As outlined in our earlier detailed report on Laurus Labs, we have consistently expressed strong conviction in the long-term prospects of India’s CDMO industry and Laurus Labs’ strategic positioning within it. For those who may have missed our analysis, you can access the full Laurus Labs report https://sanasecurities.com/laurus-labs-stock-analysis/.

In continuation of our bullish stance on the CDMO space, we now introduce OneSource Specialty Pharma Ltd. as another compelling opportunity. We believe OneSource is well-positioned to benefit from the structural tailwinds driving the global CDMO market, supported by India’s rising prominence as a cost-efficient, high-quality outsourcing destination for global pharma innovators.

Before we delve deeper,  consider some truly staggering figures.

China, the global leader in the CRDMO industry, has witnessed remarkable growth. The sector’s revenue expanded at a compounded annual growth rate (CAGR) of 34%, and profits grew at an even higher CAGR of 39%. Notably, these figures represent the growth of the overall industry, not just a single company.

Today, India’s CRDMO sector stands at a pivotal inflection point—akin to the early stages of the IT services boom in the mid-1990s.

The Indian CDMO industry presents a significant opportunity; the opportunity size is estimated to be ~$7 billion.

A Two-Decade Transformation

The Indian pharmaceutical industry has witnessed extraordinary growth over the past two decades. From a total industry size of approximately ₹28,000 crore and ₹2,500 crore in profits in 2005, it has expanded to a revenue base of over ₹6 lakh crore with ₹80,000 crore in profits by FY24.

Following the success of the IT services sector, the pharmaceutical industry has emerged as one of the few major sectors that have been built and scaled significantly over the last 20 years.

Strong Cash Flow Generation: A Key Enabler

In FY24, the combined cash flow generated by Indian pharmaceutical companies is estimated to reach around ₹1 lakh crore. This strong internal cash generation is particularly critical because growth in the CRDMO (Contract Research, Development, and Manufacturing Organization) space requires substantial capital expenditure (capex) and long gestation periods for new capacities to come online.

Importantly, these robust cash flows provide Indian pharmaceutical companies with the financial bandwidth to undertake large-scale capex without severely stretching their balance sheets or taking on unsustainable levels of debt.

Given that the CDMO opportunity is valued at approximately $7 billion, industry players would need to invest at least $5–6 billion in new infrastructure to capture a meaningful share of this market. Thanks to their healthy cash flow profiles, Indian companies are well-positioned to make these investments prudently, preserving balance sheet strength.

Evolution of the Indian Pharma Industry

India’s journey in pharmaceuticals began primarily as an API (Active Pharmaceutical Ingredient) supplier to global markets. Over time, the industry transitioned into the production of generic medicines and subsequently into complex generics, solidifying its presence in both domestic and international markets.

Today, a new chapter is unfolding with a major growth opportunity emerging in the global CDMO segment—an area where India is poised to significantly enhance its role.

Expanding Profitability and Improved Industry Metrics

Over the last decade, the profitability of Indian pharmaceutical companies has improved meaningfully. Industry margins have expanded from approximately 15% ten years ago to around 23% today, reflecting operational efficiencies, greater value addition, and a more favorable business mix.

Regulatory Strength: A Competitive Advantage

From a regulatory standpoint, India holds a strong global position. Of the 1,425 US FDA-approved manufacturing facilities worldwide, 396 are located in India—accounting for roughly 28% of the total.

This regulatory infrastructure provides Indian companies a solid foundation to scale their CDMO capabilities for regulated markets like the United States and Europe.

Global Opportunity: Still Early in the Game

Despite India’s manufacturing prowess, its share of the global pharmaceutical market remains relatively modest. The global pharmaceutical industry is valued at approximately $1.5 trillion, while India’s pharmaceutical sector is currently valued at about INR 6 lakh crore (~$65 billion)—a fraction of the global opportunity.

This significant gap suggests substantial headroom for future growth as Indian companies continue to move up the value chain in innovation, quality, and scale.

Conclusion: A Multi-Decade Growth Opportunity

Given the strong industry fundamentals, healthy cash flows, regulatory strength, and under-penetrated global market share, We are highly optimistic about the Indian pharmaceutical and CDMO sectors’ growth prospects over the next 10 years.

INDIA CDMO INDUSTRY SIZE

India’s Opportunity in the Global CDMO Industry

A Rapidly Expanding Global Market

The global CRDMO (Contract Research, Development, and Manufacturing Organization) industry was valued at approximately $200 billion in FY23. This market is projected to surpass $300 billion by 2028, representing a growth of around 42% over the five years.

