Cohance Lifesciences Limited

Cohance Lifesciences reported a challenging Q3 and 9M FY26, with 9M revenue declining by 6.7% to INR1,650 crore and Q3 revenue declining by 19.5% to INR545 crore. Adjusted EBITDA for 9M FY26 fell by 43% to INR348 crore, with margins at 21%, significantly impacted by destocking, regulatory issues at Nacharam, and biotech funding constraints. Despite these challenges, the company generated INR175 crore in free cash flow over nine months, demonstrating resilience.

The Pharma CDMO segment faced near-term challenges including continued destocking in two large commercial products (impacting revenue by nearly INR260 crore), lower reload volumes due to patent expiry of one molecule, and deferred customer reloads. However, customer engagement has deepened, with two global innovators progressing multiple programs and one late-stage commercial RFP converting. The company supports nine Phase 3 programs, providing medium-term visibility, and expects four molecules to move into commercial supply in FY27.

Performance in ADC and oligonucleotides was mixed. While biotech funding constraints slowed new signings, momentum with large pharma customers is strong. The company filed one new ADC payload and has three more planned for FY27, with a $10 million cGMP US-based expansion enabling full ADC supply up to Phase 2B by FY27 end. In oligonucleotides, increased engagement for higher complexity programs reflects confidence in chemistry capabilities, supported by two new business development professionals.

The API Plus business saw an 8% YoY revenue decline to INR815 crore for 9M FY26, primarily due to the Nacharam facility warning letter (resulting in INR55 crore shipment deferral) and customer approval delays. Remediation actions are underway at Nacharam, with production for non-US markets resumed. The company is actively rebuilding its pipeline, completing eight DMF/CEP filings against a target of ten and developing eight new products, aiming for a more balanced revenue base.

The Specialty Chemicals segment grew 32% YoY to INR190 crore for 9M FY26. Progress was made in customer diversification, including onboarding a Japanese customer with commercial qualification planned by FY27 end. Engagement with two large European agrochemical innovators continues. However, the agrochemical business faced near-term impacts from Chinese generic pressure and regulatory phasing^📎, making FY27 a transition year for the segment.

Due to the various challenges, Cohance revised its FY26 revenue outlook to an 'early-to-mid double-digit decline.' Despite this, management expressed commitment to its long-term USD1 billion sales target, though timing might shift. They anticipate FY27 to be a year of growth, driven by pipeline execution and recovery in the API Plus segment, and reiterated their long-term target of 30%+ EBITDA margins, attributing current lower margins to product mix and timing issues.