Suven Life Sciences - Embedded triggers


(Ashish) #30

Suven featured in latest Motilal Wealth Creation Study as Potential 100x Bagger Stock


#31

What is interesting is that MOFL is predicting that future wealth creators would mainly come from pharma sector. I do agree that some of them could definitely come but 4 out of 7 is little too high a no. to digest. They seem to have missed stocks from consumer or housing finance sector.


(Swaminathan) #32

Suven Life Sciences secures 4 (four) Product Patents for their NCEâs through New mechanism of action - H3 Inverse Agonist in Australia, Canada, Japan and New Zealand

http://www.bseindia.com/xml-data/corpfiling/AttachLive/Suven_Life_Sciences_Ltd_160215.pdf


(bomi karkaria) #33

Has the equity dilution occurred and if yes, at what price?


(vivek bothra) #34

@ Bomi - 191/ share


(ASPN) #35

Hi Vivek,

Kudos to your efforts and analysis.

The company is bagging patents in every other month. Are you aware about any plan from the company regarding monetization / commercialization of these patents?

The company is already trading at 22-24x TTM. Do we need to add the vast IP of the company while valuing it? Request help from seniors to understand this.


(vivek bothra) #36

Hi Advait - Patents to my knowledge are granted per geography for same molecule. So for a molecule X you will get one patent in Australia and other one in USA.

Filling patents would not translate to sales / monetization straight away though markets thinks otherwise :wink: Drug discovery & commercialization is a long process, top companies have strong pipeline Suven claims to have sound pipleline in niche space

The company is definetly not trading at bargain like it was in 2012-13, however as we pointed out that there are few embedded triggers with probability of them turning on side of investors.

hope it answered your questions


(Puneet) #37

(Rishi) #38

Patents are commendable and if successful immensely rewardingfor aPharma company to perform innovative research to launch new drugs. But monetization of patents in the Pharma industry has its owns issues as listed below. These are facts for the regulated markets (US, EU, Japan). But then they are the biggest markets and Regulators in other parts of the world take their lead.

1). The typical duration of Clinical Trials to market is 6 to 10 yrs. Clinical trials are conducted in Phases 1-3 to give drug regulators enough evidence for safety and efficacy of the drug before the regulators approve the drug to be marketed. Remember the molecule is patented as soon as it shows enough promise for the Pharma company but before Clinical Trials, thus the long gestation period.

2). The success rate of a molecule to pass all Clinical Trials and approved as a drug is very low. It runs mostly is single digit percentages and for some Therapeutic Areas like Neuro its still lower

3). The economics are staggering. The cost of getting drug to market could be hundreds of millions of dollars mostly getting close to billion dollars. The smaller companies mitigate the cost and risk by partnering with larger companies which also helps with knowledge base. Examples include Biocon tie-ups with Mylan and BMS, although in Biologics. That also means that they will share the revenue/profits with the partner.

4). There is enough and more litigation in this space where patents are overturned

I think its important to understand the industry dynamics to understand some of these news items regarding patents. The dynamics of a particular Pharma company might be immensely favourable from an economics point of view. That would need quite a bit of analysis tounderstand the monetization value, timing and risk.

Patents might be great news but their economic benefit is not guaranteed.

It isbetter to track the progress of various clinical trials that the Pharma companies are conducting. This has more near term_Potential_benefit especially if it is in later phases of Clinical Trials. You can find the progress on the company’s website.


(JKS) #39

Venkat Jasti, in every forum makes it clear that these patents won’t result in financial impact at all. That said, at some stage, Suven can dig into the treasure trove and start cashing it out, with the right partner.

The one I am betting on is Suven-502 Alzheimer’s disease drug. Here is some old news paper article on that http://www.business-standard.com/article/companies/suven-life-betting-big-on-its-key-molecule-114090801324_1.html

All said and done, Jasti - over the years has been extremely transparent, humble and above the board. He has a tendency to under commit and over deliver

Disc - Invested

Disclaimer - I am not a certified analyst and this is not a recommendation. Please do your research before acting and I am not responsible for your action


(Sagar Saxena) #40

Well said kalyan.Mr. Jasti has really been a very transparent corporate person right through.What impresses me,is the constant focus on high margin businesses.Even in Speciality chemicals,SLS has managed to gain decent margins.This tells two things: 1) The co. won’t compromise on pricing to get volumes,2) There is little complacency when it comes to business.Thus,even though pre-supplies were expected to resume in FY16.The co. didn’t take it for granted,& seems to be making the right investments in other verticals.

