About Akums Drugs and Pharmaceuticals Limited

Akums Drugs and Pharmaceuticals Limited established in 2004, they are a pharmaceutical contract development and manufacturing organization (“CDMO”) offering a comprehensive range of pharmaceutical products and services in India and overseas. As one of the leading CDMOs in India, they own the intellectual property for the manufacturing processes of several of their formulations, and their core business is focused on providing end-to-end product development and manufacturing solutions to their clients. Some of their other services include formulation research and development (“R&D”), preparation and filing of regulatory dossiers in the Indian and global markets, and other testing services. In addition to our core CDMO business, they are also engaged in the manufacturing and sale of branded pharmaceutical formulations and active pharmaceutical ingredients (“APIs”).

They are the largest India-focused CDMO in terms of revenue, production capacity and clients served during the Financial Year 2023 (among CDMOs assessed by F&S). As a CDMO, they produce an extensive range of dosage forms including tablets, capsules, liquid orals, vials, ampoules, blow-filled seals, topical preparations, eye drops, dry powder injections, and gummies, among others. During the Financial Year 2024, they had a market share of 30.2% of the Indian domestic CDMO market by value, which increased from 26.7% during the Financial Year 2021. The Indian domestic CDMO market is forecasted to grow at a CAGR of 14.3% between Financial Year 2024 and Financial Year 2028, nearly doubling its historical growth rate. Moreover, the market size of Indian domestic CDMO market is forecasted to grow to USD 2.8 billion during Financial Year 2028.

Since their inception, they have manufactured 4,146 commercialised formulations across over 60 dosage forms. During the Financial Year 2024, they manufactured formulations for 26 of the leading 30 pharmaceutical companies in terms of sales in India. For their CDMO business, they operate 10 manufacturing units, with a cumulative formulations manufacturing capacity of 49.23 billion units annually, as of March 31, 2024. Further, they expect their new injectable facility to be operational in Financial Year 2025. Some of their manufacturing units have been accredited by various global regulatory agencies such as the European Good Manufacturing Practice (“EU-GMP”), the World Health Organization Good Manufacturing Practice (“WHO-GMP”) and the United States National Sanitation Foundation (“US NSF”). During the Financial Years 2024, 2023 and 2022, their manufacturing units were subject to 58 inspections by regulators and 527 audits by their clients.

Their longstanding relationships with their clients are characterized by a commitment to consistency and trust. As of March 31, 2024, key clients for their CDMO business include Alembic Pharmaceuticals, Alkem Laboratories, Blue Cross Laboratories, Cipla, Dabur India, Dr. Reddy’s Laboratories, Hetero Healthcare, Ipca Laboratories, Mankind Pharma, MedPlus Health Services, Micro Labs, Mylan Pharmaceuticals, Natco Pharma, Sun Pharmaceutical Industries, UCB, and Amishi Consumer Technologies (The Mom’s Co), among others.

In addition to their core CDMO business, they actively engage in marketing their own branded formulations in India and across global markets, and have established a domestic and international presence through our Subsidiaries, Akumentis and Unosource, respectively. Through Akumentis, they focus on therapy areas such as gynaecology, cardiology, orthopaedic and paediatric. Utilizing their field force of 1,532 individuals, as of March 31, 2024, they have established a domestic marketing and distribution network of medical representatives, field managers, distributors and retailers and sell over 140 brands, as of March 31, 2024. Through Unosource, they focus on therapy areas such as anti-infectives, analgesics, central nervous system, and gynaecology. As of March 31, 2024, their international presence extends across 65 countries, and their key clients include Allegens (Vietnam), Ambica International (Philippines), Caferma SAC (Peru), JDS (Myanmar), Master Pharma (Cambodia), Olainfarm (Latvia), Pharma Apex (Myanmar), Planet Pharmaceutical (Tanzania), and Unisel (Kenya), among others. 

INDIAN PHARMACEUTICAL INDUSTRY OVERVIEW
With a contribution of nearly 1.3%9 to India's GDP, IPM registered a 9.0% CAGR in the last five years and a forecast of 9.6% for the next five years.

Indian pharmaceutical market is among the fastest-growing pharmaceutical markets in the world, witnessing a value increase from INR 1,317.5 billion (USD 19.0 billion) in FY19 to INR 2,852.6 billion (USD 34.2 billion) in FY28.

