Cohance Lifesciences Navigates Near-Term Headwinds with Strategic Vision and Capability Expansion

Cohance Lifesciences Limited, a prominent player in the Contract Development and Manufacturing Organization (CDMO) space, recently announced its financial results for the second quarter and first half of Fiscal Year 2026. The company, operating on a consolidated basis, reported a Q2 FY26 revenue of INR 556 crore. While this reflected an 8% year-on-year decline, adjusting for significant inventory de-stocking in two commercial products reveals an underlying growth of 14% year-on-year. For the first half of FY26, revenue stood at INR 1,105 crore, a modest 1% increase, which, when adjusted for de-stocking, translates to a robust 20% growth. This nuanced performance highlights the company's strategic focus amidst a dynamic market.

The company's gross margins expanded from 70% to 73.8% in 1HFY26, a positive indicator driven by a favorable business mix and contributions from recent acquisitions and niche technologies. However, the adjusted EBITDA margin for Q2 FY26 was 23.2%, reflecting platform-wide investments and the consolidation of NJ Bio, both currently in investment and high-growth phases. Despite these investments, Cohance generated INR 170 crore in free cash flow during 1HFY26 and maintained a healthy liquidity position with INR 391 crore cash on its books. Total borrowings were reduced to INR 222 crore, underscoring disciplined capital deployment.

Segmental Performance and Strategic Pillars

Cohance Lifesciences operates across three primary segments: Pharma CDMO, API+, and Specialty Chemicals (AgChem & Performance Chem). In Q2 FY26, Pharma CDMO contributed 41% of the revenue, API+ accounted for 46%, and Specialty Chemicals made up 13%. The company is executing a structured organization upgrade program, focusing on five capability pillars to support its 2030 vision of achieving $1 billion (INR 8,500 crore) in revenue.

Pharma CDMO: This segment continues to see positive global demand, especially from India, with strong business development traction. The company reported 70+ meetings with innovators at CPHI Frankfurt 2025, indicating strong intent for collaborations. The Phase III pipeline remains robust, with 9 active programs, 4 of which are progressing to commercial supply within 12-18 months, including 2 US FDA-approved products entering the launch phase. Cohance successfully executed a large Phase II order for a leading global innovator, further strengthening its engagement.

ADC Platform & Oligonucleotides: These niche technologies are a key focus for Cohance. The company added 17 new customers to its ADC platform this calendar year, including two large global innovators. An OEB6 high-containment block is ready at Nacharam, partly booked for a customized payload program. A significant early-phase contract for full ADC supply was secured, with potential to progress to the next phase. For oligonucleotides, an INR 230mn cGMP and non-cGMP facility has been inaugurated in Nacharam, with first customer GMP audits scheduled for Oct-Nov 2025. The company is expanding into PEGylated antibody conjugates, siRNA conjugates, and Antibody-Oligonucleotide Conjugates (AOCs).

API+: This segment experienced a 4% year-on-year decline, primarily due to the Nacharam plant shutdown. However, demand from innovators and new validation momentum remain steady. The company is targeting 10 filings in FY26, with 5 formulation launches planned this year. In 1HFY26, five regulatory filings were completed, and two new products were validated. The API site at Jaggaiahpet successfully cleared a US FDA audit with zero observations.

Specialty Chemicals (AgChem & Performance Chem): This segment reported an impressive 84% year-on-year growth in 1HFY26, aided by a rebound in the AgChem cycle. Cohance added a new Japanese customer and received four RFP projects from a large global Ag Chem innovator. In Performance Chemicals, engagements with existing innovator customers for OLED intermediates are expanding, with discussions for FY27 supply programs underway with new global clients.

Financial Summary Table (INR Crore)

Note: Figures are consolidated. Adjusted EBITDA and PAT are after one-time adjustments for ESOP, Merger, and acquisition costs.

Navigating Challenges and Future Outlook

Management acknowledged several challenges impacting near-term growth, including pharma de-stocking, delayed reloads of Phase 2-3 molecules, the Nacharam plant shutdown, and a slowdown in biotech funding affecting NJ Bio. These factors led to a revision in the FY26 revenue guidance to be broadly flattish year-on-year. The adjusted EBITDA margin guidance for FY26 was also revised downwards to the high 20s from earlier projections of early 30s, reflecting ongoing investments and lower volumes.

Despite these headwinds, Cohance remains confident in a stronger second half of FY26, driven by the execution of deferred shipments, new program activations, and regulatory normalization. For FY27, the company anticipates a return to growth, supported by new business wins, existing operations, and restocking on the CDMO side. The mid-to-longer term guidance of US$1 billion (INR 8,500 crore) revenue with mid-30s EBITDA margins is maintained, with management expecting to recoup operating leverage from the upfront investments made over the past 12-18 months.

Cohance Lifesciences is strategically positioning itself as a technology-led global CDMO, focusing on high-growth niche modalities and strengthening its integrated India-US model. The company's commitment to quality, evidenced by 22 successful US FDA audits and an EcoVadis Gold rating, along with its proactive approach to capacity expansion and customer engagement, underpins its long-term growth trajectory.