The company had guided for a PAT of ~100cr. for this fiscal.But they will easily do 120cr.+.As you said,they are underpromising and overdelivering…all very healthy signs on Management quality.However,the valuations are no longer cheap.The Joker in the pack has progressed very well so far,and their fund raising sailed through without hiccups.As FY17-18 approaches,this excitement regarding SUVN-502 will only increase.I do have high hopes too,but I will keep a keen eye on whether the Market cap goes out of hand.

Disc.: Invested.Views maybe biased.Kindly do your own discretion before investing.


(ASPN) #41

Hi, any update on the new Vaizag manufacturing facility of the co? Wasn’t it supposed to commission in March’15? Couldn’t find anything new on this on the net. Kindly share if anybody has any update. Btw, how much will this facility contribute to the co’s topline and bottomline?


(JKS) #42

Got a prompt response ( I simply love the way they operate in these things) from the CS

“We would like to inform that trial production is likely to commence during April - May, 2015”

Thx


(ASPN) #43

More patents grabbed by Suven :

http://www.moneycontrol.com/stocks/reports/suven-life-sci-suven-life-secures-five-5-product-patents-for-their-ncesaustralia-europe-hong-kong-israelnorway-951197.html

Wonder if they have a patent manufacturing unit :slight_smile:


(JKS) #44

Howlers continue (I mean in the day - I saw PFS and now this) !!
http://www.bseindia.com/xml-data/corpfiling/AttachLive/DD92EDC0_54B9_405A_B4DF_CF17B2558CDF_135718.pdf
Stock is going to be gorged for sure. Everything looks weak !!!
The biggest asset of Suven used to be its profit margin but net profit/EPS have halved now…


(Sandeep Patel) #45

Absolutely flat FY16 guidance and poor Q4FY15, so stock will take some beating. Management in true Suven style said “Without knowledge of any repeat orders coming in, more or less FY16 will be flat”.


(JKS) #46

I have some update from the co. sec
Pasting the specifics below

Mr. Rao
How are you? The flat results and subsequent guidance of 10% growth by Jasti has shaken us a bit but using this as opportunity to buy more of our favorite stock Suven. Here are some specific questions ;
Has the Vizag plant gone on stream of production? You had said in the below mail April and May 2015. If yes, how much it will contribute to the growth? I assume that the 10% projection given by Mr.Jasti includes this ? pl clarify
I had seen the occasional CRAMS order boost the PAT figures and I am sure that you must be looking out for one during the current fiscal. Given the flat growth projection, can this be the extra focus for you guys so that by Q3/Q4, we vault over, by showing improved results?
When and where is the AGM?
Thanks
Kalyan

Dear sir
Greetings from Suven. We give our replies to your queries as under

Commenced trial operations. Once validated will commence commercial operations. Yes, 10% projections given includes this facility.
CRAMS constitute major portion of revenue, which includes specialty chemicals. CRAMS grows at approximately 15%, YoY. The occasional-additional revenue related to one time pre-launch quantity was there in the year 2013-14 and the repeat order at commercial level for the same usually takes about 18 to 24 months. If we get repeat order, there is a possibility of revenue going upwards. So far, we do not have any visibility on the repeat order for commercial, the flat projections/guidance was given.
AGM will be held on Friday, 14th Aug 2015 at FAPCCI, Lakadikapul, Hyderabad.
Thanks
with regards
k h rao

PS - this is not a buy/sell reco. Please do your due diligence


(Vishnu Ch) #47

Excellent Research Report from Karvy on coverage initiation:
https://www.karvyonline.com/viewdocument.aspx?DocumentID=10504

I have cherry-picked the most relevant poins from the above report,
Conscious effort was made to ignore and not highlight the analysts projections and estimates… :smiley:

Robust base in CRAMS with client stickiness:
The company partners with innovators to develop intermediaries. SVLS was involved in over 725 innovation projects from its inception and has developed a secure basket of repeat clients with a min/max partnership of 2-15 years in the different stages trials.

Developing recurring revenue streams: Utilizing its strengths of complex intermediaries and innovator clients, the company could carve out independent streams of revenues expected to get base loaded into a constant run rate:
• A Specialty Intermediate supply: The company has been generating revenues of USD 10 Mn and 20 Mn in FY13 and FY14 respectively; and the company has built a Vizag facility to further enhance production. • Commercial supplies: Three molecules from Phase-III CRAMS have moved into commercialization in FY14. The company supplied pre-launch quantities and are expected to generate constant supplies for production from FY16E.
• Formulations: The company has out-licensed ‘Malathion’ ANDA and intends to develop 3-4 more such ANDAs with close to 13 ANDAs in pipeline.

