Onesource Specialty Pharma Ltd. Q1 FY27 Earnings Call Summary

Event Participants

Executives

3 Neeraj Sharma, Anurag Bhagania, Abhishek Singhal

Analysts

11 Abdulkader Puranwala, Anish Jobalia, Gaurav Shukla, Gautami Agarwal, Girish Bakhru, Maulik Varia, Nitin Agarwal, Parth Sodha, Pranav Chawla, Ritika Agarwal, Rupesh Tatiya

Financials & KPIs

Geographic & Segment Commentary

Drug Device Combination (DDC): Strongest growth driver with significant margin contribution. All three approved semaglutide products in Canada (largest off-patent market) are with OneSource partners; two partners have launched. India market share exceeds 40% of generic pens. Capacity fully utilized with demand outpacing supply; new line coming online this quarter doubling sterile days, with third line expected within FY27 and fourth line by FY28. New GLP customer onboarded last quarter, with customer additions resuming after capacity constraints.

Biologics: Added Formycon (marquee global biotech major) as customer in biosimilars pillar; also secured additional animal health contract. RFP funnel now ~4x year-ago levels spanning innovators, biosimilars, and animal health companies. Business expected to be significant contributor beyond FY28 as commercial revenues commence FY29 onwards. End-to-end value chain proposition (gene to final patient-ready product) with integrated drug substance and drug product capabilities.

Soft Gelatin: Capacity expanded from 800 million to 2.4 billion units; transitioning from captive Strides IP-led model to CDMO services. Tech transfers from European customers underway; capacity expected to be fully taken over in next 12-15 months. Greenfield site process initiated (current site at capacity limit). First oncology soft gel NDA secured with top 10 US generic; customer launch expected current quarter (small market, limited near-term revenue contribution).

Injectables (SteriScience): Focused scarcity play portfolio including penicillin (one of few FDA-approved plants globally) and products perpetually on FDA shortage list. Adding pre-filled syringe capability and significantly expanding lyophilization capacity. Site shutdown planned Q2-Q3 FY27 to install new capacity; will be significant contributor to FY28 numbers. Customers value supply reliability over price.

Company-Specific & Strategic Commentary

Capacity Expansion Program: US$100 million capex across sites, ~80% committed. Line 2 (second cartridge line) commercializing this quarter, doubling sterile days. Lines fully fungible across customers and products; batch sizes increasing from 200L to 500L (approvals expected quickly in most geographies). Third line ready within FY27, fourth line later in FY28.

Semaglutide Commercialization: Despite Dr. Reddy's temporary supply disruption, OneSource capacities remain full due to diverse customer base spanning markets and companies. Demand pulled forward from other customers; no anticipated impact on supplies. Canada has three-on-three approvals with OneSource.

Biologics Capacity Expansion: Based on pipeline visibility, management sees need to expand both mammalian and microbial capacity beyond current levels. Additional capex will be "significantly lower" than DDC investment. Expansion driven by customers converting from development MSAs to commercial revenues FY29 onwards.

Compliance Track Record: 12 successful inspections including two surprise FDA audits across two sites. Compliance record described as "exemplary" and a key competitive differentiator.

Tirzepatide First-to-File: Two customers successfully achieved first-to-file status in US with tirzepatide, demonstrating complex peptide development and drug-device combination capabilities.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Soft Gelatin Business Growth

• Question: Capacity expanded from 800M to 2.4B units but business hasn't grown as expected; is ibuprofen issue impacting? (Rupesh Tatiya)
• Answer: Business transitioning from captive Strides IP-led model to CDMO services; tech transfers take time but process underway. Capacity expected to be fully taken over in 12-15 months. Greenfield site process initiated as current site at capacity limit. Confident in soft gel as strong growth driver for FY28 and beyond. (Neeraj Sharma)

Injectable Margin Improvement & Shutdown

• Question: Any update on SteriScience margin improvement program? (Rupesh Tatiya)
• Answer: Focused scarcity play portfolio (penicillin, FDA shortage products); customers value supply reliability over price. Adding pre-filled syringe capability and lyophilization capacity; site shutdown in Q2-Q3 FY27 to install capacity. Will be significant contributor to FY28. (Neeraj Sharma)

Sequential Margin Improvement Drivers

• Question: USD revenues flat QoQ but margins improved significantly - what drove this? (Abdulkader Puranwala)
• Answer: Primarily mix-driven; higher contribution from DDC business. Base business (soft gel, injectables) is H2-heavy with flu season pickup. (Neeraj Sharma)

DRL Disruption Impact

• Question: Assessing temporary disruption from DRL pulling out? (Abdulkader Puranwala)
• Answer: No anticipated impact due to diverse customer base (Canada, India, MSA customers). Demand pulled forward into this quarter. Capacities full; new capacity coming online. When DRL resumes, sufficient capacity for all customers. (Neeraj Sharma)

FY28 Order Book Visibility

• Question: Do we have order book visibility to achieve $400M FY28 revenue? (Abdulkader Puranwala)
• Answer: Yes. Multiple pillars: DDC (Canada 3-on-3, India 40% market share, new markets opening in 6-9 months), biologics (new contracts, strong funnel converting), soft gel (new customers, capacity filling), injectables (new capacity available full year FY28). Each business contributing to guidance. (Neeraj Sharma)

Line Fungibility & Customer Allocation

• Question: Can line one customers be added to line two? Who takes the call on capacity allocation? (Girish Bakhru)
• Answer: Lines are fungible across customers and products. Existing customers will be serviced from both lines; batch sizes increasing from 200L to 500L for significant output increase. Batch size changes should get quick regulatory approval in most geographies. (Neeraj Sharma)

