Small and mid-size pharma companies focused on outsourcing seem to have caught the attention of investors, if the recent investments by private equity (PE) players in the sector are any indication. PE firms such as ICICI Venture, Citi Venture Group and Sequoia Capital have put their money in upcoming pharma units that are focussed on outsourcing.
Sequoia Capital on Wednesday invested Rs 100 crore in Hyderabad-based pharma and biotech research firm GVK Biosciences. Earlier, the PE firm had also picked up around 18% stake in clinical research firm Sai Advantium for around Rs 50 crore. Two other clinical research firms Radiant Research and SIRO Clinpharm have also received PE fund infusement from ICICI, 3i and Kotak, respectively, earlier this year.
Says Sequoia Capital MD Sandeep Singhal: “The growth in small companies and companies which are focussed on a specialisation, is much faster than the leading established players. We are looking at investing in companies which are looking to become leading players in the future rather than the stable companies with lesser risks and lesser rewards.”
Adds PwC associate director Pharmaceutical and Life Sciences Practice Sujay Shetty: “This is a new breed of companies which has entered the new space of high potential contract manufacturing and outsourcing. Outsourcing is the biggest growth area in the pharma sector and the PE investments in such firms will continue.”
Says Jubilant Organosys ED (finance) R Sankariah the company wants to become a leading service provider and outsourcing partners of global companies are there because margins are much higher in outsourcing.
Currently, clinical research and manufacturing services (CRAMS) market alone in India is estimated to be about $1 billion. However, it is expected to grow to over $3.7 billion by 2010 as global players are increasing outsourcing of clinical research and manufacturing services to low cost destinations such as India and China.
While most leading players have continue to bet on generic drugs by focussing on high margin and specialised segments, many companies have shifted focus to tap the outsourcing market. These include Nicholas Piramal, Jubilant Organosys, Dishman Pharmaceuticals, Sai Advantium and GVK Biosciences, among others.
Source: Economic Times