Kotak Private Equity Group (KPEG), the PE arm of Kotak Mahindra Bank, is in talks with two global clinical research organisations (CROs) to sell part of the 70% stake in Mumbai-based SIRO Clinpharm Private Limited (SIRO), which it holds with 3i. The extact amount of stake Kotak holds in SIRO could not ascertained.
Kotak PE along with co-investor 3i, a global PE player, hold nearly 70% in the Mumbai-based CRO player. Both players together invested about Rs 120 crore in the firm in 2007. SIRO Clinpharm, with a turnover of about Rs 280 crore during 2008-09, is promoted by the Mumbai-based Daftary family which holds 30% stake.
KPEG, part of Kotak Investment Advisors Ltd (KIAL), currently manages two funds across two investment themes–Growth Capital (India Growth Fund) and venture capital for lifesciences (Kotak India Venture Fund– I).
Commenting on the development, Kotak Private Equity group head Nitin Deshmukh said, “we are exploring various options including strategic sell-out.” He declined to disclose any further details.
Chetan Tamhankar, CEO, SIRO Clinpharm, told VCCircle, “the information about PE exit from SIRO is speculative and I can’t comment anything further on it.”
According to a source familiar with the development, Kotak may be eyeing returns in the region of 2x (or twice its investment) in SIRO.
SIRO, which conducts clinical trials in the pharmaceutical, biotechnology and medical devices sectors in compliance with international standards, has presence in the US, Israel, Germany, Romania, Estonia, Greece, Czech Republic and Spain. SIRO recently entered into an alliance with Virginia Contract Research Organisation, a Taiwanese CRO and with DreamCIS Inc, based in Seoul.
Quoting Chetan Tamhankar, Biospectrum reported that SIRO was looking at an IPO in 2011. In January, Businessworld had reported that Bangalore-based Biocon was in talks to acquire Siro Clinpharm and a deal could be in the region of Rs 400 crore. Kiran Mazumdar-Shaw, CMD of Biocon, reportedly, said that Biocon was only in discussions with Siro for a possible alliance to bundle some complimentary services of Siro and Clinigene, the CRO arm of Biocon.
Clinical trials constitute a key part of the drug discovery to commercial launch value chain. In fact, clinical trials that are conducted in four phases in animals and humans accounts for nearly 60-70% of the total cost of launching a drug, which could be anywhere between $800 million to $1.5 billion. KPMG has, in its recent report on India Pharma Inc, said, “recognising the value proposition India can offer in clinical research, foreign companies have, in recent years, laid great emphasis on making it an integral part of their drug development value chain. This is evident in the increased number of multinational CROs setting up in India and fast growing number of local CROs.”