An increase in chronic patient population, insurance penetration, trade generics, demand from tier II and III cities, and government schemes focused on drug access are propelling growth in the IPM.
• Increased patient population: India has a large and increasing patient pool with a high disease burden of communicable and non-communicable diseases, thereby providing a large market for the sale of drugs. India contributes 15% of the global burden for highly prevalent diseases (respiratory infections, cardiovascular, diabetes, cervical cancer)10. India contributes 20% of the global respiratory disease burden, 14% of the global cardiovascular disease burden, 17-19% of the global diabetes mellitus burden, and 8% of the global cancer burden. India is mirroring the global trend with the increasing prevalence of chronic diseases. The primary drivers of chronic diseases are social shifts, uncontrolled urbanization, detrimental physical environments, and unhealthy lifestyles. As an illustration, by 2025, the elderly population in India is projected to increase to 158.7 million, constituting 11.1% of the total population11. A recent study in 2022 revealed that roughly 21% of the elderly population in India is afflicted by at least one chronic disease. Hypertension and diabetes collectively account for approximately 68% of all chronic diseases12 . Rapid urbanization contributes to increased chronic disease incidence, with nearly an additional 50 million people expected in urban areas between 2023 and 2027. 

Furthermore, as of 2023, nearly half of India's population (50.2%) comprise individuals aged 25 to 64, representing the working age demographic13. A sizable working age group, coupled with the swift urbanization process, contributes to a sedentary lifestyle, consequently elevating the risk of chronic diseases. In FY24, the chronic and sub-chronic segments stood at INR 639.5 billion (USD 7.7 billion) and INR 407.2 billion (USD 4.9 billion), respectively, and are expected to grow to INR 925.4 billion (USD 11.1 billion) and INR 595.2 billion (USD 7.1 billion) by FY28, growing at a CAGR of 9.7% and 10.0%, respectively. 

It has encouraged domestic pharma companies to increase their focus on domestic markets and drawn several MNCs to seek growth in the market. However, the Indian market has unique nuances, which have driven pharma companies to partner with Indian CDMOs and leverage their expertise, marketing, and distribution capabilities to gain market access in India.

• Improved drug access: In 2008, the Department of Pharmaceuticals launched Pradhan Mantri Bhartiya Janaushadi Pariyojana (PMBJP) to make generic medicines more affordable. Dedicated outlets known as Janaushadi Kendras, providing generic drugs at affordable prices, were opened under the scheme. With less than 100 Jan Aushadhi stores operational in 2014, the number has risen to 10,607 as of January 2024, with a product basket of 1965 drugs14. Besides affordability, the government is also focused on accessibility. For instance, as of May 2024, 1,72,938 Ayushman Arogya Mandir were functional in India15 . 

• Rise in insurance penetration: Additionally, the increase in insurance penetration is allowing more and more Indian populations to access healthcare across all city and economic tiers. Representatively, the number of lives covered by insurance has increased from 482 million in FY18 to 550 million in FY2316 . 

• Growth in trade generics: These are branded medicines not promoted to physicians but sold directly through retailers and distributors. It results in 50% to 90% lower prices than branded equivalents, thus enabling increased access to a large patient population. According to IQVIA, the market share for trade generics in the IPM market is ~20% by volume and 5% to 6% by value, with the segment exhibiting growth of 14% to 15% per annum. Large pharma companies like Alkem Laboratories Ltd. (Alkem Laboratories) and Torrent Pharmaceuticals Ltd. (Torrent Pharma) intend to scale up their trade generics portfolio to tap into the growing market. 

• Growth in Tier II and Tier III cities: The pharmaceutical market in India, traditionally focused on major cities, is experiencing a shift towards Tier II and Tier III cities. While metropolises like Delhi and Mumbai house renowned hospital groups, healthcare organizations are increasingly expanding into cities such as Nashik, Indore, Visakhapatnam, Jaipur, Mohali, Surat, and Dehradun. These locations offer advantages like reduced competition and lower real estate costs. The growing healthcare infrastructure in these cities is expected to drive pharmaceutical spending. Along with infrastructural growth, insurance penetration, and COVID-19-prompted behavioral changes, patients seeking care close to home are also driving growth in Tier II and III cities. Additionally, the rise of e-commerce and e-pharmacy chains with extensive distribution networks covering urban and rural areas is enhancing medication accessibility, contributing significantly to the pharmaceutical market's growth.

GLOBAL & INDIA API INDUSTRY OVERVIEW

The growth in the formulations market also translates into corresponding growth in the API market. In contrast, the global API market is expected to grow at a CAGR of 7.7% between 2023-2027, and the Indian API market is expected to grow at 13.9% in the same period.

The Active Pharmaceutical Ingredient (API) serves as the biologically active core of a drug, inducing specific therapeutic effects, from pharmacological actions to disease diagnosis and prevention. A precisely formulated API is pivotal for ensuring the safety and efficacy of drugs, with the drug's potency directly linked to the API quantity. 

