3 days ago
Can this under-the-radar company cash in on the $150 bn weight-loss drug boom?
Weight-loss drugs such as Ozempic and Wegovy have shaken up global pharma. With proven outcomes and rising demand, the segment could hit $150 billion by 2035. It's no surprise that companies across the healthcare chain are rushing to get a piece of the action.
Onesource Specialty Pharma Ltd, which demerged from Strides Pharma Science Ltd and listed on 24 January 2025, wants it, too. The company is building capacity, developing complex products, and onboarding global customers. Revenue from weight-loss drug supplies is expected to start in 2025-26, with scale-up by 2026-27.
So, is this newly listed contract development and manufacturing organization (CDMO) just getting started, or is the rally already pricing it in? Let's break it down.
India's first pure-play specialty pharma CDMO
Onesource is India's first pure-play specialty pharmaceutical CDMO. It focuses on the development and manufacturing of complex, high-value pharma products and biologics.
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Its integrated capabilities include biologics, drug-device combinations, complex injectables, and oral technologies like soft gelatin capsules. Currently, it has the capacity to produce over 100 million sterile doses and 2,400 million capsules annually. However, this is expected to grow.
The company plans to double its sterile capacity to over 200 million in the next three to four years. Around 90–95% of its sales are consumed in the US and the European Union, with the remaining coming from other global markets. The company benefits from strong customer stickiness, with 75% of its business coming from repeat orders.
However, this concentration in regulated developed markets also brings risks—any shifts in regulatory policies, trade tariffs, or pricing controls in the US or the EU could materially impact growth.
Riding the miracle weight-loss drug wave
Onesource is well-positioned to benefit from three major industry tailwinds. The most prominent is the rapid rise of GLP-1 drugs, known for effectiveness in treating Type 2 diabetes and obesity.
The second is the pending Biosecure Act—a proposed US legislation that aims to reduce dependence on Chinese pharma supply chains. If approved, non-China partners like Onesource could benefit from increased demand to manufacture drugs.
The third driver is the recent acquisition of a large CDMO player (name undisclosed) by a pharma major, which has further tightened supply for outsourced could allow companies like Onesource to take on more business.
Within GLP-1, the loss of exclusivity—patent expiry—presents a long-term opportunity for players like Onesource with drug-device combination (DDC) capacities, which integrate both drugs and medical devices into a single unit.
Onesource has strong DDC capabilities, which could help meet the rising demand for fill-finish and assembly services from generic entrants. It has witnessed a notable increase in the request for proposals (RFPs), with over 39 RFPs at various stages of discussion.
Building capabilities for next-gen GLP-1 drugs
Within business segments, Onesource is a pioneer in DDC (including GLP-1s) solutions with a full-service model. This segment has nine molecules in its portfolio, including GLP-1s, biologics, and small molecules. It has 17 customers, including four out of the top five global generics.
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The DDC, including the GLP-1 drug market, is projected to grow at over 20% CAGR—$5 billion in FY23 to $12 billion in FY28. With marquee global generics as clients and a growing molecule pipeline, Onesource is well-positioned to benefit.
Onesource uses automatic machines by Bausch + Ströbel filling lineto fill, close, and package pharma products like vials, syringes, and bottles. This is crucial for ensuring the safety and quality of GLP-1 drugs.
In addition, it has over 20 advanced machines that can be customised to handle different types of injectable drugs, like GLP-1. This setup helps the company manufacture drugs as per global quality standards.
Doubling DDC capacity to meet rising demand
Customer trust is strong across service offerings, particularly in DDCs, where Onesource has executed nearly 50 projects, including GLP-1s and others.
It has 10+ DDC projects, which will convert into supply agreements, with approvals expected in H2FY26. In addition, it has 15+ DDC projects, which are expected to be commercialised in a staggered manner during FY26-28.
One of these—a DDC product approved in the US and Europe—is expected to go commercial in FY26. To capitalise on the opportunity, Onesource is doubling its DDC capacity from 40 million units to over 90 million by Q3FY26.
Capacity is being scaled up in line with customer forecasts and expected patent expiry over the next 2-3 years. A second plant is planned by end-FY26, which will again double capacity.
These products have higher per-unit realisations, though volumes may not match GLPs. However, even with moderate volumes, these high-value projects are expected to contribute meaningfully to near-term revenue growth.
While DDC volumes remain modest, GLP-1 drugs are expected to scale rapidly. Morgan Stanley estimates that obesity drug penetration could rise to 10% by 2035, from just 1% currently, translating to a $70 billion opportunity.
