Shares of Suven Pharmaceuticals rose over 4% in the opening trade on Monday after global private equity firm Advent International signed a deal to acquire a significant stake in the Hyderabad-based company from its promoter Jasti family. Besides, Advent will also make an open offer to acquire an additional 26% of the outstanding equity shares of the company from the public.
Buoyed by acquisition news, Suven Pharma share price opened 2.7% higher at ₹511.7, against the previous closing price of ₹498.2 on the Bombay Stock Exchange (BSE). In the first hour of trade so far, the pharma stock gained as much as 4.4% to ₹520.35, while the market capitalisation climbed to ₹12,792 crore. In comparison, the BSE Sensex was trading 302 points higher at 60,147 levels, led by power and realty stocks.
Suven Pharma shares have underperformed BSE benchmark Sensex, in line with BSE healthcare index, with a 2% gain in the past one year as against nearly 5% rise in the BSE Sensex. In the last six months, the stock has added 7% compared with over 14% surge in the 30-share Sensex. The counter has risen nearly 10% in a month and 7% in a week. The stock hit a 52-week high of ₹631.15 on March 29, 2022, while it touched a 52-week low of ₹387.50 on October 17, 2022.
Suven Pharma shares got a boost today after it confirmed that Advent has entered into a definitive agreement to acquire a “significant stake” in the company from the Jasti family, subject to regulatory approvals and conditions. Post mergers, Advent plans to merge its portfolio company, Cohance Lifesciences with Suven, to build a leading end-to-end Contract Development and Manufacturing Organisation (CDMO) and merchant Active Pharmaceutical Ingredient (API) player servicing the pharma and specialty chemical markets.
“The merger will be evaluated by the board taking into consideration the strategic rationale and accretiveness to Suven’s public shareholders and will be subject to regulatory approvals and other customary approvals,” it said in a BSE filing.
“Advent is the ideal partner for us, with deep expertise in healthcare, and a global network of professionals and experts. Their experience and resources will launch the next phase of growth for Suven pharma. This move will benefit Suven platform immensely. The proposed collaboration with Cohance is a win-win for Suven and its public shareholders. It will help us offer a broader set of services and multi sites to our customers,” said Venkateswarlu Jasti, Managing Director at Suven Pharmaceuticals Ltd.
Suven Pharma, which was demerged from its parent entity, Suven Life Sciences, in 2020, is one of the leaders in the India pharma CDMO space, with high growth (over 20% CAGR over last 4 years) and profitability ( over 43% EBITDA margins). It has a strong pipeline of Phase 3 and late Phase 2 molecules, with 100+ active projects.
Cohance Lifesciences, wholly owned by Advent, was formed in November 2022 to create a new brand identity for its CDMO and API platform, with an intention of bringing together three Advent portfolio companies – RA Chem Pharma, ZCL Chemicals and Avra Laboratories. It has seven manufacturing facilities.
“The potential combination of Suven and Cohance has the ability to become a powerhouse operating acrossthe pharmaceutical value chain. The combined entity will have three massive growth vectors across pharma CDMO, speciality chemicals and merchant API, each of which have strong macro tailwinds. There are strong front-end and operational synergies between the two businesses which will be leveraged,” said Pankaj Patwari, managing director at Advent International.
Advent has been investing in India since 2007 and founded its Mumbai office in 2009. Currently, it has invested/committed over $3.2 billion across 14 companies with headquarters or operations in India in sectors such as business and financial services, retail, consumer and leisure, healthcare, industrial and technology. Previous healthcare investments in India also include Bharat Serums and Vaccines. Globally, Advent has invested over US$ 10.4 billion across 51 companies in healthcare.