Jefferies lists 6 factors that will shape CRDMO winners; Divi’s Labs, Sai Life, Laurus, Anthem among stocks to watch

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The brokerage identified six factors that could shape the sector’s long-term prospects: relationships with Big Pharma, integrated capabilities, specialised manufacturing expertise, project pipeline, manufacturing scale and execution.

Jefferies equity analysts Dhawal Khut and Alok Dalal believe Divi’s Laboratories and Sai Life Sciences are well positioned across several of these parameters, while Laurus Labs and Anthem Biosciences also rank strongly on select factors.

The brokerage has a Buy rating on Divi’s Laboratories with a target price of Rs 10,200, Sai Life Sciences at Rs 1,610 and Anthem Biosciences at Rs 1,050. Laurus Labs carries a Hold rating with a target price of Rs 1,700, according to the brokerage’s report.

The brokerage estimates that Divi’s will deliver an earnings per share (EPS) compound annual growth rate (CAGR) of 22% over FY26-29. Sai Life and Anthem are each projected to post 19% growth over the same period, while Laurus Labs is estimated to record an EPS CAGR of 32%.

Jefferies argues that investors should look beyond financial forecasts to assess the underlying business strengths driving performance, identifying six factors likely to shape the CRDMO sector’s long-term prospects.

Big Pharma relationships: Divi’s and Sai Life lead

The ongoing geographical diversification of pharmaceutical supply chains is being driven largely by pharmaceutical companies in the US and Europe. Jefferies believes Indian CRDMOs with strong relationships with these companies are better positioned to deliver superior long-term financial and stock price returns than those whose growth is driven by biotechnology customers.

“We believe Indian CRDMOs with strong Pharma/Big Pharma relationships will in the long run deliver superior financial and stock price returns compared to CRDMOs whose growth is driven by Biotech customers,” the brokerage said.

Non-biotech customers account for an estimated 80% of Divi’s CRDMO sales and 78% of Sai Life’s, the highest proportions among the seven companies compared. The corresponding figures are 70% for Cohance Lifesciences, 65% for Laurus Labs, 55% for Anthem Biosciences, 40% for Syngene International and 23% for Piramal Pharma.

Divi’s has worked with several large pharmaceutical companies over the past three decades. Sai Life, meanwhile, is expanding its role as a strategic partner to three large pharmaceutical companies through dedicated development contracts, which Jefferies believes will provide a pipeline for commercial manufacturing.

The brokerage cautioned that relationships with large pharmaceutical companies do not necessarily translate into significant business, as some engagements involve low-value projects or partnerships that are yet to mature.

Integrated capabilities: Sai Life has a strong platform

Pharmaceutical innovators increasingly seek partners that can support molecules from early-stage development through commercial manufacturing. Such integrated capabilities can simplify supply chains, improve coordination and reduce the administrative burden of managing multiple vendors.

“Pharmaceutical innovators increasingly seek to consolidate their vendor base to simplify supply chains, improve coordination, and lower administrative overheads,” Jefferies said.

The brokerage considers Sai Life one of India’s strongest integrated small-molecule CRDMOs, followed by Anthem Biosciences.

Sai Life derives around 35% of its sales from contract research organisation (CRO) services, with the remainder coming from contract development and manufacturing organisation (CDMO) activities. Anthem generates around 8-10% of its sales from CRO services, while approximately 75% comes from CDMO activities.

Integrated capabilities allow CRDMOs to engage customers earlier in the drug-development cycle, creating opportunities to secure projects that may eventually progress to commercial manufacturing.

However, the revenue mix remains important. CRO projects typically have smaller contract values, shorter durations and lower scalability than development and manufacturing activities.

“CRDMOs that combine integrated capabilities with greater exposure to manufacturing are better positioned to deliver stronger and more sustainable long-term growth,” the brokerage said in its assessment.

Syngene had the highest CRO exposure among the companies compared, at 61% of FY26 sales, according to Jefferies.

Specialised manufacturing: Anthem stands out

Expertise in complex modalities such as biologics, peptides and oligonucleotides can help CRDMOs differentiate themselves and participate in a wider range of drug-development programmes.

Jefferies believes these capabilities are becoming increasingly important as pharmaceutical innovators work on more complex therapies, which can also involve substantially larger contracts.