India’s Emerging Role

India’s share in the global CRDMO industry currently stands at about $7 billion as of FY23. By 2028, this figure is expected to double to approximately $14 billion, representing a 100% increase.

This expansion presents a “$7 billion opportunity.

Faster Growth Trajectory

India’s CRDMO sector is projected to grow at a robust 14% CAGR between 2023 and 2028. This outpaces the overall global CRDMO growth rate, driven by several structural advantages, including:

• Cost-effective manufacturing capabilities

• A deep pool of skilled scientific and technical talent

• Strong regulatory compliance and a high number of US FDA-approved facilities

Key factors that have contributed to the success of Indian CDMO include:

Cost Advantage: Amidst escalating global price pressures, the imperative for cost efficiency has intensified. Indian CRDMOs distinguish themselves as preferred partners owing to substantial cost advantages over their global counterparts. Notably, wage costs in the Indian pharmaceutical industry are substantially lower than in Europe and the US

Strong Infrastructure – With presence of over 3,000 drug companies and 10,500 manufacturing units. It contributes to 20% of the global pharma supply chain and meets almost 60% of the global vaccine demand. It also meets 40% of the generic demand in the US and provides 25% of all medicines in the UK. Indian companies have extensive experience working with regulatory agencies like the FDA and EMA, and India has the highest number of US-FDA-approved plants outside the US. Currently 1,425 US FDA-approved manufacturing facilities globally, of which 396 are located in India. This gives India a 28% share of the world’s FDA-compliant plants.

Shifting Geopolitical Dynamics: Shifting geopolitics, including the China+1 strategy, the Biosecure Act, and the Inflation Reduction Act, are driving global pharma companies to diversify away from China and partner more with Indian CRDMOs. India’s strong geographic position, regulatory expertise, and improving diplomatic ties further enhance its attractiveness for global contract services.

OneSource Specialty Pharma Ltd

One Source Pharma is a One-Stop Shop Specialty Pharma CDMO covering Biologics, complex Injectables and Oral Technologies (Soft gelatin capsules). What truly sets OneSource apart is both the breadth and scale of its offerings—across drug-device combinations, sterile injectables, biologics, and soft gels—placing it on par with leading global multi-modality CDMOs.

In the high-growth GLP-1 segment, the company now works with 20 clients—including several leading global generic players—many of whom are developing more than one GLP-1 program in collaboration with OneSource. The company is also involved in seven active or potential NCE-1 programs, including several in the GLP-1 space, reflecting the early success of its strategy and growing relevance in next-generation therapies.

 Investment Case

 The outlook for OneSource Specialty Pharma is highly promising

With revenue projected to grow at a CAGR of 25–30% over the medium term. The company is on track to reach $400 million in revenue within the next 3–4 years, supported by robust fundamentals and a strong execution pipeline. A significant portion of this growth will be driven by the commercialization of products currently under regulatory approval—particularly in the GLP-1 segment—as well as other complex offerings. Additionally, OneSource’s expanding and increasingly diversified customer base is expected to further contribute to sustained growth. The business is also well-positioned to deliver industry-leading EBITDA margins of approximately 40%, reflecting its operational efficiency and value-added capabilities.

Strong GLP-1 Pipeline Backed by Global Generic Leaders

OneSource’s growing presence in the GLP-1 segment with multiple molecules progressing toward commercialization.

3 disruptive changes provide tailwind for OneSource CDMO offerings

• GLP-1s rise Obesity and Diabetes are major societal challenges → GLP-1s bring transformative innovation to patients in treating obesity and diabetes
  • Loss Of Exclusivity in GLP-1 drugs such as Semaglutide provide near and mid-term opportunity for established players with DDC capacities
  • Players with demonstrated DDC capabilities to benefit from rising demand for fill finish and assembly by generic entrants
• Biosecure Act- Prohibit U.S. federal funding in connection with biotech equipment/services produced/ provided by China
  • US and Japanese companies are looking for alternative destination for their clinical as well as commercial supplies
  • Indian CDMOs well-positioned for increased growth due to their cost effectiveness and highly skilled workforce
• Acquisition of a large CDMO by a Pharmaceutical major has puts pressure on already constrained supply for injectables and soft gelatin capsules
  • New drug developers and generic entrant are seeking independent CDMOs for diversifying their supply chain
  • CDMOs with scale, cost advantage and broad spectrum of offering to benefit from ensuing supply chain risk mitigation
  • OneSource has witnessed significant jump in RFPs over last 2 quarters → 35+ RFPs at various stages of discussion

About Author

Rishav Kaushik

Experienced Equity Research Analyst and Investor, pursuing CFA Level 3 and FRM Part 2 certifications to enhance financial expertise.

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