Suven Pharma stocks surge 5% after acquisition deal with Sapala Organics

Suven Pharmaceuticals Limited has inked an agreement to acquire 100 percent  equity shares, on a fully diluted basis, in Hyderabad’s Sapala Organics Private Limited , a contract development and manufacturing organization (CDMO).

The stock price of Suven Pharma was up 4.78 per cent, on the development at ₹699.90 a piece on BSE, at 1.47 pm on Friday.

Suven will initially acquire 67.5 percent by way of a secondary transfer from Sapala’s existing shareholders, for a consideration of ₹229.5 crore subject to customary working capital and net debt adjustments, the company said.  This represents 51 per cent of Sapala’s share capital, on a fully diluted basis, it told the stock exchanges. After financial year 2026-27, Suven will acquire the balance shareholding through secondary purchase, thereby owning 100 percent of the share capital of Sapala,  on a fully diluted basis, it added.

Sapala is focused on oligo drugs and nucleic acid building blocks including phosphoramidites and nucleosides, drug delivery compounds (including GalNAc), pseudouridine, among others.

While Suven has entered into an agreement to initially acquire a controlling stake, the existing shareholders of Sapala will continue to hold a significant minority stake for the next few years, the note said. Sapala founder Dr Yella Reddy will continue to run the business as the Chief Executive and also be associated with the Suven+Cohance platform as a strategic advisor for the Japan market, the note said.

In February, Annaswamy Vaidheesh, Suven Executive Chairman, had told businessline, that acquisitions continued to be on the radar for the private-equity-owned company. Suven Pharmaceuticals and Cohance Lifesciences had then announced, a proposed scheme of amalgamation to merge both companies – a transaction that was expected to be sealed in 12-15 months.

Sapala is among few global players with experience in a comprehensive range of specialized building blocks and has a strong customer base including innovator pharma, CDMOs and diagnostic companies, being a key partner in their oligo drug

NCE (new chemical entity ) programs, Suven said. It’s founder Dr Reddy 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 over 20 years, the note said. According to industry estimates, the oligo and nucleic acid building blocks market is a about $750 million and is expected to grow at about 20 percent.

On the Sapala acquisition, Vaidheesh  said, he saw “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, Suven Managing Director, 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-plus years of experience and Dr Reddy’s Japan experience with our customer access and  manufacturing capabilities will help drive significant synergies across the entire platform.”

Sapala was built as a unique CDMO player in the oligonucleotides value chain, Sapala’s Reddy said. “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,” he added.

Sapala had a revenue of over INR 67 crore and adjusted EBITDA margins of over 45 percent for FY24. The 100 percent acquisition is expected to be in the range of 13-15x EBITDA multiple and is linked to the financial performance of the next three years, the note said. Steadmount Capital Advisors and Banyan Advisory acted as advisors to Sapala, the note said.

(eom)