MSA vs CSA Mix

• Question: Will we see significant mix change between MSA and CSA? (Girish Bakhru)
• Answer: Mix will be significantly more commercial sales (CSA) than MSAs. Capacity constrained till now prevented new customer onboarding; new lines enable customer additions. First new GLP customer already onboarded last quarter. (Neeraj Sharma)

Growth Beyond FY28

• Question: What initiatives for FY29-30 growth trajectory? (Gautami Agarwal)
• Answer: EBITDA trajectory continues upward beyond FY28. Biologics will be long-legged growth driver (RFP funnel 4x, customers in animal health, biosimilars, innovators; commercial revenues FY29 onwards). Expanding mammalian and microbial capacity. Soft gel capacity filling, injectable new capabilities, DDC long legs (Europe FY29-30, US thereafter with FTF customers). (Neeraj Sharma)

Biologics Contracts & Capacity

• Question: Color on recent biologics contracts - when will they contribute and how large? (Pranav Chawla)
• Answer: Formycon added (biosimilars pillar), animal health contract secured. These are long-term sticky relationships driven by changed biosimilar guidelines in US/Europe requiring agile manufacturing partners. Currently development MSAs; commercialization FY29 onwards. Capacity expansion needed in both mammalian and microbial beyond current. (Neeraj Sharma)

Biologics Value Chain Position

• Question: Where do you stand in biologics value chain - R&D or CMO? (Pranav Chawla)
• Answer: Among very few completely integrated drug substance and drug product players. Full value chain from gene to final patient-ready product including fill-finish, assembly in autoinjector/pen injector. Strong R&D and development team. (Neeraj Sharma)

Competitive Risk in Biologics CDMO

• Question: Is domestic competition a material risk for biologics offering? (Pranav Chawla)
• Answer: Demand growth significant (biologics and DDC fastest growing CDMO segments globally; >50% of drug discovery in biologics). India has insignificant share currently; China push-out creates opportunity. India capacity still small fraction of South Korea. OneSource among very few offering integrated drug substance + drug product at same site. (Neeraj Sharma)

Capacity Utilization by Segment

• Question: Current capacity utilization for each segment? (Ritika Agarwal)
• Answer: DDC and injectables at peak/complete utilization (reason for capacity additions). Soft gel transitioning to CDMO with tech transfers underway; capacity being filled over next 12-15 months. CDMO model requires building capacity first, then adding customers - spare capacity needed for onboarding. (Neeraj Sharma)

Capex Plans

• Question: Capex for this year and next including all expansions? (Ritika Agarwal)
• Answer: ~80% of US$100 million committed. Biologics expansion capex will be significantly lower than DDC investment. No significant additional capex beyond balance 20% currently visible. (Neeraj Sharma)

Generic Weight Loss Drug Market Response

• Question: How are customers seeing response to generic versions in Canada and India? (Anish Jobalia)
• Answer: Constraint has been supply, not demand. Demand significantly outpacing supply. India: from <2,000 pens/month to 150,000-160,000 pens within a year (out-of-pocket market). Canada early but clear trajectory given patient demand, availability, and price delta vs brand. Customer forecasts remain robust. (Neeraj Sharma)

Line Ramp-Up Risks & Timeline

• Question: Risks in scaling up new lines? How many lines in place this year? (Anish Jobalia)
• Answer: New line coming this quarter - confident of filling capacity given clear demand visibility. Third line ready within FY27; three lines fully available for FY28. Fourth line later in FY28 for markets opening FY28-29 onwards. (Neeraj Sharma)

Line 1 Optimal Contribution

• Question: Has line one achieved optimal EBITDA contribution in Q1? (Nitin Agarwal)
• Answer: Revenue perspective - yes, full contribution per line achieved. But opex has been upfronted for new lines; opex leverage will play in as lines install. Optimal contribution comes when all lines in place with limited incremental opex. (Neeraj Sharma)

Geopolitical & Tariff Impact

• Question: Effect of geopolitical issues and US tariff announcement on generics? (Gaurav Shukla)
• Answer: Middle East situation impacting freight (Suez, Strait of Hormuz closures, longer routes, container constraints). Impact muted for OneSource due to ex-works contracts - additional time/cost borne by customers. US tariff announcement: pattern of changes/backdowns expected; too early to say but no long-term harm anticipated. (Neeraj Sharma)

FY27 Milestones to Monitor

• Question: Key milestones for investors to assess FY28 trajectory? (Parth Sodha)
• Answer: Track capacity additions (new line this quarter, next expansion end of year), revenue ramp in H2 from new line, sequential QoQ improvement in revenue and EBITDA. (Neeraj Sharma)

Key Takeaway

OneSource Specialty Pharma delivered a strong Q1 FY27 with revenue of ₹4,490 million (+37% YoY) and EBITDA of ₹1,233 million (+39% YoY, +34% QoQ), driven by semaglutide commercialization and DDC business mix. The company holds all three approved semaglutide products in Canada, supplies >40% of India's generic pens market, and maintains full capacity utilization despite Dr. Reddy's temporary disruption. Strategic focus centers on capacity expansion (second cartridge line commercializing this quarter, third by FY27 end, fourth by FY28), biologics build-out with Formycon partnership and 4x RFP funnel growth, and soft gelatin CDMO transition with greenfield site initiation. Management reiterated FY28 guidance of US$400 million organic revenue and 40% EBITDA margins, with sequential quarterly improvement expected as new lines ramp and opex leverage plays in. Key watch points include DRL