Bengaluru-based contract research and innovation services provider Anthem Biosciences Private Limited will dilute a minority stake in a fund-raising exercise aimed at a valuation of $1 billion, three sources with knowledge of the matter told Moneycontrol.
These plans come at a time when several global investors are warming up to the Indian CRAMS/CDMO (contract research & manufacturing services/contract development and manufacturing organisation) segment. Their growing appetite is reflected in the recently announced $490-million deal struck between Piramal Enterprises and private equity major Carlyle.
“Anthem Biosciences is looking to tap investors, primarily private equity funds & sell a 10 percent stake in the firm and raise around $100 million. If plans fructify, this would value the firm at a billion dollars," said the first person cited above.
The second person said investment bank o3 Capital has been mandated for the transaction. "This is a high interest segment which is attractive for private equity players.”
“The fresh capital can be used by the firm for expansion in terms of new product lines or new facilities. Margins are healthy, client profile is good and the firm is backed by strong, experienced promoters," said the third person cited above.
All the three persons spoke to Moneycontrol on the condition of anonymity.
In response to an email query from Moneycontrol, Anthem Biosciences said, “As you are aware we are a private limited company and it is our policy to not comment on any speculative news. In the case there is broadcast worthy news we will inform you via the appropriate channel.”
Moneycontrol is awaiting an email response from o3 Capital and will update this article as soon as we hear from them.
WHY IS THE INDIAN CRAMS SEGMENT RIPE FOR M&A?
Due to a diversified product mix, high-end research services and significant cost benefits, pharma MNCs and global funds are taking an active interest in the fast growing domestic CRAMS/CDMO segment where Indian players have emerged as the preferred partners in drug discovery and manufacturing. A contract research organization (CRO) mainly provides drug discovery, preclinical research, clinical trial and other new drug development contract research services for pharmaceutical companies.
If discussions conclude, the Anthem Biosciences stake sale could be the third potential transaction in the niche and active segment.
In the Piramal-Carlyle deal, the pharma business included a contract development and manufacturing (CDMO) business, a complex hospital generics business selling specialized products across over 100 countries and a consumer healthcare business selling over-the-counter products in India. According to a research report by ICICI Securities, the Piramal deal was struck at 15.2x FY 20 EV/EBIDTA .
Additionally, on February 12, 2020, Moneycontrol reported that Hyderabad-based Suven Life Sciences was exploring a sale of its demerged CRAMS arm, Suven Pharmaceuticals.
The shares of some of the listed peers of Anthem Biosciences — Biocon arm Syngene, Suven Pharmaceuticals & Dishman Carbogen have surged sharply in the last three months during the extended nationwide lockdown.
ANTHEM BIOSCIENCES: GEARING UP TO RAISE CAPITAL?
Anthem Biosciences, incorporated in 2006, is helmed by CEO Ajay Bharadwaj, an ex-Biocon executive, chief operating Officer KC Ravindra and chief scientific officer Ganesh Sambasivam.
A June 2019 report by rating agency ICRA said the firm’s revenues grew 35.3 percent YoY to Rs 624.8 crore in FY2019 on the back of healthy capacity utilisation at the newly set-up Harohalli plant and revival witnessed in its contract research segment. “Further, established relationships with renowned international pharma majors across the globe has supported the strong revenue growth momentum of the company. ABPL’s liquidity position has remained healthy , supported by comfortable collection terms and low working capital intensity,” the ICRA report said. It added that Anthem Biosciences had high customer concentration as well as high geographic concentration, with more than half of its revenues in FY 2019 attributed to its top five customers and the US market.
Anthem Biosciences offers early-stage drug discovery services with services encompassing medicinal chemistry, process chemistry, custom synthesis, discovery research and analytical research & development. Over the years the company has forward integrated into contract manufacturing with a view to benefit from synergies arising out of its involvement in development of the product.
The company commenced its operations in July 2007 as an Export Oriented Unit (EOU) and has research facilities including chemistry labs, kilo lab, pilot plant, analytical and discovery research facilities in its manufacturing plant at Bommasandra in Bangalore. According to its website, the firm is located in an industrial park in Bangalore with a built-up capacity to house over 500 researchers.According to a report by Research & Markets, the global contract research organization (CRO) Services market accounted for $39.03 billion in 2018 and is expected to reach $89.06 billion by 2027, growing at a CAGR of 9.6 percent during the forecast period.