Veeda Clinical Research

A credible outsourced clinical research partner for the pharma industry

Overview Largest Independent CRO in India with unparallel infrastructure and execution track-record

▪ Largest Independent BA/BE player in India ▪ Leading pre-clinical CRO franchise; ▪ Large multi-site infrastructure ▪ Favorable client mix of large and mid to small pharma

End-to-end CRO capabilities across preclinical (exdiscovery), clinical and regulatory / post-marketing services

Regulated markets focused; favorable client mix of mid and large pharma, biopharma, agchem, med devices

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▪ Core strength in product performance data services for regulatory filings

▪ 90%+ revenue from studies intended to regulated market filings;

▪ Multiple therapy experience; oncology, cardiac, across several dosage forms incl. injectables, topical, inhalers

▪ 650+ customers across 26 countries with high repeat business

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▪ Unparalleled volunteer onboarding track-record, provides excellent project execution edge

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▪ Highly diversified customer base; top 10 customers contribute ~30% of revenue

Impeccable regulatory compliance and success track-record

▪ Successful 90+ global regulatory audits and 650+ client qualification audits ▪ Robust and extensive SOPs in place to quality and compliance by design

Attractive financials with INR 400+ crs revenue and ~100 crs EBITDA in FY23E

▪ Organic growth potential of 15-20% on account of regulatory tailwind ▪ Additional room to grow inorganically via acquisitions ▪ High return ratios

▪ Nil instance of filing pullout

How have markets valued pure play outsourced contractors

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While pharma/chem industry has ample cases of such outsourced players, some HIGH GROWTH outsourced contractors have been richly valued !!

What exactly is clinical trial research A picture speaks a 1000 words

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Veeda is present across the entire clinical research value chain

Drug Development Life Cycle

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Clinical trials can account for as much as 60% of the entire drug-development expenses.

Leaving aside the complexities involved (and I must say the terms in pharma are indeed brain racking) and much like all investment decisions, what we truly want to address is the following

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❑ Is the addressable opportunity large enough ?

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❑ Is the business model good enough ?

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❑ Is the management team capable enough ??

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❑ Is the business scalable ??

❑ Are the financials and valuation enticing enough to make good returns ??

What did we bank on to find answers to these questions ▪ Frost and Sullivan 2021 Report, used extensively in DRHP filed with SEBI during its proposed IPO ▪ Interactions with the sector experts namely ✓ Anmol Ganjoo, Ex JM Financial ✓ Tushar Bohra, MK Ventures ✓ Aditya Khema, Incred ✓ Mayur Sirdesai, Somerset Indus Capital

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▪ Interactions with direct competitors ✓ Dr. Chirag Shah, Head Clinical Research, Raptim Research ✓ Atul Solankar, President, Accutest Research Labs ✓ Kalyan Korisapati, Cofounder GV Research Platform ✓ Dr. Vasudeo Ginde – Founder, Diagnoserch ✓ Mr Anil Joshi, Ex-Accutest COO, Currently with Motilal Oswal IB

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▪ Interactions with the management team and the facilities visit at Bangalore and Ahmedabad

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R t ❑ Is the addressable opportunity large enough ? s e u Q e u l a V ✓ Market size – Global and local ✓ Segmentations ✓ Industry regulations ✓ Industry trends ✓ Competitive landscape

USD 64bn global CRO market; ~7% CAGR between 2021-26

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North America and Europe dominant players

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APAC region expect to grow faster; Phase III trials dominate the share

India’s share 3% @ ~USD 2bn

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India has the second largest population in the world, highest disease burden, one of the largest generic drug suppliers but has an abysmal share of 3% of global clinical trials.

Rising share of outsourcing; small companies lead the pack

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Rising trend towards outsourcing research activities to various academic institutes and private CROs to gain a competitive edge and remain flexible. Factors diving outsourcing include growing regulatory scrutiny, rising commercialization costs and rising patent expirations of blockbuster drugs.

