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Suven has recorded 50 per cent compound annual growth rate since 2011

Suven has recorded 50 per cent compound annual growth rate since 2011

Suven has recorded 50 per cent compound annual growth rate (CAGR) since 2011. Its total income were up from Rs 152.25 crore in 2010/11 to Rs 529.8 crore in 2014/15, which is marginally higher than 2013/14.

Venkat Jasti, Chairman & CEO. (Photo: A. Prabhakar Rao) Venkat Jasti, Chairman & CEO. (Photo: A. Prabhakar Rao)

Fastest-Growing Emerging Companies Rank: 3
Segment: REVENUE Rs 500-1,000 Crore

For Hyderabad-based biopharmaceutical company Suven Life Sciences, 2013/14 proved to be a pivotal year. In the drugs discovery space, its SUVN-502 molecule for Alzheimer's, successfully completed Phase-I trials in the US and is expected to enroll its first subject, or patient, for the Phase-II (proof-of-concept) stage by October 2015. In the Contract Research and Manufacturing Services (CRAMS) sector, three molecules, or new chemical entities (NCE), of global innovator companies, for which Suven developed intermediates, moved into the pre-launch stage.

According to Chairman and CEO, Venkat Jasti, if SUVN-502 clears the proof-of-concept stage by end of 2017, there could be significant upside for the company because it will be a first-of-its-kind drug for Alzheimer's. Suven now has 13 molecules in its NCE pipeline. CRAMS also provides a big opportunity to the company. In its CRAMS business, Suven is partnering global players in 110 projects. It has 57 molecules in Phase-1, 52 in Phase-II and one in Phase-III, apart from three where pre-launch quantities of drug intermediates were supplied to the innovator companies, which have launched the products in the market. Suven hopes the repeat business, in terms of more supplies of intermediates, will likely start from 2016. This could, according to Jasti, add not less than $15 million to revenues per year for an extended period.

Rs 513.62 crore

Rs 144.16 crore



Says Utkarsh Palnitkar, Head, Advisory and Life Sciences, KPMG: "I think the Suven management has been brave. It requires a lot of courage to get into pure-play drug discovery, since it is fraught with inherent risks. The company has tried to balance it out with its services revenues and if it manages to successfully come up with outlicensing (monetising its drug discovery assets) deals, it could be a validation of the business model."

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Suven has recorded 50 per cent compound annual growth rate (CAGR) since 2011. Its total income were up from Rs 152.25 crore in 2010/11 to Rs 529.8 crore in 2014/15, which is marginally higher than 2013/14.

The unprecedented growth witnessed by the 26-year-old biopharmaceutical company over the last few years, was driven by three factors. One, after the 2010 global meltdown, innovator pharma companies trimmed their drug discovery pipeline, or NCEs, to focus on a few molecules, and to ensure all projects reach their logical end. "This explains the systematic revenue growth each year. There is regular growth in business with a steady requirement to supply the drug intermediates," says Jasti. Besides, 10 per cent growth in the number of molecules that are being added by the innovator companies each year, is also helping Suven scale up.

In the CRAMS business, three NCEs of innovator companies are moving into launch stage

Talent focused on drug discovery and chemistry skills in niche areas

To plough back revenues into drug discovery and CRAMS business

Success of its customers' NCE programme determines its own success

To launch a molecule discovered out of its pipeline into the global market

Jasti's approach to develop both verticals simultaneously has paid rich dividends. Considering drug discovery is Suven's core strength, he has put a lot of emphasis on the entire process till a compound reaches the Phase-II stage trial, so that Suven can outlicense the product to a global pharma major for its further development and, eventually, to market it. "With a favourable 0.2:1 debt-to-equity ratio, we are well placed to fund our own research till the proof-of-concept stage," he says.

In the CRAMS business, Suven sees itself as part of a supply chain for major drug discovery programmes - initially to supply drug intermediates to meet the small amounts required in the lab and, later, as the discovery programme progresses, in larger quantities at the clinical trials stage. Finally, for patented products launched successfully, the company gets to supply intermediates till the end of the patent period. "In the last four years, the CRAMS space has started gaining traction with big pharma innovator companies focusing on fewer projects, or drug discovery programmes. And, we are poised to becoming strategic suppliers. Any new commercial opportunity that opened up in 2013 will translate into repeat orders starting 2016," he says. The gap of three years, he says, is because the innovator companies usually take time to make the active pharmaceutical ingredients and the formulation (the finished dosage drug). He says Suven is currently working with around 70 customers, which include around a dozen leading big pharma companies.

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For Jasti, it has been an eventful journey. At 28, after completing his post graduation in pharmacy he began running six of his own community pharmacies in New York and New Jersey in 1977. After spending 12 years in the US, as he was nearing 40, he decided to return home in 1989.

At that point in time, Jasti was the president of Essex County Pharmaceutical Society in New Jersey. As was the trend among pharmaceuticals professionals back then, he wanted to start manufacturing bulk drugs in Hyderabad. He acquired a sick unit, Caffinhal Organics. "But in two years, I found that it was not my cup of tea and realised that for a small player, differentiation was crucial to be successful. Therefore, I decided to look at chemistry and spotted an opportunity in making specialty chemicals using sodium cyanide," he says.

Jasti tied up with a few German companies and started making drug intermediates for them. But then, he says, things changed after India signed the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement mandated by the World Trade Organization (WTO) in 1994.

Says Jasti: "I decided it was time to move into the supply chain of the innovators, but it was difficult to do so for a small, Rs 3-crore company. It was then that we devised a business model, which is today popular as CRAMS, to knock at the doors of innovator companies." Suven went public in 1995 and decided to "align itself with innovator pharma companies and supplying drug intermediates for their new chemical entity development programmes".

It was, however, not easy. Unfortunately, in the game of drug discovery, the success of your customer will be your success. Until 2001, only three products had gone into the commercial phase. That too, they were very small products. Even then, the company posted around Rs21 crore in net profit. The next round of success happened in 2013 and, since, there has been no looking back for Jasti.

He has now added a new business stream: identifying and launching products that are small in volume and value, and do not interest major generic companies. As soon as these products go off patent, he intends to launch them and make a quick million or two. He wants to see this business grow to a point where it would contribute 10 to 15 per cent of Suven's total revenues.

Analysts says since the company is still at an early stage with CRAMS, it will still need to cope with the uncertainties of the CRAMS model since the customer's success determines the business growth potential. The company, however, is on a high on the bourses. On the Bombay Stock Exchange, shares of Suven touched a 52-week high of Rs 338.50 in April 2015.

*Footnote: In the earlier version of the story, the sentence under Growth Drivers of the company said- In the CRAMS business, three NCEs of innovator companies are moving into pre-launch stage. They are actually moving into launch stage. It has been changed now.

Published on: Jul 16, 2015, 8:09 PM IST
Posted by: Swati Verma, Jul 16, 2015, 8:09 PM IST