Quick Background
Summary: Small Cap Pharma – CRAMS (Contract Research focus/ cabability built +
working on New Chemical Entity for Alzeimer’s )
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Market Cap: 2500 Cr
PE: 22
Current Price: Rs 200
Debt Free
Holds several patents (multiple geographies) (700+ product patents for 26
inventions; and 37 process patents for 7 inventions)
• Conservative commentary from the Management (Venkat Jasti)
• Founded in 1989 (listed in 1995), based in Hyderabad (Plants: Jeedimetla,
Suryapet, Vizag)
• Low competition due to complexity of space – one of few players in CNS
research
RoE: 27% (3 yr, 5yr avg), Sales CAGR: 25%, Profit CAGR: 40 %(3yr) to 50% (5yr)
Business Model (Rest of Pharma vs Suven: USP)
Most Indian Pharma Companies Business Model
• A) Manufacture Generics (reengineer off patent drugs)
• B) Supply API to Generic manufacturers
• C) Supply API to Innovators
SUVEN’s Business Model: (high margin outsourcing biz + R&D biz)
• CRAMS (30% margins)
– Contract Research (not
Contract Manufacturing)
– Outsourced Drug Discovery
– Partnership with AstraZenca,
Pfizer, GSK, DuPont, Eli Lilly,
Novartis, Abbott
• New Chemical Entity
– Central Nervous System
disorders (CNS) - Alzeimers/
Dementia (memory loss)
– Suven 502: Phase 1 over;
Phase 2 started
• Formulations
• Speciality Chemicals (20%
margins; 200 cr revenue)
Business Model Canvas
Product/Offerings
Market/ Segments
Contract Research to
Monetising
Capabilities
Complex Drug
Discovery/ Research
Capabilities
Using learning from contract
research to build capability
to create IP
Innovators (high margin)
MktSize: $58B research
budget of top 50 global
Pharma
Own Drug Discovery
(NCE: Suven 502 - Alzeimers)
(Lottery ticket – zero or one)
MktSize: $5B(5mAmericans)
R&D focus (15% of
Sales); expensed not
capitalised
PE funding 200 Cr for
Suven502 ($25m US
subsidiary for licensing BD)
Contract research
relationships give
opportunities for
API/intermediary
supplies
Formulations/
Speciality Chemicals
(200 Cr topline)
One time supplies
repeat every 18-24
months
Invest?
Pros
Cons
• Good Management
• Market does not have y-y
visibility (supply repeats come once in 2
– Conservative (no debt, expensing
R&D)
– Past Guidance: walked the talk
• Valuation of Suven502 not
factored much (comparable molecule
one sold for $150m, another got $350m
investment)
• Patent factory
• Forbes Asia 200 Best under
Billion, Motilal Oswal 100x
multibagger Wealth creator
yrs; Jasti says Suven should be seen in 3 yr
blocks; contract research depends on
success of Innovators in each stage)
• Probability of success in
Alzeimer’s drugs are very low
historically (2%?). (compare:
Oncology is 30% success rate)
• Second line management not
visible (Jasti age 65)