2. Conservative commentary from the Management (Venkat Jasti)
Quick Background
Summary: Small Cap Pharma – CRAMS (Contract Research focus/ cabability built + working on New Chemical Entity for Alzeimer’s )
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

3. RoE: 27% (3 yr, 5yr avg), Sales CAGR: 25%, Profit CAGR: 40 %(3yr) to 50% (5yr)

4. Speciality Chemicals (20% margins; 200 cr revenue)
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)

5. Business Model Canvas Product/Offerings Market/ Segments
Contract Research to Innovators (high margin)
MktSize: $58B research budget of top 50 global Pharma
Monetising Capabilities
Complex Drug Discovery/ Research Capabilities
Own Drug Discovery
(NCE: Suven Alzeimers) (Lottery ticket – zero or one)
MktSize: $5B(5mAmericans)
Using learning from contract research to build capability to create IP
Contract research relationships give opportunities for API/intermediary supplies
Formulations/
Speciality Chemicals (200 Cr topline)
One time supplies repeat every months
R&D focus (15% of Sales); expensed not capitalised
PE funding 200 Cr for Suven502 ($25m US subsidiary for licensing BD)

6. Invest? Pros Cons Good Management
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
Market does not have y-y visibility (supply repeats come once in 2 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)