Anthem Biosciences IPO: Mgmt confident of growth that supports premium valuations

As Anthem Biosciences’ ₹3,395 crore IPO enters Day 2 of subscriptions, the Bengaluru-based CRDMO player is already fully subscribed. With a unique business model rooted in innovation-led drug development services, the company is betting big on global opportunities across small molecules, biologics, and specialty ingredients. In this exclusive conversation with Business Today TV, Ajay Bhardwaj, Chairman, MD & CEO, and Gawir Baig, CFO of Anthem Biosciences, break down their CRDMO strategy, revenue model, IPO structure, and long-term vision.

Q: For audiences unfamiliar with your model, how is your CRDMO business different from a typical pharma company? What generates revenue for Anthem?

Ajay Bhardwaj:

CRDMO stands for Contract Research, Development, and Manufacturing Organization. We work with global drug discovery companies—primarily emerging biotechs—who have IP but lack labs. We act as their lab, developing new drugs on their behalf. Unlike Indian pharma companies focused on generics, we do not operate in that space at all. This is a knowledge-led business and is still in its early stages in India—where generics were 35 years ago.

Our revenue is generated across the full drug development life cycle—from early discovery to commercial manufacturing. Once a drug is approved and goes to market, we often become the commercial supplier of the active ingredient. In fact, over 50% of our revenue today comes from such commercialised products, many of which we helped develop from the ground up.

Q: At what stages of drug development do you earn revenue?

Ajay Bhardwaj:

We are an end-to-end service provider. Revenue starts at the discovery phase and continues through each regulatory milestone—animal trials, Phase 1, 2, and 3 clinical trials. As the drug progresses, so does our participation. When it gets commercialised, we supply the active ingredient or advanced intermediates. These are not generics—they are novel, patented molecules.

Many of our clients—initially small biotechs—get acquired by big pharma. In most cases, we remain their supplier even after acquisition. Our long-term customer relationships reflect this stickiness; the average client relationship is over 11 years.

Q: Why opt for a complete Offer for Sale (OFS) ?

Gawir Baig:

We’ve been a cash-generating, profitable company for nearly two decades, with strong capital efficiency and industry-leading metrics in revenue growth, EBITDA margins, PAT margins, and return ratios. As of March 31, 2025, we have ₹625 crore in net cash, ₹735 crore in cash equivalents and mutual funds, and just ₹109 crore in low-cost working capital debt.

Given our healthy balance sheet, we didn’t need a primary capital raise. The IPO is largely an OFS by private equity investor True North, which backed us in 2021. Our promoter, Ajay Bhardwaj, is not selling a single share. The OFS will bring promoter shareholding down from 76.8% to about 74.6% to meet regulatory norms. We've also extended ESOPs to 40% of employees, none of whom are selling either.

Q: Many analysts believe IPO are priced aggressively. How do you respond to that?

Gawir Baig:

The pricing was determined based on a comprehensive book-building process conducted by our BRLMs, who took us to over 100 institutional investors. We received strong anchor interest from marquee investors. Promoters aren't selling in this IPO, which signals confidence. We believe the pricing fairly reflects our consistent performance and future prospects.

Q: Is there any risk of customer stickiness when small biotech clients are acquired by big pharma?

Ajay Bhardwaj:

Our experience has been 100% retention. Drug development takes 8–10 years, and we are involved at every step. Once a molecule progresses to commercialisation, it’s not easy for big pharma to switch suppliers. We already understand the chemistry, processes, and filings. That makes us indispensable. Our average client relationship of 11.5 years is a strong validation of this.

Q: Your revenue seems geographically concentrated in Europe, and the top five clients contribute 70% of revenue. Is this a risk?

Ajay Bhardwaj:

Not at all. Our key markets—the U.S., Europe, and Japan—are global pharma hubs. Once a drug is commercialised, it’s often registered globally. For example, one of our blockbuster products is registered in over 140 countries. Being in our clients’ regulatory filings makes us sticky. Concentration in this context reflects quality, not risk.

Q: Could you name some of these blockbuster drugs or describe their impact?

Ajay Bhardwaj:

Blockbuster drugs are defined as those with over $1 billion in global sales. Of the ten commercial products we currently supply, four have already crossed that threshold. The rest are in the pipeline. The earliest patent expiry among them is in 2032, so they have a long runway. These are fast-growing molecules with projected CAGRs of over 17% over the next decade.

Q: Financially, you’ve reported 35% top-line growth and 36% EBITDA margins. What’s your growth outlook?

Gawir Baig:

We can’t offer forward-looking guidance, but let me explain the growth levers. The current ten commercial molecules are a result of work done 8–10 years ago. Today, we’re working on 150 active programs—including 16 late-phase molecules in Phase 3 or filing stage and over 130 in early development. These are our future growth drivers.

Capacity is another lever. We’ve expanded Unit 2 by 50%, commissioned Unit 3 (a greenfield facility), and begun work on Unit 4 on a 30-acre site. Unit 5 is also on the horizon. These investments are self-funded thanks to our strong cash flows. Historically, we’ve clocked a 24% CAGR over five years, with EBITDA margins of 36–37% and PAT margins around 23–24%.

Q: What role do specialty ingredients play in your growth?

Ajay Bhardwaj:

Specialty ingredients account for 18–22% of our revenue mix. These include probiotics, enzymes, and vitamin analogues—none of which compete with our CRDMO business. They’re high-margin, innovation-led products made using proprietary tech, primarily for India and RoW markets. They help us maximise asset utilisation and provide added growth and profitability.

Q: How do you plan to deploy the ₹600+ crore in cash reserves?

Ajay Bhardwaj:

We’ve built the business on internal accruals and remain self-sustaining. Most of our cash is invested in mutual funds and fixed deposits. The IPO isn’t for funding expansion but to provide liquidity to early investors. With consistent cash generation and minimal debt, we’re well-positioned to fund future capacity additions and explore opportunities that align with our strategy.