Global CRO outsourcing to grow @ 8% CAGR between 2021-26

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65%

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Outsourcing to account for 67% share of overall clinical research spend by 2026

Case for independent CROs

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▪ R&D cost per approved new drug increased 14x since 1970

▪ Pharmaceutical companies increasingly reliant on CROs to optimize fixed overhead costs

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▪ CROs able to navigate complex clinical regulatory framework

▪ Higher rate of outsourcing observed in clinical trials and toxicology phases of the drug value chain ▪ Need for GLP laboratory ▪ CRO business model save an average of 20 to 30 weeks of the drug development time

Stage wise outsourcing segmentation

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Toxicology Research studies account for the highest share of outsourced activity

Growth in India to be faster @ 12.5% CAGR 2021-26 in complex studies

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USD 800mn BA/BE market by 2026

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BA/BE (Bioavailability & Bioequivalence) Studies Bioequivalence is a term in pharmacokinetics used to assess the expected in vivo biological equivalence of generic version to its proprietary version of a drug or formulations of innovator drug in different clinical trial phases. Greater adoption of generic drug manufacturing and emergence of biosimilars to drive 12% CAGR in BA/BE studies over 2021-26

Generic pipeline to keep growing

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Around 56 drugs lost their patents between 2020 and 2022 and around 107 drugs are expected to do so betwn 2023 to 2025.

Drivers for growth - BA/BE studies

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▪ BA/ BE testing plays a vital role in generic drug development.

▪ India accounts for 20% of global generic drug exports and captures 70% of the global generic drug market share by revenue.

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▪ BA/ BE studies are important elements in support of INDs, NDAs, ANDAs, and their supplements.

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▪ India is one of the top 5 manufacturers of bulk drugs in the world and ranks amongst the top 20 pharmaceutical exporters in the world.

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▪ Every fifth application for marketing a generic drug in the US, the world’s largest pharmaceutical market, is filed by an Indian company; thereby creating a great opportunity for Indian CROs in the BA/ BE segment

USD 1bn Indian clinical trials market; expected to be USD 1.5bn by 2026

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USD 250mn Pre-clinical market opportunity by 2026

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Within Pre-clinical, Chemistry Manufacturing and Controls (CMC) accounts 45% to 50%, toxicology studies ~ 20% while data management accounts for 10% to 12% of the study costs

Biosimilars – a potential USD 2bn opportunity

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The global biosimilars market is expected to witness highest growth rate between 2021-26

Core clinical trials in India – a treacherous past

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New Drugs and Clinical Trial Rules, 2019 – an enabler Some of the salient features of the clinical trial rules are: • deemed approval for clinical trials in 30 working days, if no communication is otherwise received from the Central Licensing Authority, for drugs discovered in India or for drugs whose R&D is done in India and proposed to be manufactured and marketed in India. • 90 working days approval timelines for global clinical trials.

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• introduction of pre- and post-submission meetings to help smoothen the application process.

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• Requirements and the conditions for conducting BA/BE studies, including the specifications for centers conducting such studies which provides clarity for planning, conduct and reporting such studies.

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• Clearly defined Ethics Committee oversight

• Well defined financial liability formula for volunteer compensation

Pick-up in activity post New Rules

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Trends in global CRO markets North America

▪ Greater Adoption of Digital Solutions in clinical trials.

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Europe

▪ Europe is set to surpass the North American CRO industry with the highest clinical trial volume in the next five years.

▪ Countries such as Lithuania, Romania and Poland provide a huge cost advantage of 45% to 50% or more compared to the US

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APAC

▪ Asia-Pacific CRO market at a strong 10.9% growth: Availability of a highly diverse population base, supported by higher prevalence of chronic illnesses and the emergence of numerous regional and local participants alongside global CRO participants, is expected to boost the Asia-Pacific CRO market at a strong 10.9% growth.

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▪ Higher Disease Prevalence: Countries in the ROW region, especially in the Middle East, show a high prevalence of metabolic conditions (e.g., the prevalence rate of diabetes is higher than 9%) alongside CVDs and infectious diseases, making them easy locations for these clinical trials.

