LKP BYTES : Suven Life Sciences (Buy @ 33 with a price target of 65)

The story so far ………..

Suven Life Science – SLS is a Rs2bn life science company promoted by Venkat Jasti with a distinctive business model – CRAMS – Drug Discovery – Collaborative Research Partnership. SLS entered into a CRP – Collaborative Research Partnership with Eli Lilly in 2008 for CNS and has 4 fully functional collaborations with Eli Lilly, J&J, BMS & Astra Zeneca. SLS derives 20% of its revenues from drug discovery and the R&D effort is funded by its CRAMS business which accounts for 80% of its Rs2bn revenues. The R&D efforts of SLS is spearheaded by Dr NVS Ramakrishna and his team who is now associated with the company for more than 10 years now.

The story ahead ………..

SLS is partnering the development of under patent molecules by leveraging its strong relationships with more than 25 global life science companies worldwide and spends 16% of its revenues on drug discovery (fully charged to the P&L account – a prudent policy of optimizing R&D expenses as and when it happens to ensure that the burden of molecules is not carried on to the balance sheet)

Its most promising compound – SUVN – 502 for treating Alzheimer’s disease is progressing well in a space with an addressable business opportunity of $20bn in cognitive neuro de-generative disorders- an unmet medical need. Alzheimer’s does not have any cure and is a devastating neurological disorder impacting more than 37 million people worldwide. SLS is taking SUVN – 502 on its own into Proof of Concept clinical trials and once the POC is established we believe that there would be a large out licensing opportunity.

SLS with ~ 550 product patents and 18 inventions till date is confident of advancing at-least one molecule from its existing pipeline of 11 molecules (of which 6 are HT6 Antagonists and of which one has completed Phase – 1 trials and is in the process of moving into Phase – 2 and POC) into the IND stage every year and at the same time is expanding its therapeutic coverage within its focus area of CNS having an addressable market opportunity of $100bn.

We recommend a BUY on SLS @33 with an 18 month price target of Rs65.

Thanks and Regards

LKP Advisory

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