For those who may not like it, apologies upfront for a long and technical jargon intensive post.
Thought it would be a long haul before we get to decode the profitability puzzle in Suven, glad to see some starting point after a burst of effort today. It seems to be the strength of Suven expertise on drug-discovery side of things, the CRO, which is certainly giving them that edge in value add. Digging deeper into Suven’s core activities, looks like they have developed in-depth expertise in services which are very specific to the drug development phase. Most of the terminology sounds alien, but they have stated following capabilities
- Bio-analysis
- Toxicology
- In-vitro ADME
- Pharmacology
- In-vivo Pharmacokinetics
- In-vitro Biology
- Assay Development
- Analytical Chemistry
- Synthetic and Medicinal Chemistry
- NCE Formulations
Here is a short glimpse of what some of this means in layman terms
“Assays are investigative procedures that qualitatively assess a compound or examine a compound’s effects on identified molecular, cellular, or biochemical targets. The first steps in drug development are the identification and validation of potential drug targets involved in human disease. These targets are typically either a cellular structure or specific protein. Targets include:
- Receptors
- Enzymes
- Hormones and factors
- Nuclear receptors
- DNA
- Ion channels
In the following stage of drug development, biological assays and compound screening assays are created. These assays are used to identify compounds that have a desired activity at the drug target. These compounds are referred to as “hit” molecules. During the initial phase of hit compound identification, termed high throughput screening (HTS), a compound library that contains many potential hit molecules is tested to identify any compounds with the desired activity towards the target. Further assays are required to retest the hit molecule’s activity at the target. Finally, cell-based assays are used to examine a drug’s toxicity, safety profile, and efficacy. Every drug that is developed undergoes a unique series of assays that are specifically designed and organized for the drug target and compound in question. This process is termed assay development.
Now, let’s look at what Suven offers under “Assay Development”.
There have over 70 such in-vitro assays available with Suven.
Its lot of technical data, a lot of which was totally alien to me till today, but after reading a lot on the subject, it seems that these assays are processes to study and understand the impact of the drug molecule on the target cells / receptors (request boarders with domain knowledge to validate this, and kindly correct if any of this is wrong). To me this process then seems super critical in the development phase of the molecule. Suven clearly has deep expertise on this.
And please remember, that this is JUST 1 of the several dozens of other such critical processes that Suven seems to be offering.
So, just how critical is this kind of capability? Here’s another excerpt from an independent site
“Important factors in assay development
Developing top-notch assays is pivotal to drug discovery and development. The better the developed assays, the fewer potential problems in subsequent stages of the research and development process. Proper assay development requires carefully considering multiple factors, including relevance, reproducibility, quality, interference and cost.”
Just to triangulate the data, I also checked with independent sources whether Suven offers some of these stated services.
Now, I realise that a lot of these services would have moved to Suven Life after the demerger. But as Mr Jasti mentioned in last 2 con calls, both the firms will continue doing work for each other, on pre-agreed terms, so Suven Pharma would certainly have continued easy access to such high-quality capabilities in future, and that will continue to greatly differentiate its offerings from other CDMOs, and would allow Suven Pharma CRAMs operations to continue enjoying high margins and profitability.
Finally, just rounding off the discussion with some data on Neuland. Though I track Neuland in some detail, its not at the same depth as I track Suven. Also, I have looked at PI, Syngene and Divis very, very superficially. Whatever little I have read on Neuland, it seems more focussed on API in CRAMs. While they do work on early stage development molecules, it appears that they offer a more limited set of capabilities. Here is a snapshot of their offerings, taken from the same 3rd party website
As we can see from this, Neuland’s skills are more focused on Chemistry / Synthesis / Process research/ Manufacturing side of the development cycle, whereas with Suven, they are not only experts in these areas, they also have developed deep expertise on the drug discovery / biology / clinical trial phase of development cycle. And their expertise in both areas, is what allows them to command such premium with customers.