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Building niche capabilities/capacities to boost CDMO offerings

We recently met with the management of Suven Pharma (SUVEN) to gain a deeper understanding of its business outlook. ? Suven is actively expanding its niche technologies in new modalities within the CDMO space through both organic and inorganic growth.

* After acquiring a majority stake in SUVEN in Sep’23, Advent International has re-strategized the company’s growth drivers across the CDMO, API, and specialty chemicals segments.

* SUVEN has enhanced its R&D capabilities and strengthen its commercial presence in developed markets (US/EU/Japan). The company offers niche offerings in Anti-body Drug Conjugates (ADCs), oligonucleotide, and small molecules.

* SUVEN has established the necessary building blocks to achieve its USD1b revenue target, up from the revenue of USD318m in 9MFY25 (proforma basis). We believe successful execution will be crucial to achieving this target.

Key highlights from the management meet

ADCs – Strong value chain presence and growing interest from innovators position SUVEN favorably

* The ADC segment has clocked the highest CAGR of 20% in R&D spending over FY19-24, led by a focus on targeted therapies to improve efficacy and reduce side effects.

* SUVEN has positioned itself to support innovator pharma companies across the entire journey, from drug discovery to commercialization.

* The ADC outsourcing CDMO industry is expected to achieve a 23% CAGR over the next five years, reaching a market size of USD4b.

* Given the complex nature of the products, only 13 ADCs have been approved in the US to date, while almost 75 ADC projects have been discontinued.

* The total value of approved ADC products to date is approximately USD11b, with the two Topoisomerase I inhibitor-based products contributing over 40%.

* Suven/Cohance are the exclusive suppliers of the CPT-based payload supply chain, leveraging USFDA-approved, contained facilities with bestin-class purity and stability.

* That said, there has been a resurgence in ADC clinical trial projects (~270), led by the success of products like Enhertu/Trodelvy, which have shown a 37%/59% reduction in the risk of disease progression or death for patients with breast cancer.

* The development of a successful ADC candidate requires the proper integration of the receptor (target), antibody, linker, and payload. Challenges in any of these components can lead to clinical failure and the withdrawal of the drug program.

* Interestingly, ADCs that deliver Topoisomerase I inhibitors have witnessed a discontinuation rate of less than 5%.

* There are about 104 clinically active compounds based on S-trione. Notably, it is one of the key products supplied by SUVEN/Cohance. ? With its library of payload linkers, capacity expansion in India/US, and diverse payload capabilities, SUVEN, in partnership with NJ Bio, is considerably expanding its scope of business in the ADC outsourcing segment (7x expansion in market coverage to USD1.4b in CY24).

Oligonucleotide – Another growth lever in the CDMO segment

* The oligonucleotide outsourcing CDMO industry is expected to achieve a 25% CAGR, reaching USD4b by FY29. Nucleic acids & oligos are vital for R&D in therapeutics, diagnostics, and synthetic biology.

* The amidite and GalNAc segments are expected to grow at a faster rate than the overall oligonucleotide market.

* With SUVEN’s a) capability to synthesize a spectrum of modified amidites and nucleosides, and b) efforts to expand its capacity, the company is adding a niche offering to its CDMO segment.

Small molecules – Expanding customer base; new RFQs from select biotech companies

* About 52% of the total R&D pipeline in the clinically active phase is in the small molecules segment. As a result, the share of small molecules in approved novel drugs remains high at 68%.

* SUVEN has 100+ projects across Phase I/II of R&D. The number of intermediate projects in the Phase III clinical stage has increased from 6 to 15 (i.e. 2 molecules to 9 molecules).

* Interestingly, RFQs have doubled YoY.

* SUVEN is focused not only on securing more business from existing customers but also attracting new customers and advancing its position within the value chain.

API/spec-chem – New introduction and demand recovery to aid growth

* SUVEN has increased the number of product validations over the past 18-24M. It aims to add seven+ products to the API segment in FY25.

* A strong sequential recovery and increased RFQs are expected to drive business growth in the innovator-focused agricultural chemicals segment. The company is working towards adding new customers and moving up the value chain in the agriculture CDMO business as it has converted this segment into a strategic business unit.

Other key highlights

* The SUVEN-Cohance merger is on track and is expected to be completed by 1QFY26

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