Suven Pharma soars after signing deal to acquire oligo drugs maker Sapala Organics

Suven Pharmaceuticals jumped 4.59% to Rs 697.85 after the company the signing of definitive agreements for acquiring 100% of equity shares of Sapala Organics.

Sapala Organics is a Hyderabad-based CDMO focused on oligo drugs and nucleic acid building blocks including phosphoramidites & nucleosides, drug delivery compounds (including GalNAc), pseudouridine, amongst others. The proposed transaction is subject to customary closing conditions. The company had recorded turnover of Rs 85.1 crore for FY2022-23.

Oligo & nucleic acid building blocks market is an approximately $750 million market and is expected to grow at a robust nearly 20% CAGR.

Offering the rationale for the said acquisition, Suven Pharma stated: Sapala Organics is amongst the few CDMOs in the high growth oligo building blocks & nucleic acid space. The company has developed expertise in highly complex specialised building blocks which is a strong differentiator.

It fits Suvens thesis of adding a differentiated platform technology and there are potential synergies from leveraging GMP manufacturing and customer cross-selling.

Suven Pharma will initially acquire 67.5% by way of secondary transfer from Sapalas existing shareholders for a cash consideration of Rs 229.5 crore. This is expected to conclude during second quarter of FY24- 25, subject to the completion of customary closing conditions.

After financial year 2026-27, Suven will acquire the balance shareholding through secondary purchase, such that, post consummation, the company will own 100% of the share capital of Sapala Organics on a fully diluted basis.

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 more than 20 years. Post this transaction, 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.

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 its 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 Sapalas R&D depth, teams 30+ years of experience and Dr Reddys Japan experience with our customer access & manufacturing capabilities will help drive significant synergies across the entire platform."

Suven Pharmaceuticals is in the business of Contract Development & Manufacturing Organisation (CDMO), catering to the needs of global pharma industry.

The company's consolidated net profit declined 56.95% to Rs 53.37 crore on a 31.52% fall in sales to Rs 252.93 crore in Q4 FY24 over Q4 FY23.