Competitive landscape – domestic and global

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Highly fragmented nature of the domestic CRO industry with over a 100 players

Market size in a nutshell ❑ Is the addressable opportunity large enough ? Segment

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2022 (INR crs)

BA/BE

4000

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Pre-clinical Trials

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1500 9600

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2026 (INR crs)

Veeda FY22 Rev (INR crs)

Percentage share

250

6.25%

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90

6.00%

14,400

70

0.70%

6400

All the competitors we spoke to including Raptim, Cliantha, Diagnosearch, Accutest suggested industry tailwind due to the New Clinical Trials Rules, 2019

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R t ❑ Is the business model good enough? s e u Q e u l a V ✓ Capabilities ✓ Infrastructure ✓ Accreditations ✓ Regulatory observations

Presence across the value chain

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Corporate Structure

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Veeda Clinical Research

Bioneeds 87% Subsidiary

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Bioneeds – Acquired stake in tranches between March 2021-Sept2022 for ~INR 300crs; Has option to take it up to 100% Ingenuity – Established JV in 2021 with Somru BioScience, Canada based biotechnology company

Ingenuity 50% JV with Somru

Capabilities

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Company Background ▪ One of the largest independent full service clinical research organization (“CRO”) in India based on revenues (Source: F&S Report).

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▪ Founded by Apurva Bhupendra Shah and Binoy Gardi in the year 2004 – Together they currently own ~28% stake ▪ CX Partner took control in 2018; bought 63% from founders for INR 450crs (INR 714crs valuation) currently holds ~45% stake ▪ Offers a broad range of services across most aspects of the drug development and drug launch value chain throughout the global markets including North America, Europe and Asia.

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▪ Services include specialized bioanalytical services such as bioavailability and bioequivalence (“BA & BE”) studies, as well as a full suite of clinical trials including pre-clinical, early phase and late phase clinical trials, together with related services. Expertise in pharmacokinetics (“PK”) studies as well as trials in generic molecules, new chemical entities (“NCEs”), large molecules and biosimilars.

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▪ Clients in India include Dr. Reddy’s Laboratories Limited, Mankind Pharma Limited and Granules India Limited, and Laboratorios Liconsa, S.A (also known as Chemo) in Europe; Novugen Pharma (Malaysia) SDN. BHD, Sunshine Lake Pharma Co. Ltd and Qilu Pharmaceutical Co., Ltd in China; and Upsher-Smith Laboratories LLC and Osmotica Pharmaceutical US LLC in the USA

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Veeda – Journey

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Global presence with sharp developed market focus

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90%+ of the revenue from CRO work intended for regulated market filings

Rich experience in BA/BE studies

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BA/BE

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Routes of administration

Formulations

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BA/BE - Infrastructure

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BA/BE – Regulatory credentials

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Pre-clinical expertise via Bioneeds acquisition

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Bioneeds - Infrastructure

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Pre-clinical regulatory credentials

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Clinical Trial Experience

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Clinical Trial Services

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Clinical trials expertise Therapeutic Areas

Phase 1 trial experience

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Bioanalytical Research - Infrastructure Infrastructure

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Largest bank of methods developed

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Ingenuity – JV with Somru Bioscience

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Overview of the facilities

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Bioneeds acquisition – a strategic fit

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Bioneeds acquisition strengthens presence across CRO value chain

Bioneeds acquisition should help build-up clinical business

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Bioneeds acquisition to facilitate Phase I capabilities considering it being cost effective for clients when pre-clinical and clinical studies are done by the same CRO

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❑ Is the business model good enough?

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▪ End-to-end capabilities across pre-clinical (ex-discovery), clinical and regulatory/post-marketing services

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▪ Regulated market focused; favorable client mix of mid and large pharma, biopharma, ag-chem and med-devices

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▪ Good infrastructure regulatory track-record

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R t ❑ Is the management team capable enough? s e u Q e u l a V

✓ How does manager owner mindset play against promoter-owner (Advent in Eureka Forbes etc!!!) ✓ Are the interests aligned ? ✓ What has it achieved in the last 3 years in terms of financials and strategy

Management Team and their background Veeda

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Board of Directors

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Management background

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CX Partners - Overview

➢ Overall, $625 mn (~Rs. 5,000 Cr.) AUM deployed in 16 portfolio companies

COMPANY

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➢ Invests in healthcare, financial services, consumer, IT and niche manufacturing

➢ Has invested in 5 healthcare companies – Thyrocare (diagnostic lab tests), Sutures India (sutures mfg.), Natco Pharma (oncology drugs) , Veeda and Sekhmet Pharmaventures (API platform)

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➢ Other notable investments include Ujjivan, Barbeque Nations, Sapphire Foods, Cremica,

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YEAR OF INVT.

