Ajanta Pharma to generate healthy margins from Biocon deal: PL Capital

PL Capital has retained its ‘Buy’ rating on Ajanta Pharma with a target price of ₹3,200 per share after the company signed an in-licensing agreement with Biocon for marketing semaglutide in 26 countries. Analysts see this move as a strong strategic fit with its existing franchise.

 

“Overall, we expect Ebitda/PAT compound annual growth rate (CAGR) of 17 per cent/ 14 per cent over FY25-28E with healthy return on equity (RoE)/ Return on capital employed (RoCE) of 28.1 per cent/35.5 per cent in FY27E,” the brokerage said. Ebitda refers to Earnings before interest, tax, depreciation and amortisation and PAT refers to profit after tax. 

 

Contours of transaction

Ajanta Pharma has tied up with Biocon under an in-licensing arrangement to commercialise semaglutide across 26 emerging markets. As part of the agreement, Biocon will act as the manufacturing and supply partner, while Ajanta Pharma will undertake commercialisation with exclusive rights in 23 markets and semi exclusive rights in the remaining, covering Africa, the Middle East, and Central Asia.

 

Patent expiry for semaglutide in most of these territories is expected by March 2026. The management has indicated that revenue contribution should commence post Q3FY27, contingent on securing regulatory approvals across key markets.

Strong strategic fit with Ajanta’s RoW franchise

The transaction closely aligns with Ajanta’s existing footprint. Ajanta Pharma has presence in 30 countries across Asia and Africa with over 2,000 medical representatives (MRs) and leadership positions in several geographies. The company has been a pioneer in introducing field force in some of these markets. 

 

According to PL Capital, Ajanta Pharma’s strong franchise will aid in garnering a higher market share for semaglutide. The addressable semaglutide market stands at $35–45 million across 26 countries (innovator-led), which is expected to expand 10–20x over the next 2–3 years with the entry of generic players. Ajanta Pharma is expected to garner ₹200 crore of sales in FY28E with healthy margins from the semaglutide franchise across RoW markets, PL Capital noted.   ALSO READ | Equirus starts 'Long' on M&B Engineering; expects solid multi-year growth

Play on branded generics 

Ajanta Pharma’s branded generics (BGx) business enjoys a healthy operating profit margin (OPM) of 30 per cent. The business contributed to 74 per cent of overall revenue in FY25 and delivered 12.5 per cent CAGR in revenue over FY22-25. During the period, the company added 1,600 MRs across India and the rest of the world (RoW) markets. 

 

PL Capital believes the growth momentum will continue on the back of new launches, geographic expansion, new therapeutic addition, MR productivity increase and volume growth. It expects the BGx business to see 13- 14 per cent revenue CAGR over FY25-28E.

New therapies scaling up well

During FY25, the company entered the nephrology and gynecology segments in the domestic pharma market. Indian Pharmaceutical Market (IPM) size for these two segments stands at ₹16,000 crore. Ajanta Pharma also added 200 MRs and launched 12 products in these segments. 

 

The company offers a wide range of innovative products in its nephrology portfolio that support patients through all stages. Overall, it has a strong product pipeline across its key segments, which are expected to contribute to growth, followed by newer therapies, PL Capital highlighted.

 

Disclaimer: View and outlook shared on the stock belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.