Akums Drugs

Akums Drugs reported a total income of INR1,025 crores in Q3 FY25, marking a 2% QoQ and 6% YoY decline. Despite this, adjusted EBITDA grew 1% QoQ to INR136 crores and 12% YoY, while PAT increased 15% YoY to INR66 crores. Cash flow from operations significantly improved to INR91 crores from INR19 crores QoQ, and free cash flow turned positive at INR50 crores from negative INR73 crores.

The CDMO segment, contributing 78% of revenue (INR787 crores), saw its EBITDA grow 9% YoY, with overall CDMO EBITDA margins close to 15.4%. Volume growth in CDMO was subdued at 0.6% QoQ and 1% for the 9 months of FY25, though management expects recovery. A major highlight was securing a EUR 200 million CDMO contract for oral liquid formulations in European markets, with commercial supply commencing in 2027 and an upfront payment of EUR 100 million already transferred.

The API segment, representing 4% of revenue (INR40 crores), continued to incur losses, though these significantly reduced to INR11 crores in Q3 FY25 from INR14 crores in Q2 FY25. This improvement was a result of rationalizing the portfolio, discontinuing lower-margin cephalosporin APIs due to a 20-30% price drop. Management aims for the API business to reach breakeven within 1 to 2 years by focusing on higher-margin products, general APIs, and exports.

Akums invested INR94 crores in R&D over the first 9 months of FY25, securing 7 DCGI approvals in Q3, including for Empagliflozin combination. The company plans to incur an additional INR32 crores in capex over the next two quarters to upgrade R&D capabilities for regulated markets and niche dosage forms. DSIR accreditation was received for the Barwala R&D facility for APIs.

Akums entered into several strategic partnerships, including an exclusive master sales agreement with Caregen (South Korea) for nutraceuticals in India and a licensing deal with Triple Hair (Canada) for a patented topical solution for alopecia in India, valid until 2035. They also partnered with Jagdale Industries for aseptic carton technology products in wellness and sports nutrition. These are primarily in-licensing deals for the Indian market, not global CDMO, and are expected to contribute to the P&L from 2027.

The company incurred INR191 crores in capex over 9 months FY25, primarily in the CDMO vertical, and plans to spend INR175-200 crores annually over the next two years for new plants and production lines. Current overall capacity utilization stands at around 40%. The new injectable facility, which recently started operations and received WHO GMP approval in January, has insignificant utilization currently but is expected to ramp up over the next 6 months. Management targets 60-65% utilization for operational breakeven.