EXIT DATE

INVESTED ENTRY STAKE EXIT VALUATION AMT. (RS. VALUATION ACQUIRED (RS. CR.) CR.) (RS. CR.)

Thyrocare

2010

2016 (partial exit done earlier)

30%

188

626

2000

Sutures India

2012

2013 (partial exit)

37%

200

541

630

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Natco Pharma

2013

Natco Pharma Optimus Group (via Sekhmet Pharmaventures by PAG-led consortium

2017 (remaining stake) 2015 (partial exit)

3220

5%

108

2101

N/A 2020

Currently held

4800 N/A

74%

2000

2703

N/A

Other core team of scientists etc

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2022

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ESOP Pool

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Potential equity dilution (basis pre-IPO equity base after latest funding round in Dec21) from exercise from options granted (vested + unvested) is ~4%.

Management Remuneration

Particulars

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Designation

Ajay Tandon

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Apurva Shah Dr. Kiran Marthak

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Nirmal Bhatia

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INR (crs) 1.50

Non-Executive Director

0.30

Non-Executive Director

0.12

CRO

1.20

What does it mean to have a PE firm (CX Partners) at the helm ▪ Definite drive to scale up business operations and create value ▪ Decisions considering financial implications

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▪ Systems and processes improvements ▪ Interests largely aligned

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Ramp-up of operations in Bioneeds post acquisition by Veeda in 2021

Revenue PAT

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Bioneeds (INR mn)

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FY20A

FY21A

FY22A

FY23E

65

65

90

120

(4)

(3)

10

21

Examples of public companies held by PEs

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Examples of public companies held by PEs

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End-game for CX Partners

▪ Scale up operations and create value ▪ IPO in next 12-15 months

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▪ Take partial exit in the IPO

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▪ CX Partners to remain promoters for the next 3 years

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R t ❑ Is the management team capable enough? s e u Q e u l a V ✓Demonstrated growth over the past 2 years since covid ✓Brought in strategic acquisitions ✓Scaled up operations in Bioneeds ✓Interests aligned

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R t ❑ Is the business scalable? s e u Q e u l a V ✓Core BA/BE business ? ✓Clinical Trials ? ✓ Pre-clinical - Bioneeds ? ✓ Biosimilars opportunity ✓ M&A as a growth strategy?

Core BA/BE BA/BE (INR crs)

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY27

Revenue

137

170

192

129

174

174

224

462

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(High volume, low value)

Complex dosing

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Simple dosing

(patches, inhalants, glucose clamps, injectables, opthal)

Complex generics

In the overall market size of USD 800mn, even maintaining its share of ~6-7%, its fairly possible for Veeda to achieve ~INR 400crs business from BA/BE by FY27

Clinical Trial business Clinical Trials (INR crs)

FY20

FY21

FY22

FY23

FY27

Revenue

7

11

41

70

221

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Clinical trials business has only recently seen an uptick. Scale up of operations from hereon key

Pre-clinical business Bioneeds (INR crs)

FY18

FY19

FY20

FY21

FY22

FY23

FY27

Revenue

45

64

65

63

93

120

308

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Pre-clinical business requires 3-4 years for the investment to start generating revenues

Highly evolved business development process

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High mergers and acquisition activity globally among CROs

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Strategic transactions in the global CRO space

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Global M&A activity

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M&A activity in India

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Other noticeable winners of Mattew include Gokaldas, MTAR, Data Patterns etc

Veeda eyeing growth through strategic acquisitions

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Growth outlook

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Core BA/BE business – Focus on higher end complex studies – Needs to expand away from Gujarat – management hints at acquisition

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Clinical Trials business yet to pick up in a meaningful manner – Enabling regulatory environment – needs US base – management hints at acquisition

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Pre-clinical business has ample room to grow – focus on high value agro/pharma - needs investment – discovery piece missing – management hints at acquisition

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R t ❑ Is the business scalable? s e u Q e u l a V

