Strides Pharma (STAR) - Company Snapshot

 Strides Pharma Sciences Ltd.(STAR) - Company Overview

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      1) Company Profile

Strides is a global pharmaceutical company headquartered in Bangalore. The Company has two business verticals, Regulated Markets and Emerging Markets. The Company has a global manufacturing footprint with 7 manufacturing facilities spread across three continents including 5 facilities for Regulated Markets and 2 facilities for Emerging Markets. The Company has a strong R&D infrastructure in India with global filing capabilities and a strong commercial footprint across 100 countries.

The core generic pharma business of Strides is led by IP-driven product licensing and marketing and distribution partnerships across the globe. Strides have created an exhaustive pipeline of generics across varied formats and domains including oral dosage forms and topicals. The company is among the leading players worldwide in soft gel capsules. Their domain strategy of developing a comprehensive product portfolio in complex therapeutic segments has attracted marquee partnerships in Regulated markets such as the US, Europe, Australia, Canada, and South africa. In the branded generics, their ambition is to be a highly regarded player known for marketing high-quality, locally relevant generic products.

2) Revenue, EBITDA & EBITDA Margin Comparison FY19 v/s FY20

In FY 2019-20, the company achieved a 33% revenue growth of 29,127 Million, compared to 21,936 Million in FY 2018-19. Our EBITDA stood at 6,514 Million in FY 2019-20 against 2,575 Million in the previous year. The company reported a 22.4% EBIDTA margin, which is a new milestone for Strides. The company’s profitability stood at 2,341 Million with an EPS of 26.1. Their strategies continue to play out in the major markets, delivering profitable growth with encouraging EBITDA expansion.

3) Geographical Revenue Contribution for FY 2020

·        US Markets ₹16,912 Million 61% (Year on year growth)

·        Other Regulated Markets ₹8,361 Million 47% (Year on year growth)

·        Emerging Markets and Institutional ₹3,853 Million -33% (Year on year growth)

The US business, including the sales of Ranitidine of $46m, grew from $150m in FY19 to $238m, up by 61%, meets the higher end of FY20 guidance. The Other Regulated Markets reported a 47% YoY growth in FY20, driven by strong momentum in markets such as United Kingdom, Australia, key EU countries and South Africa.

4) Update on Biotech and other investments – FY2022 to be a break-even year

·        Strides committed to investing $40m into Stelis for a majority stake in the biotech business, ~$15m from the same has already been invested.

·        Strides on September 20, 2019, announced that it would re-enter into sterile injectables business post the completion of The company’s non-compete period with Mylan Inc. ended in December 2019.

·        As the injectable business is long gestation in nature, the Company will review its decision on investments. Meanwhile, the promoters of the Company continue to stay invested in injectables and Strides retains an option until December 2020 to participate in the existing platform.

5) Reduction of Debt & Completion of overall Capex – Better Growth in coming years 

Deleveraging debt undertaken during FY 20 helped strengthen the balance sheet significantly with a right-sized debt supporting continuing operations. The proceeds from Australian divestment were used for reducing debt. The company has completed all our CAPEX programs, spending 1,300 Million for the year.

6) Subsidiaries – Growth Boosters for the Company

Details of Subsidiaries, Joint Ventures and Associate entities as of March 31, 2020, are provided herein below: 

Here are the few in detail descriptions of subsidiaries:

·        The company operates its front-end business in The US through our subsidiary, Strides Pharma Inc. that offers quality healthcare products to the market in prescriptions, private-label over-the-counter (OTC) and consumer health products. We reach a broad base of customers and patients in need of quality treatment in the US with our ‘in the market for the market’ strategy.

·        The UK remains their anchor market in the region, representing an US$11 Billion generic opportunity. They operate in the island nation through our subsidiary Strides Pharma UK Limited. In July 2019, Strides Pharma Global Pte. Limited (SPG), a step-down subsidiary of the Company in Singapore, entered into a joint venture arrangement with Sun Moral International (HK) Limited, Hong Kong (Sun Moral) to fast track its entry into China, the second-largest pharmaceuticals market in the world.

·        In August 2019, Strides Pharma Inc (SPI), a step-down subsidiary of the Company in the US, acquired a US FDA-approved soft gel manufacturing facility in Florida, the USA from Micelle BioPharma Inc. The facility is one of the very few manufacturing facilities in the US with a soft-gel capsule manufacturing suite for formulations with containment needs.

·        In September 2019, Strides Pharma Global Pte. Limited (SPG), a step-down subsidiary of the Company in Singapore acquired 70% equity stake in Fairmed Healthcare AG (Fairmed), a Switzerland based generic pharma company.

7) Shifting Gears in R&D

The R&D spend in FY20 spend was ₹939m, as a significant buildout of the US portfolio is completed, we have shifted gears in R&D in FY20 to focus on other regulated markets. The R&D spend in Q1FY21 was ₹247m. Filed 2 ANDAs and received approval for 3 new ANDAs. In the other regulated markets, filed 4 products and received 2 new product approvals.

ANDA Approvals and Filed till Date

The roadmap ahead for coming years

In FY 2020-21, the company plans to introduce 4-5 new products from the already approved product basket as they build on their strategic play in the evolving business landscape.

The company also expects a significant ramp-up in supplies under the VA program with 5+ additional products. Moreover, 10-12 new product approvals are expected in FY 2020‑21, and the company expects to file 12-15 new ANDAs with the US FDA. 

The company also acquired 18 ANDAs from Pharmaceutics International, Inc. for the US market (US$2.5 Billion market opportunity), enabling us to strengthen our offerings further and continue to maintain healthy growth in the future.

Continue with their blitz scaling and tailored strategy for the US market. Foray into new markets with a small base and limited front-end presence in the UK. Widen and deepen footprint across major markets in the European continent. Accelerate product launches across new territories and enhance productivity in Africa, develop a steady product pipeline to be at the forefront of new regimen products in antiretroviral therapy.

Sources: Strides Pharma Sciences Annual Reports, Investor Presentation & Conference Call Transcript.

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