The Hindu Business Line : Suven’s 2nd drug deal: Long-term positive

Suven’s second agreement with global pharma major Eli Lilly to collaborate on the pre-clinical research of molecules in central nervous system disorders (CNS) may turn out to be a long-term positive.

Suven will receive research funding and as well as potential discovery and development milestone payments in the range of $19 million (Rs 76 crore) to $23 million (Rs 92 crore) per candidate. For trailing nine months ended December 2007, Suven clocked net profit of Rs 6.3 crore on sales of Rs 85 crore.

Collaborative deals

As is the norm, potential royalties on net sales of any products (that may be successfully commercialised from the collaboration) are also included in this deal too. Suven signed its first collaborative research deal with Eli Lily in 2006.

Upfront payments on collaborative deals such as this are typically minor and hence this deal is unlikely to have a significant impact on Suven’s earnings in the near term. Suven invests about 20-25 per cent of sales in R&D.

But most of the R&D costs of the deal will not be borne by Suven. This is because the concepts will be provided by Eli Lilly and Suven would be doing base drug discovery in India.

Enjoying benefits

Since the deal is about identifying and consequent selection of potential drug candidates, it would take nearly 3-4 years before Suven completes the entire pre-clinical process, which is when major milestone payments may come.

The payments will accrue as and when critical success factors, as laid down in the contract, are achieved. Suven may enjoy the full benefits of the deal in about six-seven years.

Suven is also looking at striking similar collaborative deals with other players in the next 6-9 months. Such deals could reduce the risks of drug discovery for smaller players such as Suven.

Discovery pipeline

Suven, which currently earns major revenues from contract research and manufacturing, has a discovery pipeline that includes a compound on Alzheimer’s which is slated to enter clinical trials shortly, two on schizophrenia (in toxicology studies) and six in various phases of pre-clinical development.

More Stories on : Pharmaceuticals | Research & Development | Stocks

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page