✓ Ample room to grow BA/BE and Pre-clinical segments ✓ Regulatory tailwind in Clinical Trials ✓Good conversion from RFP to contracts ✓ Scale-up through Cross-referencing between pre-clinical and clinical ✓ Believe acquisitions to be right growth strategy

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R t ❑ Are the financials and valuation enticing enough to make good returns? s e u Q e u l a V ✓Past Fund raise and utilization of funds ✓ Shareholding Pattern ✓Financials ✓ Valuations ✓ Risks

IPO Background/Past fund raise/ Investors Current Shareholding

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CX Partners

44.5

Ex-Promoters (Founders)

28.8

Other Investors

26.7

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%

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Total

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Sabre Partners

5.2

Dr. Vinaya Babu

3.8

Indian Acorn Fund

1.8

Ashoka India Equity Investment Trust

1.3

Sixth Sense

1.8

Dinesh Mody Ventures

1.3

High Conviction Fund – Series 1 (IIFL)

1.0

Others

10.5 100

Currently there are 5,28,93,986 number of issued shares. At per share value of 367 (pre IPO price), the company equity valuation stands at Rs 1943 crs.

Utilization of the money raised

Particulars

INR CRS

Amount Raised

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20.1% in Bioneeds

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Infusion in Bioneeds

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3.0% additional in Bioneeds Balance in the books

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h c r a e s e INR CRS 225

10 11

140

Consolidated Financials – Overview

INR crs

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Proforma numbers for FY22 considering full acquisition from start of the year

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One-time expenses related to IPO, ESOP exps, prior period exps amounting impacted profitability in FY22

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Equity fund raise of INR 225crs impacted RoE

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1HFY23 Revenue of INR 204crs and EBITDA of INR 52crs

Veeda – Standalone (BA/BE and Clinical Trial business)

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▪ Akin to hospitals and hotel industry, the CRO business is fixed cost heavy in terms of infra and manpower cost. Peak asset turns are between 1.5-2.0 x ▪ Unutilized capacity have a direct bearing on margins and returns ratios ▪ One-time expenses related to IPO, ESOP exps, prior period exps amounting impacted profitability in FY22 ▪ Steady state gross margins are between 65-68% and EBITDA margins in the range of 25-28%

Overview of revenue booking

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Veeda – Balance Sheet INR crs

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Veeda – Ratios INR crs

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Unit Economics

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Bioneeds acquisition

➢

➢ ➢

➢

➢

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First 30% for 71cr Next 20.1% for 60cr Another 25% done through share swap: 5.2 % Veeda shares to vinay Another 9%: Primary infusion - 10cr with 300cr valuations (3% stake) and 25cr paid for 6% from promoter. Another 3% acquired from promoter this month for 330cr valuations

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Veeda currently own 87% of Bioneeds with a further option to acquire the balance 13% from Dr. Vinaya Babu

Bioneeds – Profit and loss statement INR crs

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▪ Pre-clinical business has higher gross margins in the range of 80-85% with EBITDA margin upwards of 30%

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▪ It is more capital intensive in nature with peak asset turns between 1.0-1.2 x ▪ One off write-offs on account of auditor change (EY brought in by CX) impacted profitability FY20 and FY21

Bioneeds – Balance Sheet INR crs

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Bioneeds Ratios

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Consolidated – Projections

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Financials – Peer benchmarking – domestic

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Peer benchmarking - global

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How does it compare to hospitals

Particulars

Veeda

Avg Capex per bed

10 lacs

Gross Margins Manpower cost

68-70%

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Other Expenses (Overheads)

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EBITDA Margin Avg ROCE

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EV/Bed (as per last valuation) EV/EBITDA (last valuation)

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~25%

Hospitals

80 lacs – 1.20 crs

75-80% ~40%

~15%

~20%

30%

20%

30%+

~15%

3.5 crs

5.5 crs

20 x

20 x

Capital Requirements

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Valuation and return

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Risks • High fixed cost business model and hence slippage in booking revenues to have major impact on profitability

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• Regulatory compliance overhang

• Acquisition integration • Past Contingent claims

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Closure of Units by CDSCO

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Shilpa Medicare case

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