“Expertise in complex modalities such as biologics and peptides can be particularly valuable, as these programs often involve significantly larger contract values, frequently exceeding USD50m over their lifecycle,” the brokerage said.

Anthem Biosciences possesses some of the strongest manufacturing capabilities in these areas, according to Jefferies. Its capabilities include fermentation, biotransformation, complex peptides, flow chemistry and oligonucleotides.

A broader suite of services can expand a CRDMO’s addressable market, strengthen customer relationships and position it as a strategic partner rather than merely a manufacturing vendor.

Project pipeline: Divi’s and Laurus have meaningful peptide exposure

The quality and commercial potential of a CRDMO’s project pipeline are key drivers of long-term growth, according to Jefferies. Projects targeting large patient populations, substantial end markets, high dosage volumes and complex modalities can offer greater revenue visibility and scaling opportunities.

The brokerage noted that Divi’s Laboratories and Laurus Labs have meaningful exposure to peptides, while Sai Life Sciences and Anthem Biosciences have small-molecule pipelines spanning clinical and commercial opportunities.

Jefferies estimates that the end-market sales associated with selected pipeline and growth projects amount to $103.5 billion for Divi’s, $31.2 billion for Anthem, $13.6 billion for Sai Life and $7.6 billion for Laurus.

These figures represent the end-market sales associated with the selected projects, rather than revenues expected to accrue directly to the CRDMOs.

The brokerage believes a diversified pipeline with exposure to high-value modalities can improve growth visibility and deepen customer engagement over time.

Manufacturing scale: Divi’s and Laurus have an advantage

Large pharmaceutical companies often require dedicated manufacturing suites, specialised infrastructure and substantial capital investments from their outsourcing partners. Manufacturing scale, technical expertise, operational depth and land availability therefore become important when competing for large commercial contracts.

Jefferies believes Divi’s and Laurus possess some of the strongest large-scale manufacturing capabilities among Indian CRDMOs.

“Larger platforms are also better positioned to deliver cost efficiencies through vertical integration, supply-chain control, and better asset utilization,” the brokerage said.

Divi’s had a gross block of Rs 111 billion as of FY26, the highest among the companies compared, followed by Laurus at Rs 76 billion. Syngene stood at Rs 60 billion and Piramal Pharma at Rs 52 billion.

Divi’s also had small-molecule manufacturing capacity of 16,500 kilolitres as of FY26, compared with 8,200 kilolitres for Laurus.

Jefferies noted that Divi’s had invested aggressively over FY25 and FY26, while Sai Life, Anthem and Laurus were ramping up capital expenditure in FY27 and FY28.

“The ability to deploy meaningful capital is a prerequisite for winning large projects,” the brokerage said.

The brokerage added that expanding capacity ahead of demand is critical to securing large commercial contracts, particularly when pharmaceutical customers require dedicated infrastructure and long-term manufacturing partnerships.

Execution: Management quality remains key

Execution remains a key consideration for CRDMO customers, encompassing turnaround times, product quality, regulatory compliance, manufacturing reliability and project delivery.

However, operating indicators such as audit scores, right-first-time rates and on-time-in-full delivery performance are generally not disclosed publicly, limiting direct comparisons across companies.

“In the absence of such disclosures, management quality, promoter commitment, customer retention, regulatory track record, and the ability to scale operations organically serve as useful proxies,” Jefferies said.

The brokerage identified Divi’s, Laurus, Anthem and Sai Life as companies that have demonstrated strong execution through consistent business performance, quality-focused operations and customer relationships.

Management stability is another factor highlighted in the report. Jefferies noted that Anthem, Divi’s and Laurus had no major management changes over the preceding two years.

Sai Life saw the exit of its chief operating officer, while Cohance experienced changes involving its chief executive officer, chief financial officer and executive chairman, along with changes in its business development team. Syngene also saw two chief executive exits and changes in its business development team.

Jefferies additionally highlighted founder and strategic shareholder ownership as a factor investors can consider alongside management quality and operational track records.

Disclosure: This article has been written by Kumar Gaurav, who is not a Sebi-registered Research Analyst or an Investment Adviser. Gaurav and their ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective Sebi-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here