Two pharmaceutical giants announce merger

Recently, Suven Pharmaceuticals , a leading pharma company in India, announced its merger with Cohance Life Sciences. This move comes a year after Advent, a leading global private equity, acquired a majority stake in Suven back in December 2022.

The merger is based on a share swap agreement, where for every 295 shares of Cohance, shareholders will be issued 11 shares of Suven Pharma. As a result, Advent will increase its stake to 66.7 per cent. This transaction will be completed in the next 12-15 months.

Suven Pharma and Cohance: A brief

Suven Pharma is one of the largest pharmaceutical companies in the world. It primarily focuses on CDMO (contract development and manufacturing), custom synthesis and more. As of the nine months ending FY24, the company earned 56 per cent of its revenue from CDMO, 27 per cent from specialty chemicals and the remaining 17 per cent from formulations and other products.

Cohance, too, is involved in the production of CDMO and API. It provides end-to-end CDMO services to clients across 60 countries. As of the nine months ending FY24, Cohance generated 68 per cent of its revenue from APIs and the remaining 32 per cent from CDMO.

Why is the merger taking place?

The move is expected to strengthen the position of the two pharma companies in the CDMO segment, increasing the probability of boosting market share in the future. Post-merger, the combined entity will have three growth avenues: pharma, CDMO, specialty chemicals, CDMO and APIs. Further, the combined entity will have 12 manufacturing entities with a total capacity of 2,650 kilolitres and five R&D centres.

Besides, the company will also have significant cost benefits and can cross-sell the products to customers.

How should investors view this move?

Based on the numbers, it seems like Cohance is relatively less efficient than Suven, which could make the overall entity a bit less appealing as compared to Suven Pharma. Though the merger holds immense potential following management-level changes in Suven Pharma last year, how it will tackle the rising competition in CDMO and API segments remains to be seen.

Also read: These media giants have entered into a landmark joint venture