Drug Discovery-Developing a portfolio in NCE’s: SVLS has been focussing on drug discovery from FY05 covering discovery, IP creation, clinical development and out-licensing. Even in a cost intensive unit as such, the company followed disciplined method of funding. SVLS has built a pipeline of 13 molecules in therapeutics of CNS, Major Depressive and Obesity in 2006 with SUVN-502 as the lead molecule in CNS segment currently about to enter Phase-IIA. The company has 13 molecules and 26 inventions protected across markets with its 700+ product patents and 37+ process patents. SUVN-502: Targeted at Alzheimers Disease (AD), a huge unmet medical condition, with only palliative care addressing relief from symptoms (Donepazil) available currently. The molecule is expected to begin phase-IIA PoC trials in Q2-FY16 with an expected term of 2 years. The molecule acts as 5-HT6 serotonin receptor antagonist, the method which is currently regarded in this segment after the recent spate of failures for molecules following the antiamyloid method from Pfizer, GSK and J&J. In 5-HT6 Lundbeck-Otsuka in Phase-III, Pfizer in Phase-II are the other leading molecules along with Roviant (acquired from GSK) and Avineuro in Phase-IIB.

The company plans on out-licensing the molecule for an upfront, milestone and royalties subsequently if the molecule gains traction after clearing the proof-of-concept stage it is currently in. Comparatively in this space in June-13 when it cleared Phase-II, Lundbeck received an upfront payment of USD 150 million and is also entitled of upto USD 650 million in regulatory milestones. Apart from this, royalty from sales could be above 10% for Lundbeck.

Key Risks
• Risk of NCE failure: The company has developed a well diversified portfolio of 13 molecules. Any set back in the long drawn process of the NCE development will have an impact in the short term. It has to be note that the company does not have any downside financial risk in any event of failure or set back of approvals as the financing is by equity sources and balance sheet does not carry any of the assets under development.
• CRAMS projects concentration: The company has 108 projects currently from a smaller number of clients, increasing the client concentration in the number of projects it handles for each client.
• Regulatory slowdown in approvals: Even as the company is not involved in the approvals of client products its supplies intermediates to and significant increase in rejections could significantly impact the revenues of the company across streams.
• Foreign currency fluctuations: As mentioned, the company earns close to 85-90% of revenues from exports exposing it to significant currency fluctuation risk.

Disc: Sold of Alembic Pharma to buy Suven Life sciences with avg price @250 (after FY15 results)
Invested for the long term.
Please do your own due diligence.


(JKS) #48

@crazymama Vishnu - specific Q to you and other Suven investors - The answer here will help me to increase the conviction since there is golden chance for me to invest in Suven ( given the correction from 300 odd to 240s now) by exiting strides, Cadila ).
We know that the current FY is going to be flat - with 10% growth at best ( Jasti had said it in multiple forums). We are banking on FY17 block buster in Alzheimer’s drug. Question is - are we taking too much risk in just this one drug to click?

I came across a Forbes article recently.
In that article, they mentioned that Eli Lilly started working on Alzhameir’s drug 25 years back and couldnt get a break through after Trial stage 3. It was a devastating failure for everyone involved.

But Biogen took a different approach and is showing promising Trial Stage 3 results, though with a small trial population - but certainly promising and the first time ever by a drug company on alzemeirs.

Compared to oncology drug approvals, 19%, alzemeirs has ~0.29% success rate in drug approvals.

Given this background, I tried looking up articles on Suven. Suven completed stage 1 trials and they are yet to get started on Phase 2A, and a line from Jasti summarizes the whole gamble “It’s always a huge bet, it’s zero and one, there is no in-between”.

Though it would be a jackpot of Phase 2A trials are successful, but I feel its a huge bet given success rates of Alzemeirs drugs.
PS - significant allocation in Suven. Average price 235


(Nikhil Jain) #49

Hi @KS16,

I see Suven as a decent business + chance of a patent.

As Vishnu has pointed out above, in case the SUVN 502 turns out to be a failure, the balance sheet will not deteriorate but the stock price will certainly take a hit in short to medium term.

On the other hand, if the patent bid is successful, the upside will be huge. Although statistically it’s a low chance.

Now the question is, how do you value the underlying business without considering the patents? If we consider it to be worth say rs 100-150/share, you are essentially playing a gamble with the remaining money for a long period at an opportunity cost.

If you are OK with this, you should totally stay invested for long, otherwise we know what to do.