The demand for pharmaceutical products corresponds directly to API sales, and as this demand grows, so does the need for APIs. As disease patterns shift from acute to chronic and translate into high drug volume consumption, the access to healthcare facilities and affordable medicine increases, along with an increase in the purchasing power of the middle class in the country; the growth of the API industry will follow suit. Moreover, with the increasing adoption of novel drugs, including biologics, coupled with the volume growth of the generics industry, the segment is expected to grow steadily. Notably, there is a rising preference for complex APIs like Highly Potent Active Pharmaceutical Ingredients (HPAPIs) or those derived from fermentation, contributing to improved drug efficacy and increasing production costs. For instance, one of the key fermentationbased antibiotic APIs- cephalosporin, is estimated to be worth USD 2.1 billion in 2023 and forecasted to reach a size of ~USD 2.8 billion by 2028, with a CAGR of 5-7% during the forecast period. In India, too, cephalosporins comprise 40-45% of the anti-infectives segment19, with a limited number of manufacturers (4 to 5 players). Thus, expanding high-value APIs will result in an API market growing faster than the pharmaceutical market (by value).

The global API market reached USD 262.2 billion in 2023 and is expected to reach USD 352.6 billion by 2027. The Indian API market for domestic formulations, in line with faster-than-market formulations growth, is also expected to grow at 13.9%, outpacing the global growth of 7.7% between 2023 and 2027.

INDIAN CDMO INDUSTRY OVERVIEW

Large-scale, low-cost, and yet high-quality manufacturing capabilities with a high number of globally accredited plants, a surplus of highly skilled workforce, broad portfolio expertise, and technology innovation will propel the Indian CDMO industry; it accounted for 4.9% of the global small molecule CDMO market in FY24.

India's prowess in pharmaceutical manufacturing lies in its ability to produce vast quantities of affordable generic drugs. The country possesses extensive manufacturing capabilities, aligning with international regulatory standards. Furthermore, India, as the world's most populous nation with a burgeoning working-age population, offers access to a substantial labor force. India boasts the highest number of FDA-approved manufacturing facilities outside the United States. Notably, India demonstrated remarkable performance during the pandemic, showcasing its robust contract manufacturing capabilities and unwavering dedication by fulfilling domestic and global requirements for vaccines and COVID-19 medications. These achievements are attributed to India's domestic contract services, which play a crucial role in forming strategic partnerships and expanding the capacities of Indian and global pharmaceutical companies to meet growing demands.

More notably, Indian pharmaceutical companies have undergone a substantial transformation in their approach to outsourcing, marking a noteworthy departure from historical hesitations. They increasingly turn to home-grown Indian CDMOs as strategic partners, reflecting a growing confidence in the value and benefits of such collaborations. This shift underscores the evolving dynamics within the pharmaceutical industry, where Indian CDMOs have become trusted allies in drug development, manufacturing, and research, facilitating a more streamlined and efficient pharmaceutical landscape. Moreover, with the explosive growth expected in the IPM and the need to bridge the demand-supply gap rapidly and urgently, pharma companies will increasingly resort to CDMO for reliable capacity expansion.

In addition to gaining immediate access to high capacities, Indian pharma companies are also benefitting from outsourcing to Indian CDMO by achieving cost reductions and economies of scale, gaining access to highly skilled in multiple innovative dosage and API forms, and solving the growing challenge of quality.

AKUMS DRUGS AND PHARMACEUTICALS LIMITED STRENGTHS
1. Largest CDMO serving the Indian pharmaceutical industry
2. Diverse client base with longstanding CDMO relationships
3. Large and rapidly growing R&D capabilities across our product portfolio
4. Strategic presence across the pharmaceutical value chain
5. Experienced and entrepreneurial management team with a proven track record and marquee healthcare focused private equity investor

AKUMS DRUGS AND PHARMACEUTICALS LIMITED STRATEGIES
1. Leverage our leadership position to continue to increase our market share and consolidate our position in the CDMO market
2. Sustaining R&D for product development across therapies and dosage forms
3. Grow our domestic formulations business
4. Expanding our global presence through strategic initiatives
5. Scale our API business 

AKUMS DRUGS AND PHARMACEUTICALS LIMITED RISK FACTORS & CONCERNS
1. Their manufacturing units and research and development centres are concentrated in Haridwar, Uttarakhand
2. Their manufacturing units are subject to periodic inspections and audits by regulatory authorities and clients.
3. They rely on domestic and international third-party suppliers for the supply of raw materials.
4. They import some of their raw materials from China and other countries and source their remaining raw materials domestically.
5. The active pharmaceutical ingredient (“API”) manufacturing unit of their Subsidiary, Pure and Cure Healthcare Private Limited, has been subject to regulatory actions by the Punjab Pollution Control Board in relation to noncompliance with conditions stipulated in the environmental approvals granted.
6. The business is dependent on the sale of products to a limited number of clients for a significant portion of their revenues.
7. The Company has received a summon from the Directorate of Enforcement, Ministry of Finance, Government of India in relation to Parabolic Drugs Limited.
8. The Company and Subsidiaries are subject to notices from the National Pharmaceutical Pricing Authority, Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, Government of India, New Delhi, alleging sale of products above the ceiling price.
9. They may pursue strategic acquisitions for inorganic growth.