Bangalore: Tucked into a quiet residential area of south Bangalore is the office of Nadathur Holdings and Investments Pvt. Ltd (NHIL), a company that is seeking to revolutionize the drug discovery process, and the business of pharmaceuticals.
“We want to re-engineer the monstrosity called drug discovery and disprove that it takes as much as $800 million-1 billion (Rs3,224-4,030 crore) to develop a drug,” says Sriram Nadathur, director, NHIL.
Over the seven years that it has been in existence, NHIL, a mixture of a venture capital firm, a private equity firm and an angel fund, has invested around $1 billion in 25 companies. However, it is its Lifespring Ventures initiative that makes NHIL different from other venture capital firms.
Lifespring Ventures is a subsidiary of NHIL that has been incorporated as a partnership firm. It owns five start-ups, one each in every stage of the drug discovery process. Lifespring Ventures has committed an investment of Rs250 crore to these five companies that it is incubating.
The five work as stand-alone companies that already generate revenue from sales or will do so in coming months; together, they make up an entire drug discovery ecosystem.
NHIL was founded by one of Infosys Technologies Ltd’s founders, Raghavan S. Nadathur (Sriram Nadathur’s father). Sriram Nadathur and others involved in NHIL have been reticent about NHIL’s holdings—for instance, the fact that the company has invested $1 billion isn’t widely known, and its plans for the life-sciences space. Now, it emerges that NHIL has a grand plan for the business, one that changes the way drugs are discovered currently.
The cogs in the wheel
Lifespring Ventures has a stated focus on metabolic syndrome, which increases a person’s chance of developing heart disease, stroke and diabetes.
Basic research in the Lifespring Ventures family is driven by Connexios Life Sciences Pvt. Ltd, a drug discovery company looking for new molecules for drugs as well as repositioning old molecules for newer conditions. Connexios also has a programme where markers—biochemical parameters associated with specific disease states—are used for diagnostic and prognostic purposes.
Full circle: Lifespring founders Sriram Nadathur, Suri Venkatachalam and Manish Gupta. (Gopinath Nair / Mint)
Abexome Biosciences Pvt. Ltd is the company responsible for markers. It will use markers that come about from Connexios’ research to develop key diagnostic solutions as well as kits. Besides metabolic syndrome, Abexome is focused on oncology (cancer) and reproductive endocrinology (largely to do with hormones).
Inexios Pharmaceuticals Pvt. Ltd, a less-than-a-year-old specialty health management firm focused on chronic care, will feed off the research of Abexome and Connexios. “At Inexios we leverage biology and the clinical knowledge to evolve a consensus among doctors on how to drive the treatment by identifying gaps in detection and intervention options available to clinicians,” says Suri Venkatachalam, a scientist by training who founded Connexios in 2004.
The fourth firm that is part of the Lifespring Ventures family is a hospital. Shanthi Hospital and Research Centre, a 50-bed specialty surgical hospital, will become operational in May and contribute to the clinical research of the group.
Connecting all these ventures with competitive business intelligence, promotional programmes, scientific marketing and other pharmaceutical services is Indegene Lifesystems Pvt. Ltd, one of the first companies in which NHIL invested.
Between 2003 and 2005, it bought out the stake of other investors in this company and brought on board the company’s original co-founder Manish Gupta. Nadathur later founded Lifespring Ventures with Gupta and Venkatachalam and incubated Abexome and Inexios.
Bringing it all together
The founders see the obvious benefits in getting the five companies to work together—their idea is to get cellular biology, clinical research and the marketing right at the discovery stage itself.
“Our discovery programme is not like any other discovery programme,” says Venkatachalam. The key challenge for drug discovery today, he adds, is that the molecules coming out of labs and entering the clinical research stage have high failure rates. That’s primarily because there’s some “surprising element of the biology of the molecule”, either in terms of disease or drug action, which manifests itself for for the first time in clinics.
“That’s why we are trying to bring the underlying pathology of a disease early on to discovery stage,” Venkatachalam says. To be sure, this is an approach a lot of “systems biology” companies are trying to adopt globally. “This (Lifespring Ventures) is indeed building the ecosystem very early so that you have the freedom to do your science the way you want,” says Vijay Chandru, founder and CEO of Strand Life Sciences, a systems biology firm based in Bangalore. However, he adds, this could also mean “spreading oneself too thin”.
“How do you ensure your energy isn’t frittered away? A lot of it will come down to management and organizational structure,” he says.
Nadathur is not oblivious to these challenges. He returned from the US in 2003 after an MBA degree and seven years of start-up experience to further his father’s ambition of creating a “supportive entrepreneurial environment” for Indian start-ups. He had raised six rounds of funding for the two firms he worked with in the US, but back home he did the reverse and started funding start-ups. He relies on the experience of his father, or NSR as everyone calls him, who in his larger role focuses on governance, human resources and team building at not only Lifespring Ventures, but also all NHIL portfolio companies.
NHIL has exited two of these companies already—Impulsesoft Pvt. Ltd and Medi Assist India Pvt. Ltd. Nadathur says that four others—Cades Digitech Pvt. Ltd, CoOptions Technologies Ltd, Megatech Control Ltd and Metahelix Life Sciences Pvt. Ltd—will be ready for either strategic exits or a public listing in three years. His personal favourite though is Lifespring Ventures, with start-ups at different stages of market preparedness.
The colour of money
Indegene is at the head of the pack in terms of revenues and will close 2007-08 with revenues of $15-17 million. “Our target is to make this at least a $50 million company by 2010 when we intend to go for the?initial public offering,” says Gupta, director of Indegene.
The two fledglings, Inexios and Abexome, have some cash flow, but expect revenues from their services arms to kick-in within 15 months. “At Inexios we’ve developed the first level disease management map along with the top 100 diabetologists and cardiologists in India, and are now engaged with the next set of 2,000 clinicians to develop further consensus,” says Nadathur. The first set of products includes generics and novel (first in India) formulations which are in various stages of regulatory approvals, he adds.
On the diagnostic front, Abexome will begin with revenues from custom synthesis and reagent sales. The firm is targeting a menu of 50 panels (a panel is a set of markers) by April 2008; it is currently validating these panels in clinics across India.
Three potential drug candidates from Connexios for elevated blood glucose levels and triglyceride levels in blood (hypertriglyceridemia), and insulin resistance will enter clinical studies next year. To validate some of its biomarkers, the firm is currently conducting a 300-patient clinical study in collaboration with St Johns Hospital in Bangalore.
It does look like a successful business model can be created this way, says Strand’s Chandru. But he believes that the real challenge will come after the pre-clinical stage when the molecule needs animal and human studies.
Experts add that how much money Lifespring Ventures needs and its ability to succeed will also be a function of the markets it’s targeting. For instance, targeting India would change several?things,?they say.
And indeed Lifespring Ventures is interested in regional markets: “We are looking at the Asian market, particularly India and China,” says Nadathur, who plans to incubate two more start-ups in functional foods and nutraceuticals this year.