Evolvence India Life Sciences Fund (EILSF) recently invested Rs 25 crore in Chennai based pharmaceutical company, Anjan Drugs, one of the largest US-FDA approved manufacturers of drugs for epilepsy. This will set the trend of investments by PE firms into focused API companies. Anjan specialises in medicines used for the treatment of central nervous system (CNS) disorders. Last year, EILSF invested $30 million in the Hyderabad based advanced drug delivery mechanism company, Gland Pharma. EILSF also invested about $5 million in Bangalore-based cancer centre network, Health Care Global. VCCircle spoke to Hari Buggana, Managing Director of Evolvence India Life Sciences Fund, which manages a little less than $100 million, on the investment in Anjan Drugs, and the fund’s strategy.
What is the investment thesis for Anjan drugs?
Firstly, they make drugs for the treatment of central nervous system disorders – which is a very large segment of the overall pharmaceutical market world wide. They also have a very strong competitive position in a couple of molecules in that category. Divalproex Sodium (used to treat Epilepsy) is an example. Their competitive position stems from the fact that they are very innovative and have invented processes that are highly cost efficient relative to their competitors. Going forward, we believe that their sales are going to increase at a fairly rapid pace because couple of the molecules they are offering went generic recently.
How does the company plan to use the raised funds?
We have committed a total of Rs 25 crore, which will be invested in tranches. They plan to use the funds to increase production capacity for two of their leading products because they are expecting major sales in the regulated market.
What are your expectations from the company?
Over the next few years, we expect sales to at least quadruple as a minimum and we also expect them to launch another three products.
How much has your fund invested till now?
We did our final close at a little less that $100 million and we have invested about a third of the fund in three companies so far. The life of the fund is eight years.
What are the subsectors within the healthcare segment that you would be focussing on?
Pharmaceuticals is of course one of the major areas. We are also looking at medical devices, CRAMS (contract research and manufacturing services), diagnostics, and speciality healthcare services.
How many deals are you looking at closing this year? And how much money do you plan to invest this year?
We would probably do another 2 or 3 deals this calendar year. As for the amount we are looking at investing, there is a difference between investing and committing. Typically what we do when we commit, is we invest the funds in tranches linked to financial and operational milestones. We plan to commit another $20-25 million this year.
Would you also be looking at buyouts or control deals?
No, we would not be looking at buyouts or control deals. Our investments would only be growth capital for minority stakes. We did not raise this fund by positioning it as a buyout fund. The fund’s investment strategy is to provide growth capital for a minority stake. Our transaction size is typically in the $10 million range and we don’t use leverage. In any case, in the life sciences-healthcare space, there aren’t a lot of attractive buyout opportunities as of today.
When can we expect you to announce your next deal?
Probably in another 2-3 months. We are actually performing due diligence on a couple of companies.