Suven to acquire a majority stake in an oligonucleotide focused CDMO player, Sapala Organics

Suven Pharmaceuticals Limited ("Suven"), one of India's largest integrated CDMO players, has entered into a definitive agreement for a strategic controlling investment in Sapala Organics Private Limited ("Sapala"), subject to regulatory approvals and conditions.

Sapala is a Hyderabad based CDMO focused on Oligo drugs and nucleic acid building blocks including specialized/modified Amidites & Nucleosides, drug delivery compounds (including GalNAc), Pseudouridine, amongst others. Oligo & nucleic acid building blocks market is a ~$750M market and is expected to grow at a robust ~20% CAGR. Sapala is one of the very few players globally with experience in a comprehensive range of specialized building blocks. Sapala has a strong customer base including innovator Pharma, CDMOs & diagnostic companies, and is a key partner in their Oligo drug NCE programs.

Sapala was founded by Dr P Yella Reddy who has extensive experience in nucleic acid chemistry and formerly worked as Director (R&D) with Aisin Cosmos R&D Co. Ltd (Toyota Group) in Japan & India for 20+ years.

Sapala had a revenue of over INR 670mn and adjusted EBITDA margins of 45%+ for FY24. Suven has entered into an agreement to initially acquire a controlling stake whereas the existing shareholders of Sapala will continue to hold a significant minority stake for the next few years. Dr Reddy will continue to run the business as the CEO and also be associated with the Suven+Chance platform as a strategic advisor for the Japan market. Overall, 100% acquisition is expected to be in the range of 13-15x EBITDA multiple and is linked to the next three years' financial performance.

On the acquisition, Mr Annaswamy Vaidheesh, Executive Chairman, Suven said "We are delighted to partner with Sapala and believe it is a strong strategic fit. We see massive potential given it's a niche technology in the rapidly growing space. Nucleic acid based therapy targets diseases at a genetic level and has the potential to help patients immensely and cure previously incurable conditions. With this acquisition, we now have multiple differentiated technology platforms such as ADCs and Oligos amongst others. We will continue to invest both organically and inorganically to further build on these."

Dr V Prasada Raju, Managing Director, Suven added "Sapala has built unique capabilities in the complex Oligo building blocks segment. The space is poised to grow multi-fold with many of our own customers looking to expand in this space. We are convinced that combining Sapala's R&D depth, team's 30+ years of experience and Dr Reddy's Japan experience with our customer access & manufacturing capabilities will help drive significant synergies across the entire platform."

Dr P Yella Reddy, founder of Sapala said "We have built Sapala as a unique CDMO player in the oligonucleotides value chain, largely thanks to the highly capable team that I have had the privilege of leading. Sapala has earned the trust of its customers over the last two decades by consistently taking up challenging projects, developing and scaling up highly complex technologies. A strategic partner like Suven, with its wider reach and resources will help to take Sapala to the next level while providing significant growth and development opportunities for Sapala's employees as well. We at Sapala are excited with the possibilities that this partnership brings. I also look forward to working with the larger team at Suven for their Japan market initiatives and hope to contribute to the platform's success in that market."

The transaction will be subject to customary closing conditions.

Steadmount Capital Advisors and Banyan Advisory acted as advisors to Sapala.

Shares of Suven Pharmaceuticals Limited was last trading in BSE at Rs. 667.25 as compared to the previous close of Rs. 671.45. The total number of shares traded during the day was 4505 in over 580 trades.

The stock hit an intraday high of Rs. 676.10 and intraday low of 656.35. The net turnover during the day was Rs. 2985056.00.

Source : Equity Bulls

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SuvenPharmaceuticals INE03QK01018 ControllingStake Acquisition SapalaOrganics