Are CRDMOs Worth the Steep Premium?

Export-focused CRDMOs are trading at pricey valuations, reflecting investor enthusiasm

- Jessica Jani

An anticipated shift in the global pharma supply chain away from China has investors excited about Indian contract research, development and manufacturing organisations (CRDMOs), companies that offer services from early-stage drug discovery to late-stage development. Export-focused CRDMOs including Anthem Biosciences, Sai Life Sciences and Divi's Laboratories are trading at expensive valuations, reflecting investor enthusiasm as innovator drug companies look at diversifying and derisking their operations. However, experts cautioned that while CRDMOs are expected to post high growth, their financials have yet to reflect it.

Bengaluru-based Anthem Biosciences made a stellar debut on the stock exchanges on 21 July, listing on the National Stock Exchange at a premium of 27% over its initial public offering price of ₹570. Its 3,396-crore IPO was subscribed 67.42 times. The stock traded at a price-to-earnings (PE) ratio of 93.24 on 25 July.

"The good news is that China is a behemoth. So, we have that much headroom to grow," Ajay Bhardwaj, managing director and chief executive officer, told Mint earlier.