Global private equity firms Advent International and Warburg Pincus have joined the race for a stake purchase in contract drug maker Encube Ethicals Pvt. Ltd, three people aware of the development said.
Apart from Quadria Capital, which has hired bankers to sell its minority stake, Encube’s promoters are also likely to sell some of their stake, the people said on condition of anonymity. Quadria Capital, which invests in healthcare businesses in Asia, is seeking a valuation of $2.2-2.3 billion for the 27-year-old company.
“It is most likely a controlling stake sale with the promoters also looking to sell some stake alongside Quadria Capital,” one of the persons cited above said.
On 20 August, Bloomberg reported that Quadria Capital is looking to sell its stake in the contract development and manufacturing organization (CDMO), which serves multinational firms including Reckitt, Sanofi, Teva, GSK and Bayer. An Economic Times report on 25 September said JP Morgan was advising Quadria, and private equity firms Blackstone, KKR and EQT were interested in the deal. It also said Quadria was open to an initial public offering (IPO) of Encube.
Spokespersons for Blackstone, Warburg Pincus, KKR, Advent International and JP Morgan declined to comment. Queries sent to EQT, Quadria Capital and Encube Ethicals remained unanswered.
Quadria Capital bought around 15% in Encube for $100-120 million in June 2021, valuing it close to $1 billion. After investing in follow-on rounds, and co-investing with limited partner Gulf Islamic Investments, it now reportedly holds around 25% in the drugmaker, according to news reports.
When Quadria first invested in Encube in 2021, the idea was to help the drug maker “execute a robust expansion and growth strategy to establish itself as an integrated global leader in topical drugs globally”. Multiples PE exited Encube through this deal, clocking in a more than 3x return on its $40 million investment made in 2016.
“The firm has grown well in the last five years and is one of the leading companies in the CDMO space. We have seen a lot of investor interest in this space as we see good growth coming from this segment over the next decade or so,” the second person said.
Founded in 1998 by Mehul Shah, Encube has a strong focus on research and development, and has successfully developed and launched multiple products in regulated markets. Tracxn data shows it had a revenue of ₹1,000 crore in FY24.
Over the years, the CDMO space has seen rising investor interest. Quadria Capital invested $100 million in Hyderabad-based Aragen Life Sciences Ltd earlier this year, while Maiva Pharma raised ₹1,000 crore from Morgan Stanley Private Equity Asia and India Life Sciences Fund last year.
With global customers diversifying supply chains from China and seeking value-driven outsourcing, geopolitics and geoeconomics provide strong tailwinds for India’s Contract Research, Development, and Manufacturing Organization (CRDMO) industry, Boston Consulting Group said in a February report.
The consulting firm estimates that the sector is poised for growth and is expected to expand from the current $3-3.5 billion to $22-25 billion by 2035. The report added that the growth will be driven by rising demand for outsourcing of innovative pharmaceutical services and realignment in global supply chains.
