Advent International is expected to sign a binding agreement to buy Suven Pharmaceuticals, a Hyderabad-based listed contract research and manufacturing services (CRAMS) company, as early as Monday morning, people familiar with the matter told ET.
Advent’s offer is being accepted by Suven’s board in preference to a rival bid from Blackstone, the only other contender.
Promoters Venkateswarlu Jasti and his family split Suven Life Sciences in FY20, listing the CRAMS business separately via a demerger scheme. The promoters own 60% of the company. Advent will buy 51% of the promoter’s stake in the company and launch an open offer for an additional 26%. Advent is expected to pay close to Friday’s market price – ₹500/share-₹504/share – to buy the promoter’s stake, implying a payout of ₹6,350 crore. Depending on the open offer, the final deal size could cross ₹8,100 crore ($1 billion.)
Market capitalisation of Suven Pharma, as on Friday, was ₹12,682.43 crore. ET was the first to report on the sale on December 23.
Advent is using Cohance Lifesciences as the vehicle for the acquisition. The platform was created last month for its active pharmaceutical ingredient (API) and contract development and manufacturing businesses comprising three portfolio companies – RA Chem Pharma, ZCL Chemicals and Avra Laboratories.
Suven Pharmaceuticals managing director Jasti didn’t respond to queries. Advent declined to comment.
“As a forward-looking company, we keep exploring various strategic ideas that are in the interest of the firm and creating value for all its stakeholders,” Jasti had said on an earnings call last month.
Kotak Mahindra Capital and Barclays are the advisors to the deal. Shardul Amarchand Mangaldas and Cyril Amarchand Mangaldas are the legal advisors. On Friday, the shares closed at ₹498.20, up 3.29%, on BSE. The stock has climbed 8% in the past three months in anticipation of a deal. In early 2020, the Jasti family appointed Barclays to help it with the demerger and potential sale of a controlling stake in the CRAMS business to focus on the discovery research undertaking involving molecules. Several buyout funds were approached, but the process was called off as stock market valuations tanked. It was revived earlier this year. Suven Pharma has its R&D and manufacturing facilities in Hyderabad and a business development office in New Jersey. A full-fledged biopharmaceutical solutions provider for global pharma companies, Suven has a presence across the entire contract development and manufacturing operations (CDMO) value chain – intermediates and APIs. As of March 31, Suven had filed 17 abbreviated new drug applications (ANDAs), of which it got nod for nine products and has launched eight.
To step up its formulations business, Suven acquired Hyderabad-based Casper Pharma for ₹155 crore in April. “Suven’s services include custom synthesis, process R&D, scale-up and contract manufacturing,” said Siddharth Khandekar, analyst, ICICI Direct. “In Q2FY23, CRAMS pharma vertical contributed 39% of sales. Besides pharma CRAMS, Suven has also developed and supplied intermediates/technical for specialty chemicals CRAMS, which accounted for 54% of sales. Generic formulations accounted for 7% of sales.”
Khandekar added: “Suven is investing ₹600 crore for modernisation and tech upgradation, which likely stems from the need to cater to changed priorities and requirements of its clients; the benefits from this may be visible in the long run.” There was also a note of caution. “However, we continue to emphasise that the company’s foray into formulations with Casper Pharma is in a highly competitive space of generic OSD in US, with diminishing returns,” Khandekar said. The global CDMO market attained a value of $177.1 billion in 2020. Aided by the rising demand for pharmaceutical products, the market is projected to further expand at a CAGR of 8.4% between 2021 and 2026 to reach a value of $302 billion in four years. India’s pharmaceutical industry is valued at $42 billion (FY21). According to the Indian Economic Survey 2021, this is expected to grow three times in next 10 years.