Three GLP-1 molecules lined up for commercial supply
Here's where it gets interesting. Onesource has lined up three GLP-1 molecules—Molecule A, Molecule B, and Molecule C—each with signed Master Service and Clinical Supply Agreements.
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For Molecule A, key customers include three of the top five global generic players. Commercial supplies began in Q4FY25, and full revenues will start flowing from FY26. Meanwhile, Molecule B—with two of the top three generics as key clients—will begin production in FY26. Revenue contribution will start after the launch in various markets.
In contrast, Molecule C will come into play only after exclusivity ends in 2036. Even so, Onesource has already secured supply agreements for it with the top three generics—a strong signal of future demand.
Global launch potential from patent expiry is a key trigger
The big trigger is the expiry of the Semaglutide patent—a key GLP-1 molecule used in weight-loss drugs such as Ozempic and Wegovy—in over 100 countries, including Canada, Brazil, Saudi Arabia, and India.
Patent expiries are expected in Q4FY25 and Q4FY26, enabling commercial supplies in these markets. FY27 is likely to be the first full year of sales for Semaglutide in many of these regions.
Many clients have already paid reservation fees and entered into take-or-pay agreements—a sign of confidence in execution and like Brazil and Canada are underpenetrated, with less than 1% penetration in Brazil and 4-5% in Canada.
According to management, generics entering these markets could drive market expansion by 10–12 times in Brazil and 4–5 times in Canada. With Molecule A expected to contribute fully from FY26, this ongoing fiscal could be a pivotal year for Onesource.
Capex-led capacity ramp-up on track
With supply agreements already secured with the top generic players, the company is investing about ₹850 crore in expanding capacity for DDC-related development and commercialisation.
This will be funded via internal accruals, partner contributions, and debt. Clients are also paying advances to reserve capacity, which also reduces execution risk.
Most of this expansion is expected to be completed within 12–18 months, aligned with the timeline of supply agreements. Current projects are based in India, though the company is evaluating overseas expansion, both organically and inorganically.
Profitability and margin boost in FY25
The numbers speak for themselves. Revenue rose 33% from last year to ₹1,445 crore in FY25, driven by 16 new DDC projects, expansion into softgel CDMO services, and new product launches.
Ebitda more than doubled, up 104% to ₹466 crore, with a product mix shift towards high-value biologics and DDCs. Margins expanded by 11.6 percentage points to 32%, aided by better capacity utilisation and operational synergies. It also posted a net profit of ₹93 crore, its first profitable year.
With 15 new customer additions and strong repeat business, the company expects growth from FY26 onwards to be significant. With new capacity expected to go live in FY26, asset turnover is expected to increase from 1.9 (FY25) to 2.5 in the near term and 3.0 in steady state.
With strong asset turnover, the company expects revenue to grow at a compounded annual growth rate (CAGR) of over 30%, from ₹1,445 crore in FY25 to ₹3,378 crore in FY28.
As economies of scale kick in with higher production, Ebitda is expected to grow at a 40% CAGR—from ₹466 crore to ₹1,331 crore. With higher operational efficiency, the company estimates margin to expand from 32% to 40%, and return on capital employed from 23% to 50% in steady state.
In addition to DDCs and GLP-1s, Onesource is also perfectly placed to tap other emerging drug markets. Biologics, a fast-growing class of medicines derived from living organisms, is expected to grow at 14% CAGR from $20 billion (in FY23) to $38 billion in FY28.
Similarly, the soft gelatin market is also expected to grow at a 9% CAGR from $12 billion to $18 billion. With one of the largest installed capacities in the top five globally, Onesource is well placed to capture this growth.
Valuation reflects growth potential
The company trades at an EV/Ebitda multiple of 43, which is higher than peers—Neuland Labs (41), Piramal Pharma (19), and Blue Jet Healthcare (36). On FY27E EV/EBITDA of 15x, the stock appears more reasonably priced. However, much of the near-term valuation hinges on the execution of its expansion plans and actual earnings delivery.
Having said that, the opportunity comes with risk. Most of the CDMO revenue in FY25 came from services provided during the pre-approval or filing phases before the product is commercialised. Therefore, risks such as products being dropped and the lack of approvals can derail the growth story.
Other risks include higher competition and a long gestation period.
About the author: Madhvendra has over seven years of experience in equity markets and has cleared the NISM-Series-XV: Research Analyst Certification Examination. He specialises in writing detailed research articles on listed Indian companies, sectoral trends, and macroeconomic developments.
Disclosure: The writer does hold the stocks discussed in this article. The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only.
