By 24 November, 2008

Baring Private Equity Partners India has announced that it will invest upto $10 million in Sphaera Pharma, an integrated drug discovery and development company. This is the first deal to be announced from $600 million fund Baring India raised this year. Sphaera Pharma focuses on the discovery and development of novel small molecule therapeutics to fight diseases for which current treatments are inadequate.

Sphaera Pharma has operations in India and Singapore, and is building a drug discovery and development research facility in Manesar. The firm is headed by Sundeep Dugar, for whom this is a second venture.

In 2005, Dugar founded Advantium Pharma Pvt. Ltd which was subsequently merged with Hyderabad-based Sai Life Sciences Ltd to form Sai Advantium Pharma Pvt. Ltd. Dugar was the President and Chief Scientific Officer at Sai Advantium, and he quit his job to form Sphaera last year. (Sai Advatium raised $12.5 million from Sequoia Capital India last year.)

Investments in drug discovery firms is risky. ICICI Venture and Citigroup Venture Capital International (CVCI) have already burnt their fingers. Both the funds invested $22.5 million each in Dr. Reddy's Laboratories' new drug development arm Perlecan Pharma in 2005 and they had to take a hair cut later. In July this year, Dr Reddy's bought back shares from both ICICI Venture and CVCI for a total consideration of $18.5 million. The rewards in this sector can also be high as discovery of a successful new drug can reap great returns, but the odds are really high.

Baring India has invested in several healthcare and pharmaceutical related firms - SIRO, clinical research organisation, and PharmaARC, a pharmaceutical marketing analysis company. It has also invested in ReaMetrix, a contract research company, which has also been backed by Sequoia.

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