancing automation and AI-enabled scientific operations.

• The Bidar manufacturing sites (Unit IV and Unit VI) became the first sites of an Indian CRDMO to operate on 100% renewable power.

Financial Performance

In K CR.	FY 2025-26	FY 2024-25	Growth %
Total income	2,242	1,731	29.5%
Cost of materials consumed and changes in inventories	571	466	22.5%
Employee benefit expense	683	549	24.4%
Other expenses	307	274	12.0%
EBITDA*	661	425	55.6%
EBITDA Margin	30.1%	25.0%
Depreciation and amortisation expense	167	139	20.1%
EBIT	505	304	66.3%
EBIT Margin	23.1%	17.9%
Finance Cost	39	76	(48.7%)
Exceptional Items	8	-	-
Profit before tax	466	228	104.4%
Tax expense	117	58	101.7%
Profit after tax (PAT)	349	170	105.3%
PAT Margin	15.9%	10.0%	+590 bps

For FY 2025-26, total income increased by 29.5% YoY to H2,242 Cr. from H1,731 Cr. in FY 2024-25. The growth was supported by robust demand across both the CDMO and CRO segments, underlined by consistent execution and increasing traction across the Companys integrated service offerings.

EBITDA increased by 55.6% YoY to H661 Cr. from H425 Cr. in FY 2024-25. EBITDA margin expanded by 508 basis points to 30.1% in FY 2025-26 from 25.1% in FY 2024-25, mainly due to operating leverage on employee costs, material margin and other expenses.

Depreciation and amortisation expense increased to H167 Cr. in FY 2025-26 from H139 Cr. in FY 2024-25 due to addition of new blocks in CDMO and space in CRO business.

Finance costs decreased to H39 Cr. from H76 Cr. in FY 2024-25 due to repayment of H720 Cr. debt from IPO proceeds. Profit after tax (PAT) increased by 105.3% YoY to H349 Cr. from H170 Cr. in FY 2024-25, while the PAT margin improved to 15.9% from 10.0%, reflecting robust earnings growth and improved profitability.

Total equity as of March 31, 2026, stood at Rs.2,484 Cr, compared with Rs.2,128 Cr as at March 31, 2025.

Key Ratios	FY 2025-26	FY 2024-25	Change
Revenue from Operations	2,192	1,695	29.4%
Debtors Turnover	5.9	4.8	22.9%
Inventory Turnover	14.5	14.3	1.9%
Interest Coverage Ratio **	41.25	8.28	397.9%
Current Ratio	1.69	2.05	-17.6%
EBITDA Margin (%)	30.1%	25.1%	20.3%
Net Profit Margin (%) *	15.9%	10.0%	58.5%
Return on Equity (%) *	14.0%	8.0%	75.7%
Return on Capital Employed (%) *	18.2%	12.2%	48.8%
Net Debt-Equity Ratio	0.01	-	NA
Net Debt-EBITDA	0.04	-	NA

Notes:

* The variance is on account of higher profitability and optimum utilisation of shareholders funds for the year ended March 31, 2026. ** The variance is on account of increase in operating profits and lower debt service obligation during the year ended March 31, 2026.

Debtors Turnover: Revenue from Operations/Trade Receivables Inventory Turnover: Revenue from Operations/Inventories

Interest Coverage Ratio: EBITDA/Finance Cost (excluding Interest on lease liabilities)

Current Ratio: Current Assets/Current Liabilities EBITDA Margin (%): EBITDA/Revenue from Operations Net Profit Margin (%): Profit after Tax/Revenue from Operations Return on Equity (%): Profit after Tax/Total Equity

Return on Capital Employed (%): EBIT/Total Equity + Borrowings + Lease Liabilities Business Outlook

The Company remains focused on strengthening its integrated CRDMO platform by deepening relationships with global pharmaceutical customers and expanding its capabilities. It continues to invest in science-led capacity expansion, product and pipeline diversification and the adoption of newer technologies. Promoted by innovation- led outsourcing, supply chain diversification, increasing R&D and manufacturing outsourcing and strategic partnerships, the Company continues to enhance its capabilities. It is investing in new modalities, automation, digital technologies and AI to drive long-term growth.

The Company also announced a planned capital expenditure program of H1,100-1,300 Cr. for FY 2026-27, focused on capacity expansion, capability enhancement, AI and technology investments.

1. Human Resources

Human resources remain integral to the Companys growth strategy. During the year, the Company continued to strengthen its talent base across discovery, development and manufacturing functions to support its expanding operations and increasing technical complexity.

Ongoing investments in R&D capabilities, along with the induction of specialized talent, are contributing improved operating efficiency as the business scales. The Company maintains a strong focus on recruiting skilled scientific personnel, enhancing integrated capabilities and supporting long-term capacity creation.

Transformation initiatives, including the adoption of automation and artificial intelligence, are being implemented to improve productivity, optimize resource utilization and enable scientific teams to focus on high-value activities with greater scientific rigor.

2. Risk and Concern

The Company has adequate risk management processes to identify, assess and communicate potential risks that could have an adverse impact on the Companys operations. The internal processes and procedures are structured to enable a timely and effective response to the emerging risks. Risk oversight processes are embedded across all functional areas which enables the Company to act in a time-bound manner to manage the risks. The Company has adequate internal controls and takes appropriate protective and preventive measures across all functional areas, as required.

3. Internal Control Systems

The Companys robust internal control framework is in accordance with the size of the business and nature of business operations. The policies and procedures of the internal control framework enable the Company to safeguard assets, prevent and detect fraud and errors and ensure accuracy and completeness of accounting records. The internal control framework ensures orderly and efficient conduct of business operations. The internal control framework is monitored and periodically assessed for effectiveness and adequacy by the Board of Directors. The internal controls are regularly evaluated to ensure strict adherence to regulatory norms and to monitor the effectiveness of governance processes.

4. Cautionary Statement

This report contains statements that may be forward-looking, including, but not limited to, statements relating to the implementation of strategic initiatives and other statements relating to the Companys future business developments and economic performance. While these forward-looking statements indicate the Companys assessment and future expectations concerning the development of the Companys business, several risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from the Companys expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange rates and interest rates, competitive pressures, technological developments, changes in the financial condition of third parties dealing with the Company, legislative developments and other key factors that could affect the Companys business and financial performance. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.